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Determinants of Investor’s Behaviour – An analytical review

Anju K J
Research Scholar
Department of Commerce
Christ University

Dr Anuradha P S
Associate Professor
Department of Commerce
Christ University


Behavioural Finance combines psychology with financial theory to comprehend the associations
between markets, emotions, personality and reason. Investors have dissimilar outlook when they
choose about investing in a specific avenue. Through appropriate investment strategies and
financial management, investors can upsurge personal wealth which will enhance the economic
growth. Three variables that measure the growth of an economy are Income, Saving and
Investment. This study forms a concrete theoretical framework for the researchers on investor’s
behaviour in different countries. In this paper numerous literatures prevailing worldwide has
been examined using interpretative approach viz., objectives, sample, research methodology and
results of the study to diagnose the investor’s behaviour. The paper exhibits that there are
miscellaneous variables that administer an investor’s decision to save and invest. Further, an
investor’s behaviour model has been developed.

Keywords: Behavioural Finance, Financial Management, Investor’s behaviour model,

Investment Strategies, Personal Wealth.

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The evolving field of behavioral finance examines the psychological and sociological
factors that impact the decision-making process of individuals, groups, and organizations.
Savings and investments by individuals are important both for personal financial well-being and
for economic growth. Money saved is of no use if it is not invested in some productive assets or
capital goods. After investment in productive areas, it enhances the national product or per capita
income and raises the standards of living of the investor. In this day and age the financial
services sector has turn out to be extremely diversified offering the investor with an extensive
variety of investment opportunities. Through appropriate investment strategies and financial
planning, investors can upsurge personal wealth which will enhance economic growth.
Economic growth is amid the utmost imperative factor affecting the quality of life that
individuals lead in a country. Three variables that measure the growth of an economy are
Income, Saving and Investment. The present study aims to review various published empirical
research studies available worldwide for identifying the variables that govern an investor’s
decision to save and invest and also, develop an Investor’s behaviour model.

Researchers across different countries have analysed the behaviour of investors and have
attempted to enhance our understanding of why people manage investments in different ways. It
is believed that decisions of an investor were based on modern portfolio theory and the efficient
market hypothesis. However, researchers have proved that most of the investors do not pick their
stocks and portfolio based on the three criteria of modern portfolio theory – expected return,
standard deviation and correlation. Analysis of their portfolio revealed that they fold few stocks
and fail to diversify (Kiran and Rao, 2004). In fact the investor’s portfolio practices, preferences,
risk perceptions, intentions, pattern of investment, their awareness level, factors affecting their
investment behaviour and the problems faced by them need to be examined in order to
understand their saving and investment behaviour. Investing in several types of assets is a
challenging phenomenon that fascinates individuals from all walks of life. It is the employment
of funds with the aim of earning income or capital appreciation (Pandian 2001). The investment

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strategies of one investor are dissimilar from that of another. The enthusiasm of an investor to
invest is multifaceted and hinges on a number of factors.
In this paper, a systematic review of the prevailing empirical literature from the year 1974 to
2014 has been performed using interpretative approach viz., objectives, sample, research
methodology and results of the study. 86 Articles published in various online databases and
search engines such as SSRN, NBER, Science Direct, INDIASTAT, ProQuest, JSTOR, OECD
library and Google scholar along with relevant books on the topic were reviewed.

1. To present a contemporary and comprehensive review of experiential studies on investor’s
2. To reconnoiter the miscellaneous literature existing worldwide for identifying the variables
that administrates an investor’s decision to save and invest for building the Investor’s
behaviour model.

Behavioural finance is a new emerging science that studies the irrational behavior of the people.
While conventional academic finance emphasizes theories such as modern portfolio theory and
the efficient market hypothesis, the emerging field of behavioral finance investigates the
psychological and sociological issues that impact the decision-making process of individuals,
groups, and organizations. There exist numerous empirical studies on the investor’s behaviour
worldwide. Academic researchers have accepted various factors that influence the investor’s
decisions to save and invest. Empirical studies conducted earlier on investor’s behaviour has
been reviewed and presented in Table 1.

