Wealth Guardians: Navigating Behavioral Biases In Investing

Abstract

Purpose: The paper highlights the major gap in the prevailing studies on behavioral biases. We aim to highlight the biases that investors need to consider, whether consciously or unconsciously when making any investment decisions. The main objective/ goal is to offer a thorough understanding of the core behavioural elements affecting the individual investor's decision-making. Design/methodology/approach: A questionnaire was distributed to 100 individual investors of PSX to gather data. The data is analysed by using Statistical Package for Social Sciences (SPSS). Findings: The findings of our study highlight that there is a significant and positive correlation between Behavioural Biases and Individual investor investment decision-making. This study also provides information related to the influence of Behavioral Biases on the investment decision-making of investors participating in the Pakistan Stock Exchange (PSX). Our study interposes to the literature by showing the significant affiliation between Behavioral Biases and Investment decision-making. Research limitations/implications: This paper focuses on individuals’ behavioral biases in investing decision-making who believe their behavioral biases influence their investing decisions positively. While the analysis and discussion in this study raise several issues for further exploration, there are avenues for future research. Originality/value: To the best knowledge of the authors’, this paper is the first to examine a combination of three different Behavioral biases involved in decisions of investment while using Risk Propensity as a mediator and moderating variable of Financial Literacy. This study will be useful to academicians, researchers and individuals in the field of behavioral finance in understanding the influence of behavioral biases on investment decisions. Keywords: Behavioral biases, confirmation bias, loss aversion bias, overconfidence bias, Prospect theory, Rationality & Bounded Rationality Theory, Structured Equation Modelling, Statistical Package for Social Sciences.