Impact of behavioural dispositions on risk endurance of individual investors: an application of multiple discriminant analysis

Abstract

For the rapid development of an economy, investment of excess funds is essential. But in today's dynamic environment, individual investor's decision-making is influenced by several factors such as behavioural dispositions, where emotions play a crucial role in investing. Further, investment decisions are also influenced by the risk-tolerant behaviour of investors. The present study attempts to know the impact of behavioural biases on the risk endurance level of investors. For the study, a sample of 720 individual investors has been taken from it, 600 investors have responded from the state of Rajasthan. A structured questionnaire has been prepared to include statements of investors' behavioural biases and risk-taking ability. The analysis has been done using the technique of Multiple Discriminant Analysis. It has been concluded that behavioural biases impact the risk-taking capacity, and further investors have been categorised into three groups viz. Risk Intolerant investors, Conservative moderate investors and rational confident investors.