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Project Report
INVESTMENT DECISIONS”
SUBMITTED TO
CHANDIGARH UNIVERSITY
AWARD OF DEGREE OF
OF
CHANDIGARH UNIVERSITY
DHRUV JAIN
SONAM NORBU
ABSTRACT
unbiased outlook on the future. However, the reality is far more nuanced.
portfolios alike.
investment choices. The findings shed light on several key insights that
alike.
One of the most striking revelations from the study is the prevalence and
Similarly, Hindsight Bias and Regret Aversion Bias were found to have
the tendency to perceive past events as having been more predictable than
opportunities.
factors for their failures. In the realm of investing, it can lead investors to
take undue credit for profitable trades while attributing losses to external
reward.
Despite these individual biases, when considered collectively,
choices.
can tailor their products and services to better meet the psychological
tendencies.
more rational and informed choices, while financial institutions can better
Introduction
The traditional finance paradigm has long been anchored in the belief that
beliefs or actions.
tendency to avoid making decisions that may lead to regret. This bias
failures to external forces, influenced by factors like age and gender. This
This study aims to analyze the cognitive and emotional biases affecting
making.
investment choices.
2. Literature Review
Jaya Mamta Prosad's research delves into the intricate dynamics of the
behavioral biases. Divided into three distinct themes, the study navigates
and biases within the Indian financial landscape. With a meticulous blend
(July 2023) empirical study on financial literacy, risk tolerance, and stock
By leveraging national survey data, the study offers valuable insights into
dynamics.
Joychen Manuel & George Mathew's scholarly inquiry into the impact of
factors, the research sheds light on the intricate interplay between human
following sections."
movements, looking for patterns and trends that may signal opportunities
or risks.
pay dividends and have a track record of dividend growth are often
volatility, beta coefficients, and other risk metrics, investors can assess
tolerance.
of future results. While historical data can provide valuable insights and
factors can all change over time, affecting future performance and
investment outcomes.
without the need for additional investment. Bonus shares, also known as
and signal confidence in future prospects. Bonus shares are often issued
shares.
The announcement of bonus shares can also have implications for stock
demand for the company's stock and a corresponding rise in stock prices.
create value.
shareholder value in the short term, they can also dilute existing
bonus share issues may signal to investors that the company lacks
strategic, financial, and market dynamics. While they offer the potential
for value creation and wealth enhancement, they also entail risks and
trade-offs that investors must carefully consider. By understanding the
the ease with which a security can be bought or sold in the secondary
and liquidity, allowing them to enter and exit positions quickly and
efficiently. Marketable stocks are easier to buy and sell, reducing the risk
institutional investors and traders who may need to execute large orders
or manage their portfolios actively.
with high trading volumes and broad investor interest tend to be more
investor
over a specified period. This metric encapsulates the net profits or losses
generated by the organization after accounting for all expenses, taxes, and
varies across firms. Research has shown that companies with lower
expected earnings growth tend to exhibit greater sensitivity to changes in
leverage.
investors with valuable insights into its overall financial health and
margins.
or turnaround opportunities.
Investors generally prefer shares that are priced affordably, as they offer
stock prices.
2.1.7. Stock Split and Capital Increase Implications
Stock splits and capital increases are strategic corporate actions aimed at
shares, thereby reducing the price per share while maintaining the total
uncertainty.
drive stock prices higher, while negative news or critical analysis may
lead to investor skepticism and downward pressure on stock prices.
price movements and predict future market trends. This approach relies
price data and volume trends, technical analysts seek to identify patterns
and trends that may repeat in the future, enabling them to anticipate
While technical analysis has its critics, many investors find value in its
investment decisions.
that enable investors to execute trades, manage risk, and track market
leveling the playing field for retail investors and empowering them to
investors can access the same data and research tools as professional
online.
and market dynamics, they are not always reliable indicators of future
events or outcomes.
being aware of their speculative nature. Studies have shown that investors
may behave as if rumours are credible news, even when they doubt the
sentiment.