TABLE 1 – Existing empirical literature focusing on investor’s behaviour

Author and Research
No Research Objective Sample Results of the study
Year Methodology

Respondents are quite aware and
To examine the awareness
park their money in traditional
level and investment
Bhushan Descriptive and safe financial products
1 behaviour of salaried 516
(2014) Statistics whereas awareness level of new
individuals towards
age financial products among the
financial products.
population is low.
Hood, To examine the factors that Logistic Social characteristics and
Nofsinger influences the investment Regression, personal values had an impact on
2 brokerage list
and Varma decisions of socially Correlation and the stocks owned by individual
of firms from
(2014) responsible investors. Clustered investors.
1991 to 1996.
Standard Error
The most important factors that
influence individual investment
decisions were: reputation of the
To establish the factors firm, firm’s status in industry,
Jagongo and analysis,
influencing investment expected corporate earnings,
3 Mutswenje 42 Friedman’s test
decisions at the profit and condition of
(2014) and
Nairobi Stock Exchange statement, past performance
Factor analysis
firms stock, price per share,
feeling on the economy and
expected divided by investors.
There is a remarkable change in
the investment avenues due to
establishment of different
To identify the popular
financial institution, creditable
perception of individual
source attractive return, good
investors towards selected
Geetha and One sample capital appreciation, and tax
investment avenues and
4 Vimala 500 t-test, Chi- concession. From the investors
the predominant factors
(2014) Square point of view changes in
which influence individual
demographic factor such as age,
to go for savings in that
income, education, and
occupation have an influence in
the investment avenue
There are various investment
To study investment options available in the market
behaviour and individual and people prefer to invest in
Raheja and investment practices as per different investment options with
5 Lamba different stages in their life some objective behind
(2014) cycle and to understand investment. It also concludes
what an investor look for that life cycle stages and
in investment avenues. investment objectives are
dependent on each other.
The perceptions of the investors
To review the important
do have a strong and significant
developments in the field
impact on the financial decision
of behavioral financial and
Case Study, making of the investors thus
to present how behavior
6 Raza (2014) 50 Descriptive implying that behavioral finance
finance is the emerging
Analysis in fact duly challenges the
field in the area of
conventional financial modeling
investment decision
and thus is an important
emerging field of financial

decision making that definitely
needs to be explored and studied

An individual’s investment
intention is significantly affected
by his attitude towards
investment, subjective norm and
To use the theory of perceived behavioral control. the
planned behavior (TPB) as study has also provided strong
a conceptional lens for evidences for the existence of
Phan and exploring factors psychological factors which
7 472 SEM
Zhou (2014) influencing individuals’ supports the hypothesis that four
investment behavioral psychological factors
intention in the (overconfidence, excessive
Vietnamese stock market. optimism, psychology of risk
and herd behavior) do have
significant impact on the
individuals’ attitude towards
To find out whether
Charles and Investor’s emotion based
individual’s emotions 742 retail
8 Kasilingam SEM intuitiveness affects their
determine their investment investors
(2014) investment personality.
personality or not
Investment options opted by
people are Currency, Bank
To understand and present Deposits, Non-Banking
Chhabra and
a glimpse of research work Literature Deposits, Life Insurance Fund,
9 Mundra
done on the investment review Provident Fund & Pension Fund,
behaviour Claims on Government, Shares
& Debentures, Units of UTI,
National Saving Certificates.
To establish the behavioral Herding effect, risk aversion,
factors influencing prospecting and
Wamae Correlation and
10 individual investors’ 47 anchoring influences the
(2013) Regression
decisions at the Nairobi investment decision making in
Stock Exchange. stock market
To study the interaction The results show that the
between five personality investment biases in individual
traits and demographic investigators has relationship
11 factors with behavioural 215 SEM with personal characteristics
and Gholam
biases in investment meaningfully and with some of
decisions in Tehran Stock the demographic variables
Exchange in 2011. weakly.
The survey of literate household
To determine the basic revealed features of irrational
Jurevicience features and slopes of Regression behaviour. Some characteristics
12 and Ivanova behavioural finance in 171 Correlation (such as the winner’s curse
(2013) concordance with financial Analysis effect or loss aversion) are
decisions of a household. similar to those established by
scientists of behavioural

