1Research Scholar, Department of Commerce and Business Studies, Jamia Millia Islamia, New Delhi-110025, India
2Assistant Professor, Department of Commerce and Business Studies, Jamia Millia Islamia, New Delhi-110025, India
*Corresponding author Email-id: mohd127301@st.jmi.ac.in
Rationality is one of the basic assumptions in all standard financial theories, but the behavioural finance experts have shown with the help of various experiments and other studies that investment decisions are influenced by cognitive psychology and emotional factors. Individuals’ investment decisions are affected by not only intellectual aspects but emotions, preference and desires also. There are a number of demographical factors such as gender, age, income, education, wealth and marital status of individuals which influence the investment decision-making apart from cognitive and emotional biases.
This paper tries to find out how individuals’ investment decisions are affected in Indian stock market with respect to overconfidence and risk attitude. Besides, the association between overconfidence and risk attitude has also been examined.
The study is descriptive in nature and is based on primary data collected with the help of a semi structured questionnaire from 91 individual investors who trade in stock market. The survey was carried out in Delhi.
The collected data was analysed using summated mean score and Pearson's coefficient of correlation. In addition, the significant of the correlation coefficient has also been examined with the help of a t-test designed for measuring the significance of correlation.
On the basis of the analysis of the mean scores, the study found that investors exhibit overconfidence and are risk-seekers. Besides, t-test reveals that there is positive and significant correlation between overconfidence and risk attitude of investors.
The findings of the study have useful implications for portfolio/wealth managers as well as for individual investors. By understanding and overcoming behavioural biases, especially the overconfidence bias, the investors can gain better returns commensurate with the risk.
There are a few studies which have investigated the association between overconfidence and risk-attitude. In the context of Delhi, this is first study to the best of our knowledge which has addressed this issue. In a cosmopolitan city like Delhi where the numbers of investors are growing at a rapid pace, the value of the studies which describe investors’ behaviour increases many fold.
Overconfidence, Risk attitude, Behavioural finance, Stock market, Risk attitude
