Movements of Investor behaviour during the pre and post-

Equity Market Crash of January 2008

Anil Kumari

Abstract
The high valuation in the equity markets during the period between June 2005 and January 2008

cannot always be attributed to the strong fundamentals of the Indian economy nor can it be based

purely on the performances of the companies traded during the period. There is a very strong and

valid reason to believe that the Bull Run witnessed was to a large extent aided at the time by

investor behavior not always rational. Finance researchers commonly treat investors as

independent agents often ignoring the impact of social factors this was clearly brought out by

Shiller (1989). Behavioral finance literature, has established that individual investor behavior is a

result of the interaction between the investor and his environment. Investors tend to use various

heuristics and are influenced by various biases in making his decisions. The purpose of this

paper is to study how individual investors responded to the developments in the equity market

during the foresaid period. The study tries to establish the various factors that influenced

individual investors during the period and the changes in investor behavior if any post the

meltdown of January 2008. The study is based on a questionnaire directed towards active

investors in Mangalore.
i
Research Scholar, Post Graduate Department of Economics, Mangalore University, Mangalore and also
Principal,Vijayalakshmi Institute of Hospitality Sciences, Mangalore. Email: anilnairs@sify.com/
akgnairs@gmail.com/.