economics and
some characteristics (absence of
the market impact) are
recognised as unique and based
on Lithuanian mentality
As far as the investment
strategies by small investors are
concerned, risk and returns
topped the list, followed by
Intrinsic Value /Current Market
To assess the investment
Price, Timings of investment,
strategies and motivational
Cost Price of Shares, and
Deene and factors involved in
13 425 Chi Square Services of Financial Advisors.
Pathi (2013) corporate investment by
For corporate investment by
small investors of
small investors following factors
Karnataka state.
played important role- Quality of
Management, Track record of
the company, Persuasion of
intermediaries, Interim Results
and Press coverage.
Four major factors have greater
Elankumara To explore the factors
influence on the behavior of
n and influencing the behavior of Descriptive and
14 525 investors, viz., low risk,
Ananth investors towards Factor Analysis
informational asymmetry, high
(2013) commodity market in India
return and objective knowledge
Most of the employees are aware
Bhardwaj, To throw light on the
of investments in securities but
Sharma and investment behavior of the Descriptive
15 50 they are not investing in it as
Sharma employees of Bahra analysis
they consider it as an unsafe
(2013) University, Solan District
Females are more risk averse
than males. Young and educated
people are attracted more
To analyse the relationship
towards new risky investment
of demographic variables
opportunities and are reluctant
Bashir, with the investment
because of limited resources and
Ahmed, preferences consisting of
Descriptive lack of investment opportunities
Jahangir, stock investment and
16 120 Analysis, and absence of investment
Zaigam, gambling decisions of
Correlation trends. The emergence of
Saeed and salaried individuals of
frequent religious issues, non-
Shafi (2013) finance teachers
conducive economic
and bankers of Gujarat and
environment and culture has
negative relationship with
gambling while making
investment decisions.
The results reveal that the
To identify the factors psychological axes
which determine conservatism, diligent and
individual investor Principle discreet, remorse abhorrence fall
17 investment behaviour. 300 component in line with the earlier research
To know whether any analysis but prudence and under
psychological biases exist confidence are the contrary
among Indian investors behaviour axes reported by the
multivariate analysis.

The individual investors still
Narayanan To stud the investors Descriptive
prefer to invest in financial
18 and behaviour towards various 100 analysis and
products which give risk free
Arivazhagan investment avenues Correlation
Certain factors like education
level, awareness about the
current financial system, age of
Palanivelu To analyze the investment investors make significant
and choice of salaried class in impact while deciding the
19 100 Chi Square
Chandrakum Namakkal Taluk, Tamil investment avenues. Awareness
ar (2013) Nadu, India. program has to be conducted by
Stock Broking firms, because
most of the respondents unaware
about new services.
There is significant gender
To analyse the gender differences that occur
Bhushan and
differences in investment in investment preferences for
20 Medury 118 Chi Square
behaviour among health insurance, fixed deposits
employees and market investments among
It is found that gender, age and
friends are mostly influencing
To find out the impact of
the investment decisions
demographic factors on
Sireesha and of the respondents. It is
investment avenues Descriptive
21 Laxmi 165 concluded that the respondents
selected by investors in the analysis
(2013) of the study are conservative in
twin cities of Hyderabad
nature and show less concern for
and Secunderabad, India
money multiplication and
The major impact on savings is
due to the level of income of the
To determine the
school teachers. The main
relationship between the
Virani Descriptive avenues of investment are Bank
22 savings and investments 100
(2013) Analysis deposits and the main purpose of
pattern among the school
investment is for children
education, marriage, and security
after retirement
Individuals who are optimistic
are more interested in long term
investing than individuals who
are generally pessimistic. Male
To study the impact of Regression, investors are mostly longer term
Dhar and
23 Individual’s Psychology in 82 Chi-square, investors when compared to
Dey (2012)
their Investment Pattern ANOVA female investors. Individuals
who trust other people and
individuals who do not trust
other people do not differ in
their investment horizons.

