A Study on Behavioural Biases, Emotions, And Risk Preferences: An Empirical Study of Investor Decision-Making in Emerging Markets

This study explores the underlying behavioural dimensions that influence investor decision-making in emerging markets, with specific focus on India. While traditional financial theories are built on the assumption of rationality, real-world investment behaviour often deviates from these expectations due to the influence of psychological and emotional factors. This research integrates behavioural finance perspectives to examine how cognitive biases, emotional responses, and dynamic risk preferences collectively shape investment choices. The study is based on primary data collected through a structured questionnaire administered to 61 respondents with varying levels of investment experience. A descriptive and analytical approach has been adopted, utilizing percentage-based analysis to identify patterns in investor behaviour. The findings indicate that investors are significantly influenced by behavioural biases such as loss aversion, overconfidence, and herd behaviour. Emotional factors, including fear during market downturns and optimism during upward trends, also play a crucial role in shaping decision-making processes. Further, the study reveals that risk preferences among investors are not static but tend to fluctuate based on market conditions and individual experiences. Many investors exhibit a tendency to rely on informal sources such as peer opinions and prevailing market trends rather than solely on fundamental analysis. Overall, the research highlights that investment decisions are the result of a complex interaction between rational evaluation and behavioural influences. By providing a more realistic understanding of investor behaviour in the Indian context, this study contributes to the growing body of behavioural finance literature and offers practical insights for investors, financial advisors, and policymakers.