Elucidating investors rationality and behavioural biases in Indian stock market
Venkata Narasimha Chary Mushinada and
Venkata Subrahmanya Sarma Veluri
Review of Behavioral Finance, 2019, vol. 11, issue 2, 201-219
Purpose - The purpose of this paper is to empirically test the relationship between investors’ rationality and behavioural biases like self-attribution, overconfidence. Design/methodology/approach - The study applies structural equation modelling to understand whether individual investors, besides being rational, are subjected to self-attribution bias and overconfidence bias. Findings - The study shows the empirical evidence in the support of behavioural biases like self-attribution and overconfidence existing besides investors’ rationality. Moreover, there is a statistically significant positive covariance found between self-attribution and overconfidence, implying that an increase/decrease in self-attribution results in the increase/decrease in overconfidence and vice versa. It is also observed that the personal characteristics of an investor such as gender, age, occupation, annual income and their trading experience have an impact on behavioural biases. Research limitations/implications - The study focused on rational decision making, self-attribution and overconfidence biases using primary data. Further studies can be encouraged to test the existence of behavioural biases based on both market level and individual account data simultaneously. Practical implications - Insights from the study suggest that the investors should perform a post-analysis of each investment, so that they become aware of past behavioural mistakes and stop continuing the same. This might help investors to minimise the negative impact of self-attribution and overconfidence on their expected utility. Originality/value - To the best of the authors’ knowledge, this is the first study to examine the relationship among investors’ rationality, self-attribution and overconfidence in the Indian context using a comprehensive survey.
Keywords: Structural equation modelling; Behavioural finance; Bounded rationality; Self-attribution bias; Overconfidence bias (search for similar items in EconPapers)
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://www.emeraldinsight.com/10.1108/RBF-04-2018- ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:rbf-04-2018-0034
Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://emeraldgroupp ... /journals.htm?id=rbf
Access Statistics for this article
Review of Behavioral Finance is currently edited by Phil Holmes and Robert Hudson
More articles in Review of Behavioral Finance from Emerald Group Publishing
Bibliographic data for series maintained by Virginia Chapman ().