Challenges of Financial Behavioral in Personal Investment: Analyzing the Role of Psychological Factors in Decision-Making

Abstract

This research challenges the conventional economic theory that states markets are efficient and investors are always rational by examining the long-term effects of psychological variables on individual investment decisions made inside the Indian Stock Exchange. The study examines how availability bias, conservatism, overconfidence, and the herding effect influence investors' long-term investing behaviors via the prism of behavioral finance. Significant insights may be gleaned from data gathered from 75 individual investors using a structured questionnaire: conservatism consistently has a detrimental impact on investing decisions, whereas overconfidence, availability bias, and the herding effect regularly have a favorable impact. These emotional and cognitive biases imply that psychological variables influence investors' long-term judgments, which are not solely based on reason. In order to better navigate the complexities of financial markets over time, investors, policymakers, and financial advisors must adopt behavioral insights into their practices. This understanding is essential for enhancing investment strategies and decision-making processes.