Behavioral Biases Influencing Investor’s Decisions in NCR: Locus of Control a Moderating Variable

Abstract

Purpose- The study aims to recognize the behavioral biases influencing the investor’s decisions with the locus of control moderating role. Classical finance theories assert that rational investors utilize all available information to optimize their wealth. Behavioral finance contends that psychological factors influence investment decisions.

Design/methodology/approach- A survey was used to test the hypotheses, and questionnaires were distributed throughout the NCR region. The data was analyzed from 490 investors after eliminating incomplete ones using the Smart PLS 4 software to apply the PLS algorithm and bootstrapping technique in partial least squares structural equation modeling.

Findings- The result suggests that behavioral biases (availability, familiarity, overconfidence, representativeness, and herding) have a significant and positive relation with investment decisions. However, endowment bias had no significant contribution to the investment decisions of individual investors. Moreover, the study found no moderating role of locus of control.

Research limitations/implications- The primary constraint of this research is that it focused only on the NCR region.

Practical implications– This research raises investors' awareness of the influence of psychological aspects on their decision-making in the stock market. By doing so, it seeks to improve the rationality of investment choices and promote market efficiency.

Originality- This research offers a unique perspective on the investor profile that is consistent with each bias that is being considered. Not only does it update the research on behavioral biases, but it also highlights the prejudice that is most effective in the context of India.