Role of Herd Behavior on Investment Decision of Mutual Fund Investors in India - An Empirical Study

Abstract

Behaviour finance helps to understand the attitude and perception of investors on their investment decisions. Every investor differs from others in all the aspects due to a range of factors like demographic and socio-economic background. An optimal investment decision plays a vital role and is a major deliberation.
 This paper analyses the role of herding behaviour on Indian mutual fund investors. By referring to psychology and pointing out the imperfections of a human mind, it reveals mistakes committed by both individual and professional investors.
 This study captures the impact of herding behavior and overconfidence biases on the investors’ decision-making in India The proposed study will collects the necessary data through questionnaires distributed among 113 respondents who were investing in mutual fund. The results show that overconfidence and herding bias have significant positive impact on investment decision. Overall results conclude that individual investors have limited knowledge and more prone towards making psychological errors. The findings of the study also indicate the existence of these four behavioral biases on individual investment decisions. This study will be helpful to financial intermediaries to advice their clients.