ISSN : 3049-1754 (PRINT) ISSN : 3048-8966 (ONLINE)
DETERMINANTS OF RETAIL INVESTOR DECISION MAKING: A BEHAVIOURAL FINANCE ANALYSIS OF PSYCHOLOGICAL AND SOCIO-DEMOGRAPHIC INFLUENCES
MR JEEVAN HIRA & DR RAMANATHA HR
Affiliations:
Student, Christ (Deemed to be University), Bengaluru
Professor, Christ (Deemed to be University), Bengaluru
Abstract:
This study investigates the key determinants influencing retail investors' investment decisions, with a particular focus on psychological and social factors such as investment attitude, cognitive biases, emotional responses, risk perception, and herding behaviour. The research aims to identify how these factors shape investor decision-making and how financial institutions can use this knowledge to engage retail investors better. The study employs a combination of surveys and statistical tools, including multiple linear regression, ANOVA, and descriptive analysis, to explore the relationships between these factors and investment choices. Findings reveal that investment attitude plays a significant role in shaping investment decisions, reflecting how investors perceive and evaluate various investment opportunities. In contrast, cognitive factors, such as biases and mental shortcuts, were found to have a limited impact on decision-making, suggesting they are not primary drivers of investment behaviour. Emotional factors, though present, account for a small proportion of variance in investment decisions, indicating that while emotions may influence choices, they do so in a relatively minor way. On the other hand, risk perception emerged as a crucial factor, as investors’ sensitivity to risk strongly influences their investment decisions. Interestingly, the herding behaviour factor, often associated with crowd-driven investment decisions, was found to have a diminishing effect in the current context. This can be attributed to the increased financial literacy and accessibility of advanced investment tools, which have empowered individual investors to make more independent and informed decisions. Overall, the study highlights that while investment attitude and risk perception are central to decision-making, emotional and cognitive factors play a secondary role, and herding behaviour is becoming less relevant in today’s investing environment.
Keywords:
Behavioural Finance, Psychological Factors in Investing, Cognitive Biases, Risk Perception, Investment Attitude, Herding Behaviour, Socio-Demographic Influences, Emotional Factors in Investing, Retail Investor Decision-Making.
Publishing Chronology:
Received - 24/03/2025
Revised - 26/07/2025
Accepted - 30/07/2025
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