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Abstract
The stock market is a crucial aspect of India's financial market and the world's economy, which results in massive investment performances. In the fast-moving financial scenario, traditional finance is incapable of explaining the irrationality of an investor. The investors are irrational and get influenced by irregularities in the financial market. Behavioural finance has received a lot of significance through its endeavours to ascertain the biases behind an investor's behaviour. This research paper aims to examine the significant impact of behavioural biases on the investment decision-making of individual investors. The study consisted of 378 individual investors trading in Indian stock exchanges, and data was gathered with the help of a questionnaire developed for the purpose of research. The questionnaire was empirically tested after approving its reliability and validity. The results revealed a substantial impact of the behavioural biases affecting the investment decisions of the individual investors: Loss aversion bias, Status quo bias and Optimism bias in the presence of gender as a moderator. The results also exhibited that Loss Aversion bias had the maximum impact on the investment decision-making of an Indian individual investor.
Keywords: Behavioural finance, Behavioural bias, Emotional bias, Individual investor, gender
1.Introduction
The state-of-the-art advancements in the expanse of finance and related markets emphasise the divergences between conventional and modern (related to behaviour) finance. Standard finance posits the rationality of individuals, organisations, and markets while they take their financial decisions (Hunguru et al., 2020; Baker & Filbeck, 2013). On the contrary, behavioural finance confronts the notion of prudence and proposes that investors tend to vary from opting for ideal monetary decisions to be taken and do not take impeccable decisions (Riaz et al., 2020; Tourani-Rad & Kirkby, 2005). Theories associated with traditional finance considered the markets exceedingly efficient and the investors to be decidedly logical (Sattar et al., 2020). On the other hand, the modern-day market clearly observes that each investor who invests in the market is not extremely efficient or rational in the financial decisions taken; rather, they are affected by inefficiencies. These inefficiencies of financial markets have always been the region of concern and the centre of attraction because many irregularities continue to exist without being answered. These irregularities or irrationalities arrive or appear since every investor is human...