Influence of Behavioural Factors Affecting Investment Decision—An AHP Analysis

Abstract

Investors exhibit irrational behaviour in their decision-making. The decision-making process itself is considered to be a cognitive process as the investors have to make a decision based on various alternatives available to them. The researchers have found that the investors’ decision-making was adversely affected by the various psychological/behavioural factors. The current study was carried forward to identify the effect of the behavioural factors affecting the investment decision of the investors. Five behavioural factors, namely overconfidence bias, representative bias, regret aversion, mental accounting, and herd behaviour, were considered to study the behavioural biases of the investors. The study sample was taken from investors of Kerala, and the analytical hierarchy process (AHP) method was used to analyse the intensity of behavioural factors affecting the investment decision. Based on the priority vector, it was found that the investors of Kerala were highly influenced with overconfidence bias and regret aversion. Herd behaviour had less effect on their decision-making.

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