Factors Influencing Indian Individual Investor Behaviour: Survey Evidence

Decision, Vol. 39, No. 3, pp. 141-167, December 2012

41 Pages Posted: 28 Mar 2012 Last revised: 11 Mar 2013

See all articles by Abhijeet Chandra

Abhijeet Chandra

Vinod Gupta School of Management, IIT Kharagpur

Ravinder Kumar

Jamia Millia Islamia, Central University

Date Written: October 17, 2011

Abstract

Individual investor behaviour is motivated by a variety of psychological heuristics and biases. Using survey data of more than 350 individual investors, we document four important results in the context of Indian individual investor behaviour. First, investors make investment decisions based on heuristics; they assume price as decision-anchor and are overconfident in their judgments. Second, their investment behaviour is highly influenced by representativeness and they do lot of mental accounting in the sense of grouping their gains and losses while making decisions. Third, though investors follow fundamentals, they tend to discount complex information at first instance; they prefer those pieces of information which are easily adjustable into their investment decision-making. Finally, there exists an asymmetric pattern of distribution and usage of information among individual investors which affects their investment behaviour to greater extent.

Keywords: Individual investor, Psychological biases, Investment behaviour, Stock market, Principal components analysis

JEL Classification: A12, D03

Suggested Citation

Chandra, Abhijeet and Kumar, Ravinder, Factors Influencing Indian Individual Investor Behaviour: Survey Evidence (October 17, 2011). Decision, Vol. 39, No. 3, pp. 141-167, December 2012. Available at SSRN: https://ssrn.com/abstract=2029642 or http://dx.doi.org/10.2139/ssrn.2029642

Abhijeet Chandra (Contact Author)

Vinod Gupta School of Management, IIT Kharagpur ( email )

Kharagpur, 721302
India

Ravinder Kumar

Jamia Millia Islamia, Central University ( email )

Jamia Nagar
New Delhi, Haryana 122002
India

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