Investors’ Psychology: An Empirical Analysis

Abstract

Investors are always assumed to be rational creatures. Prior to investing their hard earned money, investors analyze the market plausibly by using various approaches like technical, fundamental, Capital Asset Pricing Model (CAPM), Arbitrage Pricing Theory (APT), etc. Nevertheless, some investor wins the game, while others lose it. This volatile behavior of markets has challenged the hypothesis of efficient markets which motivates us to understand the driving forces behind it. It is the major concern for academicians, investors and portfolio managers to understand the reasons causing irrationality in the markets. Academicians brought out few behavioral biases into existence which are required to be studied. The present paper is an attempt to have an insight about key factors influencing the behavior of retail investors with respect to demographics in relation to their investment and their decision making process.