Does Investor's Heuristics Determines Their Investment Decisions?

Investors use many rules to make an investment decision. Many of the rules will be framed based on the trial and error method. This leads to the development of rules of thumb. Investors use these rules to make decisions in a complex and uncertain environments. But in reality, the investors’ decisions are not rational. They are frequently influenced by psychological biases during investment decisions. One such bias is heuristic. This paper looks at these heuristics and its influence on investor's investment decisions. Heuristic variables such as representativeness, overconfidence, anchoring-adjustment, conservatisms and aversion to ambiguity were taken for this study. The multistage random sampling technique was used to collect the data from retail investors through the structured questionnaire. The data so collected was analysed quantitatively by using different statistical tools. Findings of this study suggest that investors are categorised based on the influence of heuristics as heuristic satisficing, heuristic bounded and heuristic unbounded. Further, based on the interactions of demographic and investment variables with the heuristics, investor's heuristic model has been framed and explained in this study.