Behavioral Biases and Investment Decision-Making of Young Investors in Lalbandi, Sarlahi

Abstract

The classical concept of the behavioral finance assumes that the empirical study the actual practices of world’s investors are often influenced by psychological and cognitive biases. The main purpose of study is to examine the impact of psychological and behavioral biases on investing decision making amongst young adults in Lalbandi, Nepal. Quantitative and explanatory research design has been used. The questionnaire were distributed to 420 respondents among them 384 are valid questionnaire were collected and data were analyzed by the helping of SPSS 27 and Structured Equation model using SmartPls. The study found that behavioral factors significantly influence investment decisions, by loss aversion emerging as the highly dominant factors and similarly with representativeness, overconfidence, risk perception, and herding behavior. The result supports the relevance of Prospect theory and boundary theory in explaining investor behavior in emerging and semi-urban markets. The study found that investment-decisions are not completely rational but are shaped by psychological and social influences. It emphasizes the significance of incorporating behavioral finance awareness into higher education organizations and policy makers to improve decision quality and support sustainable investment practices among young adult investors in Lalbandi.