Financial Theory Research Articles

PENGARUH LITERASI KEUANGAN, HERDING, DAN HEURISTIK TERHADAP KINERJA INVESTASI MAHASISWA DI INDONESIA

This study aims to analyze the influence of financial literacy, herding, and heuristics on the investment performance of university students in Indonesia. The first issue in this study is the small number of investors caused by the motivation and return of investment, and the second issue is the discovery of anomalies in the capital market. The main theory used as a reference in this research is Behavioral Finance theory. This type of research is quantitative with primary data using a Likert scale, tested by the Partial Least Square method. The results in this study indicate that financial literacy and heuristics have a positive and significant effect on investment performance. In addition, herding has a positive but insignificant influence on investment performance. This research has a contribution as a source of new information and reference in the development of science, especially with studies related to investment, capital markets, financial behavior, and other related topics.

Capital Structure Determinants of Listed Private and State Companies

Purpose. The purpose of this paper is to determine and analyze the determinants of the capital structure of joint-stock companies in Bosnia and Herzegovina that are listed on the Banja Luka Stock Exchange. This study will answer the question as to which factors determine the capital structure of BiH companies and whether existing financial theories of the capital structure hold true in that context. The main research objective is to estimate the effects of a firm’s level determinants on its capital structure measures in different ownership structures. Those findings will certainly advance our understanding of listed companies financing behavior. Methodology. For the research, we took into account firm-specific characteristics and divided joint-stock companies into private and state-owned. The results of the research show that the capital structure of these two groups of enterprises is differently affected by individual determinants. Findings and implications. While state-owned enterprises rely more on borrowed resources to finance both short-term and long-term assets, private enterprises even finance part of their short-term assets with their own capital. However, the most important determinant in both groups of enterprises is the share of inventories in short-term assets, which confirms that short-term liabilities, i.e. free sources of financing in the form of liabilities to suppliers are the determinant that most positively affect the indebtedness of all enterprises. Unlike previous research that observed enterprises according to their size or affiliation to individual industries, the focus of our research is enterprises of different ownership structures. The empirical statistical results provide basis for logical conclusion and appropriate policy implications. The study points to the specifics of the capital structure in private and publicly listed joint-stock companies. The stated opposite influence of certain ratios on the indebtedness of the enterprises is explained by a number of factors. Limitations. This study focuses only on the presentation of the recent indicators of capital structure of listed companies - listed on the Banja Luka Stock Exchange, which is one of its major limitations. The limitation of this search is the sample size which can be considered low. Further research may be conducted by using other capital markets to explore more information regarding the effect of the variables affecting the capital structure. In addition, further research may also be conducted by using other proxies or by adding more variables, sample size, and research period to get a better result. Originality. The study is an original research paper. It has not been published in any other peer-reviewed journal not under consideration for publication by any other journal. The paper adds to the existing literature on Bosnia and Hezegovina by giving an overview of recent developments in the flexi purity concept, pointing out the areas that require policy response.

Influence of Investor Behavior on Investment Choices among Equity Fund Managers of Listed Firms at Nairobi Securities Exchange-Kenya

Purpose: This study sought to determine how market factors influence investment decisions in Nairobi Securities Exchange-Kenya. The study would offer valuable contributions from both a theoretical and practical standpoint where it contributes to the general understanding of the drivers of investment in the Nairobi Securities Exchange in Kenya.
 Methodology: The study adopted positivism philosophy because the study variables were based on facts derived from the empirical literature review and the theoretical premises discussed in chapter two. Its results are quantitative and explain the relationship between the variables quantitatively. This research used a descriptive research design that allows a researcher to get adequate data from a small population cost-effectively and easily by use of a questionnaire as the research instrument. It is the structure, or the blueprint of research that directs the process of research from the formulation of the research questions and hypotheses to reporting on the research findings Krishnan, (2015). Primary data was collected using standard questionnaires with both closed and open-ended questions. Cronbach’s Alpha Test was used to test the internal consistency reliability of measurements. Data was obtained from the unit trusts and pension funds in Nairobi County. The study was conducted during the 2010- 2019 period. This study adopted a census of all fund managers the Nairobi Securities Exchange that have been actively trading for the period starting 2010-2019. The target population for this study was 129 fund managers hence a census of all equity fund managers at the NSE. Quantitative data was coded to facilitate analysis using Statistical Package for Social Scientists (SPSS 23). The study performed tests on statistical assumptions such as test of regression assumptions and statistics used. This included tests of reliability, normality, autocorrelation, panel root test, cointegration, linearity, independence, heteroscedasticity, and multicollinearity. Data was extracted from the financial statements and NSE handbooks, Excel program was used to calculate ratios relevant to the study variables. Descriptive statistics were used to summarize the study variables; group behavior, accounting information, firm characteristics, and market factors of fund managers at NSE.
 Findings: The study concluded that more attention should be focused on firm characteristics to achieve the best investment choices.
 Unique Contribution to Theory, Practice and Policy: The study was guided by finance theories that acted as its base that supported the empirical literature review which included Resource Based Theory (RBT), agency theory, herding theory and prospect theory. More attention should be paid to the predictors in the order of the magnitude of their effect on investment decision-making.

