This research proposal aims to study the applicability of behavioral biases in individual investors' decision-making. It will apply behavioral finance concepts to identify common behavioral biases like cognitive dissonance, herd instinct, hindsight bias, and confirmation bias that influence investment decisions. The study will collect primary data through surveys to analyze the impact of these biases and develop a regression model relating behavioral biases as independent variables to investment decisions as dependent variables. The goal is to understand how biases influence performance to help investors make better informed choices.
This research proposal aims to study the applicability of behavioral biases in individual investors' decision-making. It will apply behavioral finance concepts to identify common behavioral biases like cognitive dissonance, herd instinct, hindsight bias, and confirmation bias that influence investment decisions. The study will collect primary data through surveys to analyze the impact of these biases and develop a regression model relating behavioral biases as independent variables to investment decisions as dependent variables. The goal is to understand how biases influence performance to help investors make better informed choices.
This research proposal aims to study the applicability of behavioral biases in individual investors' decision-making. It will apply behavioral finance concepts to identify common behavioral biases like cognitive dissonance, herd instinct, hindsight bias, and confirmation bias that influence investment decisions. The study will collect primary data through surveys to analyze the impact of these biases and develop a regression model relating behavioral biases as independent variables to investment decisions as dependent variables. The goal is to understand how biases influence performance to help investors make better informed choices.
This research proposal aims to study the applicability of behavioral biases in individual investors' decision-making. It will apply behavioral finance concepts to identify common behavioral biases like cognitive dissonance, herd instinct, hindsight bias, and confirmation bias that influence investment decisions. The study will collect primary data through surveys to analyze the impact of these biases and develop a regression model relating behavioral biases as independent variables to investment decisions as dependent variables. The goal is to understand how biases influence performance to help investors make better informed choices.
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The key takeaways are that behavioral finance studies how psychology influences investor behavior and decisions. It recognizes that investors are not perfectly rational and can be influenced by their own cognitive biases.
Behavioral finance treats investors as normal rather than perfectly rational. It recognizes limits to self-control and how investors can be influenced by biases. Traditional finance assumes investors are perfectly rational, have perfect self-control, and are not influenced by cognitive errors.
The document discusses cognitive dissonance, herd instinct, hindsight bias, and confirmation bias.
RESEARCH PROPOSAL
ON
A STUDY ON APPLICABILITY OF BEHAVIORAL
BIASES IN INDIVIDUAL INVESTORS DECISION- MAKING. BEHAVIORAL FINANCE
• DEFINITION :- Behavioral finance is the study of the influence of
psychology on the behavior of investors. It focuses on the fact that investors are not always rational, have limits to their self-control, and are influenced by their own biases. COMPARISION
BEHAVIORAL FINANCE TRADITIONAL FINANCE
• Investors are treated as • Investors are treated as “Normal” not “Rational”. perfectly “Rational”. • They actually have limits to • Investors have perfect self- their self-control. control. • Investors are influenced by • They are not confused by their own biases. cognitive errors or • Investors make cognitive information processing errors that can lead to errors. wrong decision. BEHAVIORAL BIASES
• COGNITIVE DISSONANCE :- Cognitive dissonance is the
unpleasant psychological bias that results from believing two contradictory things at the same time . Cognitive dissonance can lead to irrational decision making .
• HERD INSTINCT :- Heard instinct is a mentality that influence
the investors to follow what they perceive other investors are doing rather than their own analysis. • HINDSIGHT BIAS :- Hindsight bias is a term used in psychology to explain the tendency of people to overestimate their ability to have predicted an outcome that could not possibly have been predicted.
• CONFIRMATION BIAS :- Confirmation bias is a term from the
field of cognitive psychology that describes how investor naturally favor information that confirms their previously existing beliefs. OBJECTIVES OF THE STUDY
Applying the behavioral finance to identify the possible
behavioral biases influencing the investment decisions of individual investors.
Identify the impact level of behavioral biases on the investment
decision and performance of individual investors. PROBLEM STATEMENT
To understand and give some suitable explanation for the investors
decision-making , it is important to explore which behavioral bias influence the decision of investors, and how these bias influence their investment performance.
It will be useful for investors to understand common behavior ,
from which justify their reactions for better return. RESEARCH MODEL
INDEPENDENT VARIABLE DEPENDENT VARIABLE
BEHAVIORAL BIAS INVESTMENT DECISION
HYPOTHESES
• On the basis of the existing studies the researchable
hypotheses are presented as under :-
• H0 : There is no significant impact of behavioral bias
on individual investor decision-making.
• Ha : There is significant impact of behavioral bias
on individual investor decision-making. RESEARCH METHODOLOGY
• Deductive method will employ in the study.
• The study would be based on the primary data. • In order to collect data, structured questionnaire will be used to enable respondents to express their behavioral bias . • A sample size of 500 individual investors will be taken. • Correlation analysis will be used to assess the types (positive/negative) of relationship that exist between two variables. • Further a regression function will be developed by assuming behavioral bias as the independent variable and investment decision as the dependent variable. PROPOSED CHAPTER OF THE STUDY
• CHAPTER 1. Introduction and Conceptual Framework
• CHAPTER 2. Review of Literature • CHAPTER 3. Research Methodology • CHAPTER 4. Analysis and Interpretation • CHAPTER 5. Suggestion and Conclusion • References