Behavioural Biases in Financial Decision-Making

Abstract

Behavioral finance is an emerging field of study which is relatively new and having its provenance from decision theory. Behavioral finance is a multidisciplinary research area that combines psychology and finance and investigates the issues that impact the decision-making process and explains the irrational nature of individuals, groups and organizations. Behavioral finance tries to address those psychological traps that are confronted while making decisions under uncertainty. The main objective of this study is to explore behavioral determinants influencing individual investor’s decision at financial front. The paper tries to extend the knowledge of how biases, moods and emotions influence the financial behavior of individuals. In conclusion, the paper will provide future paradigm of behavioral finance.

Keywords: Behavioral Finance, Overconfidence, Anchoring, investors, investment.

JEL Classification: A12, G00, G14