Behavioural Finance: An Introspection of Investors Psychology

Dr. G. K. Deshmukh ., Dr. Sanskrity Joseph .

Abstract


Purpose: Investors always try to make rational decision while analyzing and interpreting   information collected from various sources for different investment avenues to arrive at an optimal investment decision. But at the same time they are influenced by various psychological factors that influence them internally and bias their investment decision. Linter (1998) studied the various factors that influence internally the informed investment decision and included them under the discipline of behavioural finance. Behavioural finance studies how people make investment decision and influenced by internal factors and bias. The main purpose of the paper is to assess impact of behavioural factors over mutual fund investment decision made by investors in Raipur city.

Design/methodology/approach: The researchers conducted a survey on factors of behaviour of investors with respect to investment in mutual fund industry from 300 investors of mutual funds across different demographic profiles in Raipur city.

Major Result / Findings: The researchers assessed that factors like perception, motivation, incentive potential, intensity of cues play major role in formation of intention to invest which further influence investors in Raipur city to take investment decision that determines their satisfaction with mutual fund which is based on performance and growth of a particular mutual fund.

Implications: This paper helps in analyzing the factors which influence formation of intention to invest and further direct towards investment in a particular mutual fund. Various mutual fund companies can concentrate on these factors to devise strategies to pull investors to invest in their mutual fund.

Originality/value: This a fairly original paper which has tested the model developed by researchers using SEM.

Paper type: Empirical and descriptive


Keywords


Behavioural finance, investment decision, intention to invest, mutual fund, SEM.

Full Text:

PDF

References


Akerlof, George E., and Robert J. Shiller. (2009). Animal Spirits: How Human Psychology Drives the Economy, and why it Matters for Global Capitalism. Princeton, NJ: Princeton University Press. 19.

Andreson, J. C. and Gerbing, D. W. (1992). Assumptions and Comparative Strengths of the Two Step Approach Comment on Fornell and Yi. Sociological Methods and Research. 20 (3): 321-333.

Barberis, Nicholas, and Thaler, Richard. (2003). A Survey of Behavioral Finance. In handbook of the Economics of Finance (eds.) George M. Constantinides, Milton Harris, and Rene M. Stulz, Volume 1B, 1051–121. Amsterdam: North-Holland

Byrne, B. M. (2010). Structural Equation Modelling with AMOS: Basic Concepts, Applications and Programming. New York: Taylor and Francis Group.

Cohen, J. (1992). A Power Primer. Psychological Bulletin, July, 112 (1): 155-159. Accessed on 2015, September 02 and retrieved from website www. drsmorey.org/bibtex /upload/Cohen:1992.pdf

Frankfurter, G., and McGoun, E. (2002). Resistance is Futile: The Assimilation of Behvioural Finance. Journal of Economic Behaviour and Organisation, 48(4), 375-389.

Forbes, William. (2009). Behavioural Finance. John Wiley and Sons.

Fromlet, Hubert. (2001). Behavioral Fiannce- Theory and Practical Application. Business Economics. 36(3): 63-69.

Gilovich, Thomas, and Dale Griffin. (2002). Introduction—Heuristics and biases: Then and Now. In Heuristics and Biases: The Psychology of Intuitive Judgment, ed. Thomas Gilovich, Dale Griffin, and Daniel Kahneman, 1–18. New York and Cambridge, England: Cambridge University Press, 34.

Glaser, Markus, Thomas Langer, and Martin Weber. 2007. On the Trend Recognition and Forecasting Ability of Professional Traders. Decision Analysis. 4(4): 176–193.

Hair, J. F., Black, B., Babin, B., Anderson, R. E. and Tatham, R. L. (2010). Multivariate Data Analysis: A Global Perspective. NJ: Pearson Education Inc.

Howard, J. A. (1965). Marketing Theory. Boston: Allyn & Bacon. 71.

Hirschey, Mark and Nofsinger, John. (2008). Investments: Analysis and Behaviour. P. 210. Ed. SIE, Tata McGrow Hill.

Hu, L. T. and Bentler, P. M. (1999). Cutoff Criteria for Fit Indexes in Covariance Structure Analysis: Conventional Criteria versus New Alternatives. Structural Equation Modeling: A Multidisciplinary Journal. 6 (1): 1-55.

Kahneman, Daniel and Smith, Vernon. (2002, December 17). Foundations of Behavioral and Experimental Economics. Advanced information on the Prize in Economic Sciences 2002, Accessed on September 15, 2015 and retrieved from the website:

http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2002/advanced-economicsciences2002.pdf

Lintner, G. (1998). What are the Distinctive Features of Behavioural Finance as Applied to Individual Investor’s Decision – making? Accessed on September 15, 2015 and retrieved from the International Proceedings of Economics Development and Research (IPEDR) website: www.ipedr.com/vol21/19-icif2011-10015.pdf

Olsen, Robert A. (1998). Behavioural Finance and its Implications for Stock-Price Volatility. Financial Analyst Journal, 54(2): 10-17.

Sewel, Martin. (2010). Behavioural Finance. 2, University of Cambridge Press, Accessed on September 16, 2015 and retrieved from the website http:// www.behaviouralfinance.net/behavioural-finance.pdf

Shefrin, Hersh. (2000). Beyond Greed and Fear: Understanding Behavioural Finance and Psychology of Investing. Financial Management Association Survey and Synthesis Series. Boston, MA Harvard Business School Press.

Shiller, Robert (1998). Human Behaviour and Efficiency of the Financial System, Accessed on September 16, 2015 and retrieved from the National Bureau of Economic Research website: www.nber.org/papers/w6375

Shleifer, A. and Robert, Vishny. (1997). The Limit to Arbitrage. Journal of Finance, 52(1), 35-55.

Statman, Meir.(1999). Behavioral Finance: Past Battles and Future Engagements. Financial Analyst Journal, 55(6): 18-27.


Refbacks

  • There are currently no refbacks.




Editorial Office:

Educational Research Multimedia & Publications,
S.N. 21, Plot No 24, Mirza Ghalib Road Malegaon Nasik,
Maharashtra India - 423203.
+919764558895 (whatsapp),
editor@scholarshub.net, www.scholarshub.net

Copyrights © 2010-2020 - ERM Publications, India     

This work is licensed under https://creativecommons.org/licenses/by-sa/4.0/