An empirical analysis of influential factors on investment behaviour of retail investors’ in Indian stock market: a behavioural perspective”

Traditional finance theories such as Capital Asset Pricing Model, Efficient Market Hypothesis and Modern portfolio theories presumes that markets are efficient, people make rational decisions to maximise profits. But recent studies on individual investors’ behaviour have shown that people do not act in a rational manner, rather several factors influence their investment decisions in the stock market. This paper aims at identifying the factors influencing the retail investor's behaviour in Indian stock market. In this study, Principal Component analysis is used to find out the determinants of individual investment behaviour. The present study has identified five major factors that can influences retail investor's investment behaviour in Indian stock market. They are Overconfidence, Anchoring, Loss Aversion, Herd behaviour and Market factors. The findings will be useful for investors to understand common behaviours, from which justify their reactions for better returns and also helpful to the financial planners to device appropriate asset allocation strategies for their clients.