Abstract
The cognitive dissonance theory, formulated by Psychologist Leon Festinger, revealed that inconsistency in beliefs or behaviour among individuals causes psychological tension or dissonance due to exposure to new information. Investor behaviour is prone to several biases that refrains them from making rational decisions. They often reluctantly stick to their original decision even though it is costly. An online and offline survey using a structured questionnaire was used and data was collected from 250 stock market investors of Visakhapatnam, India. With the use of mean and one-way ANOVA - the relationship between independent variable (income, investment amount, education qualification, age, gender and investor experience) and dependent variables (cognitive dissonance) - it was revealed that investors were prone to cognitive dissonance bias. The research shows that cognitive dissonance bias causes investors to make sub-optimal choices. Based on the findings, recommendations were put forth to help investors mitigate their susceptibility to cognitive dissonance bias.
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