To find out the
significance of
demographic factors of
the demographic factors have a
Geetha and population such as gender,
ANOVA and significant influence over some
24 Ramesh age, education, occupation, 475
Chi Square of the investment decision
(2012) income, savings and
family size over several
elements of investment
Most popular investment
avenues are bank deposits and
real estate, small saving schemes
Chaturvedi To study the investment and life insurance. Safety,
25 and Khare culture among the Indian 526 income, liquidity and
(2012) Investors marketability capital
appreciation, tax benefit and
diversification benefits are the
major objectives.
To gain a greater
understanding of the
Individual factors such as
individual motivations,
obligation to family, upbringing
Kea and institutional mechanisms, Descriptive
26 189 and employment experiences
Kim (2012) and structural Analysis
affect participants’ attitudes
determinants, that guide
toward savings.
savings decisions among
low-income households.
Investors make investment
decisions based on heuristics.
Investment behaviour is highly
influenced by representativeness
and they do lot of mental
accounting in the sense of
To identify and confirm
grouping their gains and losses
Chandra and psychological heuristics Principle
while making decisions.
27 Kumar and biases prevailing 350 Component
Investors prefer those pieces of
(2012) among the Indian Analysis
information which are easily
individual investors.
adjustable into their investment
decision-making. Existence of
information asymmetry pattern
among individual investors
which affects their investment
behaviour to greater extent.
Individual characteristics of
To diagnose the attitude teachers such as age, gender,
and behaviour of the marital status, lifestyle and
teachers towards savings family characteristics such as
Achar Analysis, Chi
28 and investment and to 535 monthly family income, stage of
(2012) square and
understand the resultant family life cycle and upbringing
economic behaviour and status emerged as determinants
its implications of their savings and investment
To analyze and identify the Individual Eccentric, Wealth
Sultana and factors influencing the Maximization, Risk
29 Pardhasarad Indian individual equity 891 Factor Analysis Minimization, Brand Perception,
hi (2012) investors while choosing a Social Responsibility, Financial
stock for investment. Expectation, Accounting

Government and Media,
Economic Expectation and
Advocate recommendation are
factors influencing the behavior
of Indian individual equity
The respondents integrate the
objectives of saving, the factors
To understand the influencing the saving and the
behaviour of individual sources of information for
Suman and 50 investors
investor in stock market, Descriptive decision making. Today’s
30 Warne from Ambala
specifically their attitude Analysis investors are fully aware about
(2012) District
and perception with the stock market.
respect to the stock market. The market movements affect
the investment pattern of
investors in the stock market.

People give more preference to

Brahmabhatt To determine the Descriptive
savings and safety but at the
Kumari and investment behaviour of analysis,
31 100 same time they want higher
Malekar investors and investment Regression and
interest at low risk in shorter
(2012) preferences for the same Cluster analysis

In spite of low income the

teachers have been saving for
To determine the
future needs. The main avenues
relationship between the
Jain and Jain Descriptive of investment are Bank deposits
32 savings and investments 100
(2012) Analysis and the main purpose of
literacy among the school
investment is for children
education, marriage,
and security after retirement.
There is association of
demographic profiles and
personality type of the investors
with investment choice.
Jain and To examine the association Investors with higher income
33 Ranawat of demographic factors on 100 Chi Square test group prefer to invest in real
(2012) investment choices. estate and females prefer to
invest in old/ commodities.
Females were conservative while
and males were aggressive.
To know the preference of
investment instruments, to
Bank deposits, insurance and
know the various
Samudra and small saving schemes such as
objectives of investment 300 Descriptive
34 Burghate Public provident fund, Post
and to know whether there households Analysis
(2012) office saving deposits are
has been increase in the
preferred investment options.
savings and the reasons for
the same.
To analyse the investment Chi-square, Saving objective is influenced
35 pattern, saving objective 200 ANOVA, factor by demographic factors such as
and preferences of analysis. age, occupation and the income