Empirical Research on the Impact of Open Fund Sheep Behavior on Stock Price Volatility

In the past, economic research took the “rational man hypothesis” as the premise, but in reality, this premise is difficult to hold. In a large number of financial practices, a large number of special phenomena that are inconsistent with standard financial theory have emerged. Behavioral finance is premised on the assumption of irrational people, and herd behavior is a relatively special irrational behavior. It refers to the behavior of investors who are influenced by other investors when the information environment is uncertain, imitate other people’s decisions, or rely too much on public opinion without considering their own information. Sheep behavior is a related behavior involving multiple investment entities, which has a great impact on the stability and efficiency of the market, and is also closely related to the financial crisis. Therefore, herd behavior has attracted widespread attention from academia, investment and financial supervision.China’s capital market started late. In 1990, the Shanghai Stock Exchange was established, marking the birth of China’s stock market, the distribution of market investors have changed again and again, unchanged is that the behavior of investment subjects has a strong similarity, at the same time, China’s fund market has persistent fluctuations.Whether there is a causal connection, this paper will focus on the development of China’s fund market, use LSV model and VAR test method to test and analyze the fund and stock trading data of Shanghai and Shenzhen from the first quarter of 2017 to the first quarter of 2022, and empirically study whether there is significant herd behavior in China’s open-end funds. On this basis, the impact of stock investment herd behavior on stock price volatility is empirically studied.Finally, according to the research conclusion, from the three aspects of investor investment rationality, the effectiveness of capital market and the optimization of market structure, suggestions on how to reduce the impact of the herd effect and the healthy and sustainable development in the future.

Financial Relations between Hong Kong and the Mainland

The financial crisis caused by the subprime mortgage crisis in the United States in 2006 has deeply plunged many Western capitalist countries into multiple political, economic and social crises. This has forced many financial institutions in developed countries to redistribute their assets to strengthen the stability of financial institutions, forcing many Europeans and Americans to return funds to their own countries. As a result, the domestic currency depreciated, and the economic growth slowed down or even went into recession. As an emerging economy, China has been faced with both opportunities and challenges. The financial market has long been regarded as the "barometer" of the national economy, so the deepening relationship, such as the research and cooperation between the financial markets in Hong Kong and the Mainland, can certainly improve the international financial status of both sides. It also promotes the process of building a fair, orderly and inclusive new international order. This paper systematically introduces the political and financial relations between Hong Kong and the Mainland, focusing on the relationships between Shanghai-Hong Kong and Guangdong-Hong Kong financial centers and advocating some suggestions on how to balance the relationship between the three financial centers while speeding up the construction of the national financial center. Using a variety of financial theories and statistics of Hang Seng AH Share Premium Index and Centaline City Leading Index, etc., this paper reaches the conclusion that the financial relationships between the Mainland and Hong Kong have always been close, while the differences between the two markets are more pronounced, steps can definitely be taken to benefit both of them (Zhu, 2013).

Alternative Forms of Currency: An Exploratory Theoretical Analysis of Bitcoin

Objective: The study aims to critically analyse the role of digital currencies in the context of the monetary system and the challenges and implications for monetary liberalism. Method: Critical review based on an analysis of financial doctrine. A descriptive approach was applied to identify the relevant theories, followed by a critical analysis of the perspectives adopted by the authors. The main theoretical arguments are identified and debated. The methodology enables a critical study to be carried out through comparisons. Results and conclusions: The results highlight the clarity of the arguments, the logical solidity, and the relevance of the evidence presented by the authors. The comparative analysis reveals points of convergence and divergence in the arguments. Inclusive interpretation and reflection allowed the implications of the theoretical approaches for the field of study to be analysed. The conclusions reveal the evidence obtained. Implications if the research: They include an in-depth understanding of the financial theories examined at the level of Bitcoin, highlighting contributions and limitations. Promotes the advancement of knowledge in the theoretical field, identifies possible gaps in the literature, and suggests areas for future research. Provides relevant insights for academia, society, and policymakers. Originality/value: It resides in the application of a critical and analytical approach to financial theories, offering a detailed and contextualised review of the literature. The value comes from providing enlightened insights into the theoretical foundations and possible applications, contributing to the advancement of the academic and social fields.

