Behavioural bias and investment dicision in nepalese share market; The mediating role of saving behaviour

Abstract

The study aimed to examine the relationship between behavioural biases and investment decision with mediating role of saving behavior in Nepalese share market. This study is categorized as a descriptive and causal comparative study. Population of the study is targeted to the Nepalese investors who have been engaged in buy and sell of shares in NEPSE. 408 respondents have been selected to collect the responses towards the study variables in Kathmandu valley. Convenience sample method is used to select respondents. Sample venue is the various brokerage firms. Since the study is concerned with behavioural biases, saving behavior and investment decision, the data are primary nature and the data are collected from the Nepalese share market investors. The questionnaire is chosen as research instrument to collect primary data. The quantitative analysis has been conducted by adopting statistical techniques. First of all, the study presented the analysis of demographic profile of the respondents. Descriptive statistics, correlation and regression analysis are performed to analyze the data. The statistics output is derived using SPSS. The study found that that saving behavior and anchoring bias are the most influential factors positively impacting investment decisions, while mental accounting has a significant negative effect. Overconfidence and availability bias also show significant positive influences, albeit to a lesser extent. In contrast, herding bias and loss aversion do not significantly affect investment decisions in this model. The findings of mediation effect of saving behavior highlight the crucial role of saving behavior as a psychological link that converts cognitive and emotional biases into tangible investment actions. The results support the notion that although biases directly impact investment decisions, their influence is notably intensified or mediated through an individual’s saving habits. This deeper understanding of how biases, saving behavior, and investment choices are interconnected offers important insights into behavioral finance, especially within the context of emerging markets such as Nepal.

Keywords: Behavioural biases, investment decision, overconfidence, herding bias and saving behavior.