Investment Management by Individual Investors: A Behavioral Approach
The IUP Journal of Behavioral Finance, Vol. VII, Nos. 1 & 2, pp. 7-18, March & June 2010
Posted: 30 Mar 2010
Date Written: March 25, 2010
For small and marginal investors, managing their investments is like managing any enterprise. They apply all their skills, knowledge and expertise in managing their money to get the best from investments. Despite all efforts, some cognitive and psychological factors affect their decisions. This study proposes to identify the major psychological biases that influence the individual investors’ behavior and that, in return, may drive a momentum effect in stock returns. In this study, survey approach has been used to achieve this objective. The study used a structured questionnaire in which potential investors were asked for their reactions to some specific situations. The study was undertaken within the geographical area of Delhi and National Capital Region (NCR). The results revealed some psychological and cognitive peculiarities. It was interesting to find that the individual investors’ behavior is driven by some psychological factors such as conservatism, under confidence, opportunitism, representativeness and informational inferiority complex. The results of the study are helpful in understanding the hidden aspects of individual investors’ behavior.
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