Behavioral Finance and how its Behavioral Biases Affect German Investors

Abstract

The growing discipline of behavioral finance has identified several biases that significantly impact individual investors' actions. This paper aims to evaluate the influence of behavioral biases on investing decision-making among German investors. A questionnaire is created, and survey results from 342 investors are collected. Three behavioral biases, namely overconfidence, herding, and anchoring behavior, have been examined in this study. Moreover, it was determined if gender influences these biases among German investors. The findings indicate that male German investors are more susceptible to overconfidence and anchoring bias than female German investors. However, women are more likely than males to fall victim to the herding bias. Overall findings show that individual investors are prone to psychological mistakes.