Studies have shown that the impact of news coverage on stock prices is
stock prices and market trends. These indicators provide valuable insights
into the overall health and direction of the economy, influencing investor
correlation with stock prices. For example, GDP growth rates, interest
rate fluctuations, and foreign investment inflows can impact stock market
and savings rates may also influence stock prices over the long term.
returns, with higher inflation rates generally associated with lower stock
economic landscape.
informed decisions.
discounts.
The KANO model, developed by Dr. Noriaki Kano and others, provides a
Linear attributes are those that exhibit a direct relationship between their
that resonate with their target audience and drive long-term success.
decisions:
bonds or savings accounts, where the potential for capital loss is minimal.
investment strategies.
ventures. These investors possess a voracious appetite for risk and are
accumulators are driven by a desire for rapid wealth accumulation and are
insights for investors and practitioners alike. Finally, the study conducted
investment behavior.
behavior.
to inform not only individual investors but also financial advisors and
Research Methodology.
3.2 Population
The target population for this study comprises investors across India, with
financial landscape.
3.4 Sample
comprehensive dataset.
Leveraging tools such as SPSS and R-Studio, the research scrutinized the
Implications.
retention programs that account for the nuanced impact of biases, thereby
respondents
Female 46.9 39
Male 53.1 42
Total 100 81
respondents
20-29 50.62 40
30-39 8.64 8
40-49 27.16 23
Professional 6.17 5
Qualification
Graduate 40.74 32
Post-graduate 53.09 44
Total 100 81
and sources of information. The findings have been condensed into the
subsequent tables:
percent Frequency
total 100.00 60
by Stocks (43.3).
No 41.7 24
Yes 58.3 36
Total 100 60
(motivators)?
Financial advisor 15 10
knowledge
Friends 16.7 10
Father/Relatives 1.7.0 1
TOTAL 100 60
TOTAL 100 60
growth (28.30%).
0-10% 34.6 27
11-20% 40.7 34
21-30% 14.8 11
Total 100 81
to 10% (34.60%).
TOTAL 100 81
A majority of investors (60.50%) are considering an investment duration
of over a year.
investment
Brokers/fund managers 22 16
Television 14.8 12
Reference group 16 14
total 100 81
The primary source of market information for most investors is websites
(%)
bias
values and low standard deviations, while Cognitive Dissonance Bias has
return
for past
5 years
bias)
coefficients with alpha levels set at 0.05 and 0.01. The investors’
Representativeness Bias
model R R square R adjusted std. error of
Investors’ Decision.
Coefficients
coefficient coefficient
veness bias
Model Summary
Investors’ Decision
coefficient coefficient
dissonance
bias
Over-optimism Bias
Model Summary
estimate.
Investors’Decision
Coefficients
coefficient confections
optimism
bias
The R square shows the total variation of 2.9% in the Investors’ Decision
be:
Model Summary
Decision
Coefficients
coefficient coefficient
The R square shows the total variation of 2.9% in the Investors’ Decision
can be explained by Herd Instinct Bias. The regression equation will be: Y
Model Summary
Investors’ Decision
Coefficients
coefficient coefficient
control bias
The R square shows the total variation of 2.7% in the Investors’ Decision
only elucidate prevailing research trends but also discern latent gaps in
the existing literature, thereby paving the way for future scholarly inquiry
post-2009
Notably, the majority of respondents (50.62%) fell within the age bracket
varied, with 21% anticipating returns between 16 and 20%, while 46.9%
and 13.6% expected returns within the ranges of 11-15% and above 20%,
Conclusion.
The study elucidates the multifaceted dynamics of investor behavior and
navigate financial markets with greater prudence and foresight. the study
to recognize and address biases that may cloud their judgment. While
can optimize their investment strategies and work towards achieving their
REFERENCES
University, Jharkhand.
3. (2017). Investigating Herding Effects, Overconfidence, Availability
Investment Performance.
Investor Behavior.
Location: Pune.