BEHAVIORAL FINANCE: IMPACT OF COGNITIVE BIASES ON RETAIL INVESTOR DECISION MAKING

Behavioral finance challenges the traditional assumption of rational decision-making by emphasizing the role of psychological factors in financial behavior. This study examines the impact of cognitive biases on retail investors' decision-making, with a specific focus on overconfidence, herding, loss aversion, anchoring, availability bias, and mental accounting. The research adopts a mixed-method approach integrating both primary and secondary data. Primary data was collected through a structured questionnaire targeting retail investors, capturing behavioral tendencies and subjective decision-making patterns. Secondary data was sourced from academic literature, financial reports, and prior empirical studies. Statistical tools including correlation and regression analysis were employed. Findings reveal that psychological biases significantly affect investor behavior, often leading to irrational decisions, suboptimal portfolio performance, and increased susceptibility to market volatility. This research contributes to behavioral finance literature by providing empirical evidence and highlighting the importance of psychological awareness in financial decision-making.

 

Keywords: Behavioral Finance, Cognitive Biases, Retail Investors, Investment Decision-Making, Investor Behavior, Loss Aversion, Overconfidence, Herding Behavior

 

 

Behavioral Finance Cognitive Biases Retail Investors Investment Decision-Making Investor Behavior Loss Aversion Overconfidence Herding Behavior