individual investor’s for level of investors. Female
various investment options investors tend to save more in a
available in India. To disciplined way than the male
explore whether investors. Women are risk averse
dichotomy of the popular indeed but save more than the
believes that men are more male counterparts as the income
pro-risk than women. level rises.
Chi-square tests indicated that
both young and experienced
To study whether the
investors suffered losses, and
behavioural factors have
Subash Discriminant thus were equally impacted by
36 an influence on the 119
(2012) analysis the crisis. Results from weighted
decision making process of
scoring showed that investors
portfolio investors
were suffering from almost all
the biases studied.
To study preference level
Majority of investors prefer bank
of individual towards
deposit because of less risk.
various investment
Investors who have less
avenues, to find out the Descriptive
Bhatt and education and income compare
37 frequency and the factors 200 analysis, Two
Bhatt (2012) to other, they also prefer bank
that influences on way ANOVA
deposit, post office deposit and
investments and to
insurance because of easy to
measure risk ability of
understand and less risk.
different class of people.
To what extent literature Emotions play a vital role in
restricted the role of investment decisions and
Bhat and Literature
38 investor emotions in building long-term wealth
Dar (2012) review
investment decision requires counter-emotional
making investment decisions
Except the gender, there exists a
Kumar To analyse the influence of
469 investors Descriptive relationship between the socio-
Vijayabanu the financial literacy level
39 from analysis, Chi economic factors and the level of
and Amudha on individual investment
Tiruchirapalli Square, financial literacy possessed by
(2012) decisions.
the respondents.
Most of the respondents are
To compare the young and
looking to meet out their future
experienced women
expenses as their major motive
Ramanujam investors related to their
towards the investment with low
and investment Chi Square,
40 66 risk options. And the women
Ramkumar avenues with their ANOVA
investors are preferred to have a
(2012) empirical analysis towards
long term appreciation rather
the success in investing in
than having short or medium
stock market
term appreciations.
All age groups marked highest
To examine the investment preference towards bank
behaviour of the middle Descriptive deposits and insurance
41 Das (2012) 150
class households of Barak Analysis investment so as to get the
Valley in Assam benefit of safety and security of
their life and investment
Working women invest their
To study the money in insurance plans. The
investment behavior Descriptive less financially literate are less
42 Bahl (2012) 100
among the working analysis likely to engage in
women in Punjab recommended
financial practices, such as

planning for retirement.

The investors belonging to

To analyse the investor’s different age groups have
Mean and
Kothari behaviour towards different behaviour while doing
43 100 Standard
(2012) investment avenues in investment and their selection of
Indore city. any investment avenue highly
depends upon their age.
Accounting information is the
most influencing factor of the
individual investor behavior and
neutral information is the least
influencing factor of the
Dharmaja, To identify the most and
individual investor behavior. It
Ganesh and the least influencing Descriptive and
44 200 was found that there are
Santhi factors of the individual Chi Square
also some behavioral factors like
(2012) investor behavior
the investor’s financial
tolerance, emotional risk
tolerance and financial literacy
which influence the investor’s
To explore the
psychological concept of
individual attachment
There is a significant role of
Harikanth style, especially individual
Descriptive income and occupation in
45 and Pragathi investors to different 270
Analysis investment avenue selection by
(2012) available investment
the male and female investors
avenues and their
investment preference
Personality traits of the investors
have an impact on the
To analyze the influence of
individuals while taking
seven personality traits
Descriptive decisions and also have a strong
emotional stability,
Chitra and analysis, Chi influence on determining the
extraversion, risk,
46 Sreedevi 94 Square and method of investment. The study
return, agreeability,
(2011) Discriminant also found that the influence of
conscientiousness and
analysis personality traits on the
reasoning on the choice of
investment decision is more
the investment pattern.
compared to that of demographic
There is relationship of savings
Delafrooz To examine determinants behaviour and financial
47 and Paim that influence financial 2000 problems to financial literacy,
(2011) wellness financial stress and financial
management practice.

Neutral Information, Accounting
Information, Self -Image/Firm-
To identify the most Image Classical wealth
Dawar and affecting and the least 275 investors maximization criteria, Social
Analysis and
48 Wadhwa affecting factors living in Relevance, Advocate
(2011) influencing investor Jalandhar recommendation and Personal
Sample T Test
behaviour in Punjab financial needs were found to
influence individual investor
behaviour in Punjab.
To explore the effects of
psychological factors, such Those who are able to exercise
Seong, Kai
as, social influence, Ordinal self-control and receive parental
49 and Joo 400
attitude towards savings, Regression influence during childhood are
and self-control on savers tending to save more.
in Malaysia.
To identify and confirm
The results reveal some
the presence of
psychological axes, such as
psychological biases. To
Chandra and Principle conservatism, under confidence,
examine the extent to
50 Kumar 500 Component prudence, precautious attitude
which psychological biases
(2011) Analysis and informational asymmetry
are responsible for
which have as influence on
individual investment
investor decision making.
The survey revealed relatively
low rates of participation by the
To understand the
households in the securities
behaviour of household 38000
market. The degree of risk
investors in dealing with households
NCAER Descriptive aversion was found to be
51 various financial across 44
(2011) Analysis extremely high in Indian
instruments which were cities and 40
households and so commercial
traded in markets regulated villages
banks and insurance schemes
were their primary choice for
saving and investment.
Age composition and assets do
To estimate the
not have a major effect on
determinants of financial
saving while levels of income,
Issahaku saving and investment in 60 household Multiple Linear
52 occupation and expenditure has.
(2011) one of the most deprived units Regression
There is the propensity to save
district capitals in Ghana,
and invest in Nadowli in spite of
the Nadowli
low income.

