Abstract
Purpose: One among the most important challenges to our own success may be our own self-generated behavioural biases. People’s choice on
investments in money market is exaggerated by so many reasons. Cognitive biases may creep into their investment decisions such as Herd Instinct,
over confidence, Regret aversion and Representativenessetc. The current study is analyzing about how investors’ financial decisions were impacted by
behavioral and cognitive biases.
Methodology: Primary data have been collected from individual stock market participants from Bangalore, India. The four biases identified in the
literature were hypothesized to have a significant influence on investment decision making. The path model, which has been developed using AMOS
(Version 20) to analyse the relationship, shows that the relationships of all the four cognitive biases on investment decision making have a significant
influence.
Findings: From the RIDIT ranking analysis, it was found that out of all the cognitive biases dimensions, the dimensions of over confidence bias are
given utmost priority by the respondents followed by the dimensions of herd instinct bias.
Practical Implications: It is very common to be influenced by biases during investment decision making. But if we are careful and able to identify our
mistakes by creating transaction and financing rules and following those rules strictly, we can alleviate those biases.