Challenges of Behavioral Finance in Investment Decision Making

Papi Halder and Prof (Dr.) Ram Milan
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Papi Halder: Research Scholar, Department of Commerce, University of Lucknow, Uttar Pradesh, India
Prof (Dr.) Ram Milan: Head, Department of Commerce, University of Lucknow, Uttar Pradesh, India

International Journal of Research and Scientific Innovation, 2024, vol. 11, issue 5, 1028-1034

Abstract: This study investigates how behavioral challenges can influence the investment decisions of individual investors. In particular, it looks at some behavioral mistakes that might make the field of behavioral finance harder to understand. The Efficient Market Hypothesis is not supported by this study, which looks at how psychological factors affect financial decisions. Behavioral finance doesn’t try to replace traditional theories of finance. Instead, it gives us a different way to think about why markets don’t work well and why investors act in crazy ways. Overconfidence and emotion bias can induce investors to overestimate their skills and knowledge, ignoring market volatility. Herd behavior and framing bias can also skew investors’ perspectives by influencing how they receive information, causing them to overlook or underestimate its importance and trustworthiness or make risky decisions. Because of this, it is essential for investors to regularly look into and understand the reasons and effects of behavioral problems, as well as come up with ways to reduce or get rid of them. The study wants to make investors, financial experts, teachers, and lawmakers more aware of the problems and complexities of behavioral finance.

Date: 2024
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