Impact Of Cognitive Biases On Investment Decisions And Financial Markets

Abstract

This study is focused in investigating the impact that cognitive biases have on the investing choices made by individuals who are involved in the Indian stock market. Overconfidence, herding, representativeness, anchoring, loss aversion, and confirmation are the six cognitive biases that are investigated in this study. The research is conducted by analyzing a sample of 234 respondents to determine the consequences of these biases. A combination of descriptive and inferential statistical methods were utilized for the purpose of data analysis in the study. According to the findings, a sizeable percentage of people exhibited either high or moderate levels of prejudice, which suggests that this is a problem that warrants concern. The herding and anchoring biases came in second place in the study, while the representativeness bias was found to have the most significant impact on the decision-making process regarding investments. According to these findings, cognitive biases may have a major impact on the decisions that Nepalese individuals make regarding their investments and may have a negative impact on the outcomes of such investments. According to the findings of the study, individuals should acknowledge their own prejudices and take steps to reduce the influence that these biases have on decision-making.