THE IMPACT OF BEHAVIOURAL FINANCE ON INVESTMENT DECISION

Abstract

The study delves into the extensive impact of behavioral finance on investment decisions, focusing on the intricate interplay between psychological factors and financial choices. The field of behavioral finance has emerged as a critical component in comprehending the deviations of actual investor behavior from the idealized rational models proposed in traditional finance theories.This research paper aims to provide a comprehensive analysis of how psychological biases and emotional influences significantly affect investment decisions. By combining insights from psychology and economics, the study examines the fundamental biases that impact decision-making processes, including confirmation bias, overconfidence, loss aversion, and herding behavior, among others.The research incorporates empirical evidence and case studies to highlight the real-world implications of these biases on investment strategies and financial markets. It examines how these biases manifest in investor behavior and impact portfolio management, risk perception, and market inefficiencies. Furthermore, the paper explores the implications for individual investors, fund managers, and the broader financial landscape. this paper employed the the techniques of Exploratory Factor Analysis, Principal Component Analysis by spss23.