Investment Behavior of College Students: Implications for Kathmandu’s Share Market

Abstract

This study investigates the influence of behavioral biases on the investment decision-making of college students in Nepal, with a particular focus on the Nepal Stock Exchange. Recognizing that psychological factors significantly shape portfolio management and financial choices, the research examines four key biases: herding, risk perception, overconfidence, and loss aversion. A quantitative approach was employed, using a structured questionnaire administered to 430 students in Kathmandu, yielding 385 valid responses (an 89.53% response rate). Statistical tools, including mean, standard deviation, correlation, and regression analyses, were applied, and reliability testing confirmed acceptable internal consistency (Cronbach’s alpha > 0.74). The results reveal that all four biases exert a significant positive impact on investment decisions (p < 0.05). Herding emerged as the strongest predictor (β = 0.439), followed by overconfidence (β = 0.209), loss aversion (β = 0.116), and risk perception (β = 0.009). Correlation analysis further substantiated a moderate association between herding and investment choices (r = 0.518). The findings indicate that student investors deviate from rational decision-making models, with herding behavior playing a dominant role. These insights reinforce the relevance of behavioral finance theory in emerging markets. Practically, the study underscores the need for financial literacy initiatives and investor awareness programs by regulatory bodies such as the Securities Board of Nepal, while also offering guidance for young investors to cultivate more rational and informed investment strategies.