EMPIRICAL TESTING OF HEURISTICS INTERRUPTING THE INVESTOR’S RATIONAL DECISION MAKING

Abstract

The study aimed to investigate the impact of behavioral biases on investor’s financial decision making. Current research studies the behavioral biases including overconfidence, confirmation, and illusion of control, loss aversion, mental accounting, status quo and excessive optimism. The study is significant for the investors, policy makers, investment advisors, and bankers. Empirical data has been collected through administrating a questionnaire. Correlation and Linear regression model techniques are used to investigate whether investor decision making is affected by these biases. The study concluded that the Confirmation, Illusion of control, Excessive optimism, Overconfidence biases have direct impact on the investor’s decision making while status quo, Loss aversion and Mantel accounting biases have no impact according to data collected from financial institutions.