The people were not properly

To know that how people
Geetha and Descriptive aware to the investment options,
plan to their investment to
53 Ramesh 210 Analysis and they have lack of knowledge
meet their objectives and
(2011) Chi Square about risky and less risky

The result shows that there are

five behavioural factors affecting
To explore the behavioural
the investment decisions of
factors influencing
Luong and Factor analysis, individual investors such as
54 individual investors’ 300
Ha (2011) SEM Herding, Market, Prospect,
decisions at the Ho Chi
Minh Stock Exchange
fallacy and Anchoring-ability

Higher level of awareness for
To study the differences in males than females for different
Arti, Julee, the Investment Decision investment avenues. Female
55 and Sunita Making (IDM) process 200 Chi-square investors tend to display less
(2011) between female and male confidence in their investment
investors decisions and hence have lower
satisfaction levels.

To determine the effect & It was found that heuristic

extent of behavioural factors such as anchoring,
56 factors influencing the 155 Factor Analysis representativeness & availability
property investment bias has more influence on
decisions in Kenya property investment decisions.
Savings of low and middle
To explore the socio income group is positively
Rehman, economic and related to total dependency rate
Bashir and demographic factors and total income. Higher income
57 292 Regression
Faridi influencing household households are likely to save
(2011) savings of various income more due to age, spouse
groups participation, total income and
size of land holdings
Attitudes and referent groups
To determine individual
(peers, family and significant
Alleyene factors that are likely to Hierarchical
others) and beliefs about
58 and Broome influence the investment 104 Regression
potential obstacles and
(2010) decisions of potential Analysis
opportunities significantly
predict intentions to invest.

Difference in perception of
Investor in the decision of
Security, Opinion, Awareness,
Kabra, investing on the basis of Factor and
Hedging, Duration and Benefits
59 Mishra and Age. Difference in 150 Regression
affect individual investment
Dash (2010) perception of Investor in analysis
the decision of investing
on the basis of Gender.

Cluster analysis, The demographic variables such

To find out the effect of Correspondence as age, gender, income,
Parashar personality traits on Analysis, education, occupation as well as
60 100
(2010) investment choice made by Kruskal Wallis the various personality types
individual investors. test and Factor affect the investment choice
analysis made by the individual investors.

The investor behaviour in

Tunisia was driven by various
To identify the
Zoglami and Univariate and psychological factors such as
psychological biases that
61 Matoussi 92 brokers Multivariate precaution, under confidence,
influences the investor
(2009) analysis conservatism, under optimism
and informational inferiority

To examine the effects of
People in general are exposed to
hindsight bias,
the studied behavioral biases but
Seppala overconfidence and self- Z -test ,T test,
62 200 the degree and impact are
(2009) attribution behavioral Regression
affected by experience and other
biases on investment

Household income, nature of

businessmen occupation, gender,
To investigate the factors
and education level of household
that influence savings
head positively influenced the
Kibet et al among households of
63 359 Regression saving behaviour of the rural
(2009) teachers, entrepreneurs and
households in Nakuru district,
farmers in rural parts of
while credit access, age, and
Nakuru District.
dependency ratio negatively
influence household saving.
The investors needed to choose
Kumar , the financial products among the
To study the financial process and
Banu and alternatives available and
64 product preference of the 120 Multi-criteria
Nayagam according to their own priority
respondents. Decision
(2008) rating of an attribute in the
To bring out the investors The household investors
preferences among the preferred investing in shares as
Gupta and various types of financial 1463 Descriptive compared to mutual funds due to
Jain (2008) assets and also their households Analysis relatively lower returns because
problems concerning the of entry loads and management
stock market. fees charged by the funds.
Investors with more financial
To determine the risk 1484 commitment, those approaching
Al Ajmi Univariate
66 tolerance of individual individual towards retirement or retired
(2008) analysis and
investors in bahrain investors showed a decline towards risk
analysis of

Too much volatility and price

To understand the 5908
SCMRD Descriptive manipulation were found to be
67 problems and need of the household
(2005) Analysis the major cause of worries of the
investor investors
retail investors.

