An application of the theoretical framework of behavioural biases of retail investors in the Indian stock market

Abstract

Biases can be seen as reflections of an investor's mindset, explaining the underlying reasoning for irrational investment decisions. Retail investors can mitigate risk by basing their choices on a mix of rational and irrational considerations. This study aims to achieve two objectives: first, to examine the impact of mental accounting, availability, and anchoring biases on investment decisions, and second, to identify the most influential factor affecting these decisions. Data was collected using a survey method with an adapted questionnaire designed to measure these factors. A sample of 459 participants was selected through convenience sampling. The data was analyzed using SPSS software to measure the correlation and regression between the independent and dependent variables. The findings indicate that among all the biases studied, anchoring bias had the most significant influence on the investment decisions of retail investors.