EFFECT OF BEHAVIORAL BIASES ON INVESTMENT DECISION OF MUTUAL FUND INVESTMENT IN NEPAL
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Shanker Dev Campus
Abstract
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The aim of this study is to investigate the effects of behavioral biases such as
overconfidence, availability bias, herding variables, disposition effect on mutual fund
decision in Nepal. The sample was collected using the convenience method and a total of
200 participants participated in the study. In this study, descriptive statistics, analysis of
variance, independent sample t-test, correlation and horizontal analysis were used to
analyze the data. Research results show that overconfidence, emotional performance and
risk aversion have a positive effect on investment decisions, but the herding effect is not
significant. Additionally, the results show that financial literacy has a negative impact on
overconfidence, emotional distress, risk taking and animal husbandry. This means that a
high level of financial literacy can help reduce the impact of these biases on investment
decisions. This study provides insight to policy makers, stakeholders and financial
institutions in developing policies and strategies to improve financial literacy. It is also
useful for researchers and the public as it provides a deeper understanding of behavior and
investment decisions. Future research could expand the research by including new
independent variables such as shock and recognition bias. Future research could also
investigate the effects of other factors, such as age and gender, on the relationship between
negative attitudes and investment decisions. Overall, the research highlights the importance
of understanding and managing biases in investment decisions and suggests that good
financial literacy can help people make informed decisions about investing more.