6.3 million
active local
Less wealthy investors favoured
To examine the stock investors from
stocks with high betas, low
preferences of Chinese Shanghai Cross sectional
Ng and Wu market prices, high turnover,
68 individual investors and stock regression
(2005) small market capitalisation and
revealed by their executed exchange for analysis
stocks that have performed
trades, the period of
poorly in the past year.
April 2001 to
April 2002

To identify and Hierarchical Four segments of investors
Wood and characterise individual cluster analysis namely risk tolerant traders,
69 Zaichkowsk investors into segments 90 with ward’s confident traders , loss averse
y (2004) based on their investing linkage and traders and conservative long
attitudes and behaviour. ANOVA term traders were identified.
Four major investor segments
were identified based on
To identify the investor
Multinominal demographic and psychographic
group segments on the
Kiran and 96 Logistic characteristics. The risk bearing
70 basis of demographic and
Rao (2004) respondents Regression and capacity of an individual was
Factor Analysis strongly dependent on the
characteristics of investors
demographic and psychographic
To identify the association
A strong association between the
between the demographic 405 Chi Square and
Rajarajan demographic profile and the risk
71 profile and the risk bearing individuals Correspondence
(2003) bearing capacity of individual
capacity of individual from Chennai Analysis
investors in Chennai
The expected rate of return on
investments, risk bearing
capacity of investors and
To study the determinants 405 Multiple investors loss avoidance
72 of portfolio choice of individuals Regression behaviour had a positive
individual investors from Chennai Analysis relationship while the locus of
control had a n inverse
relationship between the
portfolio choice.
Behavioral Finance has two
building blocks: limits to
arbitrage, which argues that
To discuss limits to
arbitrageurs may not be able to
Barberis and arbitrage and psychology
profit from market dislocations
73 Thaler and present a number of Application
caused by less or not rational
(2002) behavioural finance
traders, and psychology, which
catalogues all the possible kinds
of deviations that we may see in
the financial markets
The saving rate rises with both
To examine the the level and the rate of growth
Athukorala Case Study ,
determinants of the private of disposable income and the
74 and Sen India Time Series
saving rate in India during magnitude of the impact of the
(2001) Analysis
the period 1954 to 1998 former is smaller than that of the
Men trade more than women and
To test the prediction that
thereby reduce their returns
Barber and overconfident investors
35,000 more so than do women.
75 Odean trade excessively by Regression
households Furthermore, these differences
(2001) partitioning investors on
are most pronounced between
single men and single women.
To study the primary Safety and liquidity were the
NCAER considerations of the Descriptive primary considerations of the
76 288081
(2000) investors while choosing a Analysis investors while choosing an
financial instruments asset.

To summarize the Each of the components of
current state of our mental accounting violates the
Thaler Literature
77 knowledge about how economic principle of
(1999) Review
people engage in mental fungibility. As a result, mental
accounting activities. accounting influences choice,
Women were more likely to hold
risky assets if expecting an
To explore gender
839 inheritance, employed and
Embrey and differences in the Descriptive
78 single-person holding higher net worth; while
Fox (1997) investment decision- Analysis
households. men invested in risky assets if
making process.
they were risk seekers, divorced,
older, and college educated.
The investors preferred
A list of securities with long term capital
Lewellen, accounts appreciations instead of short
To study the asset portfolio
Lease , brokerage firm Descriptive term gains. Age income level
79 of US investors and their
Schlabaum over a period Analysis and gender were the most
decision making behaviour
(1997) from Jan 1964 dominant factors effecting
to Dec 1970 individual investor’s investment
To survey the existing
Provided explanations for gender
Bajtelsmit literature regarding gender
differences that have been
and differences in investment Literature
80 offered in a variety of fields,
Bernasek and considers the Review
including economics, sociology,
(1996) policy implications of
education and gender studies.
these differences.
They developed a questionnaire
that included 34 factors such as
expected corporate earnings,
Nagy and To study the factors diversification needs, feelings
81 Obenberger influencing the individual 300 Factor Analysis for firm’s products and services,
(1994) investor behaviour past performance of stocks, past
performance of their own
portfolio, stock broker
recommendations to name a few.
40998 unit
holders and
The study revealed a massive
shift towards units/mutual fund
To analyse the changing shareholders
Gupta Descriptive products, a moderate continuing
82 patterns of ownership of from over 19
(1993) Analysis shift towards shares and
Indian Households states/union
debentures and a shift away from
territories and
traditional financial assets.
76 cities in
The Indian investors preferred to
To know the profile of Descriptive
83 Lal (1992) 1200 invest in larger portfolios with
Indian investors Analysis
more than five companies.
To examine saving
The countries with the highest
behaviour in nine Asian
Collins, S. Time Series saving rates in the 1980s were
84 developing countries plus 10 countries
M. (1991) Analysis also the ones with the fastest real
Turkey since the early
growth rates during 1960-84.

