Impact of Psychological Biases on Investor Behavior and Decision Making

In the present study financial market and investor psychology is analyzed in the light of individual psychological biases and reasons for people's behavior as to why sometimes individual is make irrational financial decisions. The basic purpose of this study is to find the impact of behavioral aspects and the relationship between investors behavior and risk. We found out that investors are not always rational unlike the theories of standard finance. They are subject to several cognitive and emotional errors; they suffer from several biases while taking the investment decision. Due to different biases of their perceptions change about risk taking. Results show that investors who are actually risk averse in their characteristics show the risk seeking behavior by holding the losing investments. Results show that psychology of risk has the highest score(mean = 3.674, SD =.795) and overconfidence has the lowest score (mean = 3.001, SD = 0.912)