Impact of cognition and emotions on financial decision making an empirical study of indian investors

Abstract

The thesis entitled Impact of Cognition and Emotions on Financial Decision Making: An Empirical Study of Indian Investors challenges the conventional notion of complete investor rationality. The domain of Clinical Psychology, Neurology and other disciplines in Medical Sciences explain that it is physiologically impossible for an investor to stay completely rational, especially in conditions like that of a stock market, where the market is most of the times in a frenzy. The current research aimed to explain the impact that emotions and various cognitive biases have on financial decision making of individual investors. The current study is empirical in nature, with the data collected from 511 individual investors across the states of Punjab, Haryana, Himachal Pradesh, Jammu and Kashmir, and Delhi-NCR. Sophisticated tools of data analysis such as Exploratory Factor Analysis, Confirmatory Factor Analysis and Structural Equation Modelling have been used in the study. The current research developed the measurement scale for emotions and various cognitive biases, in order to measure the same and facilitate future research in this domain. The study concluded by providing noteworthy suggestions to attenuate the impact of emotions and cognitive biases on financial decision making. Since, the role of emotions and biases cannot be eliminated during making financial decisions, recommendations have been provided in the study for individual investors and policy makers to decrease their impact. newline newline newline