Impact of Cognitive Biases on Investment Intentions: Exploring the Mediating Role of Self-Esteem among Indian Emerging Investors

Abstract

Investment decision-making among young investors is influenced by various psychological factors, including cognitive biases and self-esteem. This study employs Structural Equation Modelling (SEM) to investigate the relationships between cognitive biases—specifically the anchoring effect, disposition effect, and herding effect—self-esteem, and investment intentions among young investors. The findings suggest significant direct effects of cognitive biases on investment intentions, as well as significant indirect effects mediated by self-esteem. Specifically, the anchoring effect and herding effect demonstrate successful mediation through self-esteem, whereas the mediation effect for the disposition effect was not significant. These findings highlight the importance of considering cognitive biases and psychological factors in understanding investment decision-making processes among young investors.