Behavioral Biases and Decision-Making in Day Trading: Examining the Roles of Risk Perception and AI Assistance

Sherry Ritha Antony () and K. Siby Joseph
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Sherry Ritha Antony: St. Berchmans College, Research Scholar, Department of Business Administration
K. Siby Joseph: St. Berchmans College, Professor, Department of Business Administration

A chapter in Proceedings of the 3rd International Conference on Artificial Intelligence in Economics, Finance and Management (ICAIEFM 2025), 2025, pp 68-95 from Springer

Abstract: Abstract Behavioral biases are mostly extensively studied in the context of long-term investment decisions however their influence on short-term, high-frequency trading such as day trading has received only limited attention. This research seeks to bridge the gap by exploring the influence of cognitive biases particularly anchoring and availability bias on investment decision-making, among day traders in Kerala, India, that operates in a volatile and fast-paced environment. The study also looks at how risk perception acts as a link in the decision-making process and the moderating impact of Artificial Intelligence (AI) assistance over these relationships. The study gathered primary data by giving a structured questionnaire to active day traders from Kerala using validated measurement scales. Responses gathered via convenience sampling were analyzed using SPSS 25.0. Reliability confirmed using Cronbach’s alpha, construct validity ensured through correlation and confirmatory factor analysis (CFA), and hypotheses tested using PROCESS macro (Model 5). The findings reveal that both anchoring and availability biases significantly influence day trading decisions. Risk perception serves as a partial mediator, shaping how traders interpret risk under cognitive distortions. Crucially, AI assistance moderates these effects, helping to mitigate bias-driven decisions and enabling more objective, data-informed trading behavior. By extending behavioral finance research into the domain of short-term trading, this study offers timely insights into the combined impact of psychological and technological factors on decision-making in Kerala’s evolving retail trading landscape.

Keywords: Anchoring Bias; Availability Bias; Risk Perception; AI Assistance; Decision Making; Behavioral Finance; Day Trading (search for similar items in EconPapers)
Date: 2025
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DOI: 10.2991/978-94-6463-896-7_5

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