Influence of Psychological Factors and Emotional Intelligence on Investment Decisions in the Stock Market in Kathmandu Valley

Abstract

This study investigates the impact of emotional intelligence (EI) and psychological biases on investment decisions (ID) in Nepalese stock markets, including primary and secondary markets. It aims to explore how these psychological factors influence individuals’ investment behavior and to identify strategies for improving investment decision-making. An explanatory research design examined the relationship between emotional intelligence, psychological biases, and investment decisions. Data were collected through self-administered surveys distributed online and in person, utilizing convenience sampling techniques. A total of 231 responses were gathered for analysis. Quantitative analysis was conducted using statistical software (SPSS and PLS-SEM), incorporating descriptive and inferential statistics to assess the relationships among variables. The study found that emotional intelligence (EI) and overconfidence bias (OCB) positively and significantly impact investment decisions. In contrast, factors such as risk aversion and representative bias play a crucial role. The findings provide valuable insights for investors and financial educators, emphasizing the importance of emotional intelligence and awareness of psychological biases. This leads to improved investment decision-making and more significant financial literacy among investors in Nepal.