Evaluation of Behavioral Biases and Investment Decision: An Evidence from Pakistan Stock Exchange (PSX)

Abstract

Investors act irrationally while making decisions, according to research in the subject of behavioral finance. The main goal of this study is to assess the behavioral biases that influence the choices made by individual equities investors from Punjab. For investors, agents, and other market participants, this study is useful and aids in making better investment decisions. The study takes into account the private investors who buy common stocks in the Pakistani province of Punjab. The Fuzzy Analytical Hierarchy Process (F-AHP) is used to examine the behavioral biases that influence certain common stock investors' choices. The familiarity bias, optimism bias, herding bias, mental accounting bias, loss aversion bias, regret aversion bias, availability bias, anchoring bias, representative bias, and overconfidence bias are the most prevalent behavioral biases taken into account in this study. Mental accounting bias, herding bias, anchoring bias, and representational prejudice were the four factors that had the greatest impact. "I prefer to invest in the well-known companies that have wider media coverage (C101)" was one of the top six sub-criteria. The financial effects of my choices are better than I anticipated (C96). "The financial ramifications of my choices turn out to be immediate" (C95). The company's news (from newspapers, television, and magazines) influences my investment choice (C84). “My investment for purchasing new stock is totally based on information released regarding the stock (C43).” “I have particular skills and experience for decision making (C13).”