The study segmented the
Warren, To segment the investors
Multiple investors on the basis of their
Stevens, Mc on the basis of
85 152 Discriminant investment behaviour i.e. active
Conkey demographic and life style
Analysis & passive investors as well as
(1990) characteristics
light & heavy investors.
Cohn, To investigate the effect of
analysis, Chi The proportion of individual
Lewellen, change in wealth on the
Square portfolio allocated to risky assets
86 Lease and proportion of individual 972
Contingency decreased with the increase in
Schlarbaum portfolios allocated to
Analysis and wealth.
(1974) risky assets
Source : Compiled from various academic studies


Behavioural finance is a comparatively new paradigm of finance, which seeks to improve the
standard theories of finance by introducing behavioural aspects to the investment decision
making process. The study of behavioural finance shows how cognitive and emotional factors
affect the investment decision of an investment and particularly how they affect the rationality in
decision making. It is not only describing the behaviour of the investors, but also studies why
they behave so. From the review of the empirical literature given in Table 1, researchers have
proved that investors are irrational in investment decision making. There are various factors
which influence their decisions to save and invest. They are presented in Table 2 and Figure 1
shows the Investor’s behaviour model.
TABLE 2 – Variables that govern an investor’s decision to save and invest
Demographic Age, Gender , Income, Education , Occupation , Experience, Marital Status,
factors Family status, Family earning status, Number of dependents, Upbringing status
Price changes, Market information, Over reaction to price changes, Customer
Market factors
Risk Bearing
Considerations of safety, liquidity, capital appreciation, return and risk coverage
Lifestyle Personal ability, investment experience, confidence level, dependency level of
characteristics investor.
Cognitive factors – Representative heuristics, Availability heuristics, Over
confidence effect, Anchoring, Hindsight bias, Gambler’s fallacy, Investor

Emotional Factors – Mental accounting, Endowment effect, Loss aversion, Regret
Herding factors – Following the habits of other investors (social proof ) in buying,
selling , choice and trading of investments.
Personal financial needs – Portfolio diversification need , Easy availability of
fund whenever needs , need to minimize the risk and maximize the return
Advocate recommendation – advice or recommendation from family member,
friend , stock holder , broker
Neutral information – Information from internet, coverage in press, recent price
Other factors
movement statement by government officials, economic indicators.
Accounting information – Expected corporate earnings, Financial position,
dividend paid, expected dividend and past performance.
Self-image / firm image coincidence – Reputation of the firm, Information
regarding product or service of the firm, Efforts made by the firm for the
development of the community.
Source : Compiled from various studies presented in Table 1

FIGURE 1 – Investor’s Behaviour Model


This paper has reviewed published work relating to investor behavior. The investor’s portfolio
practices, preferences, risk perceptions, intentions, pattern of investment, their awareness level,
factors affecting their investment behavior and the problems faced by them have been studied.
Based on the extensive study, variables that administrate the investor’s decision to save and
invest were identified and an Investor’s Behaviour model has been developed. This could be of
great significance to the investors for their wealth management and to the policy makers, the
investment agencies, the researchers as well as managers of the firms to equip themselves to
react to the fluctuating behaviour of the investor. The saving rate of any country is a vital
indicator of economic development since the domestic saving rate is directly related with the
investment rate and the lending capacity of the banking system. Even though research studies are
existing which have examined this phenomenon, most of them are based on anecdotal evidences
instead of rigorous empirical research with analytical estimation. Hence this domain belongs to
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