UNDERSTANDING THE BIASES IN INVESTMENT DECISION MAKING ON STUDENTS

Abstract

This research project delves into the intricate realm of behavioral finance, where the interplay of psychological biases and investment decision-making unfolds. Anchored in the theoretical foundations of behavioral finance, particularly Prospect Theory, the study explores how cognitive biases influence investor behavior and market dynamics. With a focus on 21 psychological biases, ranging from anchoring bias to gambler's fallacy, the project aims to decipher their impact on investment decisions and market inefficiencies. Drawing upon empirical evidence and theoretical frameworks, the research investigates the role of psychological biases in shaping individual investor behavior and market anomalies. Through a comprehensive analysis of real-world data and behavioral experiments, the study elucidates predictable patterns of behavior exhibited by investors and their implications for portfolio management strategies. By examining case studies such as the Dot-Com Bubble and the GameStop Short Squeeze, the research elucidates the practical implications of psychological biases on market outcomes and investor returns. The findings of this study have significant implications for investors, policymakers, and financial professionals, providing insights into the cognitive mechanisms underlying investment decision making. By identifying and analyzing psychological biases, the research contributes to a nuanced understanding of investor behavior and market efficiency, paving the way for informed decision making and risk management strategies in the dynamic landscape of financial markets.