EFFECT OF BEHAVIORAL BIASES ON INVESTMENT DECISION MAKING AMONG NEPALESE INVESTORS

Abstract

This study investigates the effect of behavioral biases on investment decision making among Nepalese investors. The research focuses on five key biases: overconfidence, anchoring, regret aversion, herding, and availability. Data were collected from a primary source using a structured questionnaire, with a sample of 385 investors selected through convenience sampling. The collected data were analyzed using descriptive statistics, correlation, and regression analysis through SPSS. The results highlight the significant prevalence of these biases among Nepalese investors, and significantly impact their investment decision making processes. The correlation analysis revealed that all five behavioral biases overconfidence, anchoring, regret aversion, herding, and availability are significantly and positively correlated with investment decision making among Nepalese investors. Overconfidence and herding biases showed the strongest correlations, suggesting they play a particularly critical role in shaping investment behaviors. The regression analysis confirmed that all five behavioral biases overconfidence, anchoring, regret aversion, herding, and availability have a significant impact on investment decision making among Nepalese investors. Each bias was found to significantly influence investment behavior, with overconfidence and herding biases emerging as the most impactful factors. These insights have significant implications for policymakers and financial educators, suggesting the need for targeted interventions to mitigate the effects of these biases. Future research should investigate these biases across different demographics and regions to provide a more comprehensive understanding of behavioral finance in diverse contexts.