Entrepreneurial finance in Europe and the Russian war against Ukraine

AbstractPrior research has investigated how the prices of stocks and commodities as well as inflation levels have been affected by the Russian war against Ukraine. So far, however, we know little about the impacts of the war on the entrepreneurial finance sector. Prior research on the effects of unexpected exogenous crisis events on entrepreneurial finance suggests a strong negative impact on new and follow-on funding for entrepreneurial ventures. Our study regards the Russian war against Ukraine as an unexpected exogenous crisis event and explores its impact on the entrepreneurial finance sector. It goes beyond a mere sentiment and impact analysis and also explores the underlying reasons and mechanisms as well as potential response and coping strategies employed by entrepreneurial finance investors. Based on two surveys of European venture capital (VC) and private equity (PE) investors, we find that the war had a strong negative impact on the two types of investors and their respective funds. Both VC and PE investors report more risk-aversion of limited partners (LPs) and LPs leaving the market as important challenges resulting in an overall lower willingness of LPs to invest. This applies in particular to banks, insurance funds, and pension funds. On the portfolio firm level, securing equity financing and maintaining liquidity were considered pressing issues. Overall, the situation seems to be more difficult for portfolio companies of VC as compared to PE investors. For the former, the financing- and liquidity-related issues seem to be more existential and survival-threatening. Responding to these challenges, both VC and PE investors altered their industry focus and put more emphasis on entrepreneurial experience. Financial investment selection criteria such as financial valuation, profitability, and cash- as well as revenue-generating capacity also increased in importance. Again, differences between VC and PE investors exist. Our study has implications for entrepreneurial finance theory and practice and concludes with an agenda for research on the impacts of the Russian war against Ukraine on entrepreneurial finance.

Does Trust Beneficiary Protection Affect the Performance of Trust Companies? An Analysis Based on the Theory of Law and Finance

<p>Trust beneficiary protection constitutes an important legal system in the trust industry. This paper, based upon the study approach of the “Theory of Law and Finance”, establishes the trust beneficiary protection index of China. We also test the influence of trust beneficiary protection on the performance of trust companies. As indicated by our study’s results, an “inverted U-shaped” relationship exists between the degree of trust beneficiary protection and the performance of trust companies. In a period when the trust law system has not yet been well established, strengthening trust beneficiary protection could help facilitate the growth of trust company performance. However, this facilitation effect gradually diminishes as the trust law system becomes more perfect. This in turn means that, after reaching a certain peak, conferring the beneficiary with more rights of supervision and participation would cause the performance of trust companies to decline. Improving regional legal environments could also help facilitate the growth of trust company performance. In addition, this facilitation effect is subject to the influence of the nature of trust company controllers. In trust companies controlled by local state-owned capitals, we find that the facilitation effect of the improvement of regional legal environments on trust company performance is inhibited. In trust companies controlled by non-state-owned capitals, however, the facilitation effect of the improvement of regional legal environments on trust company performance is enhanced.</p>

Market Sentiment and High-Rise Housing Prices in Hong Kong

Classical finance theories fall short of explaining volatile housing prices in Hong Kong. Employing principal component analysis (PCA) and factor analysis, this study constructs a unique Sentiment Index that integrates 11 market variables tailored to Hong Kong’s high-rise residential properties. Covering 2002Q1 to 2021Q2, including pivotal events such as the SARS epidemic, the Global Financial Crisis, stock downturns, political instability, and Covid-19, our analysis reveals the significant predictive capability of the Sentiment Index for property prices. A discernible relationship exists between housing prices and the Sentiment Index. While policies addressing smaller-sized flats (HPI40) should focus on demand-supply imbalances, those for larger apartments (HPI100 and HPI160) must consider speculative investments. An adaptive policy response with periodic assessments and measures responsive to market conditions, economic shifts, and geopolitical events is imperative for the robust and stable development of Hong Kong's housing market.

Impact of Macroeconomic Variables on Stock Market Volatility in Kenya

Purpose: The aim of the study was to assess the impact of macroeconomic variables on stock market volatility in Kenya. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The impact of macroeconomic variables on stock market volatility in Kenya reveals several key findings. Firstly, studies suggest that variables such as inflation rate, exchange rate fluctuations, and interest rates significantly influence stock market volatility in the country. Specifically, an increase in inflation tends to amplify stock market volatility, while fluctuations in exchange rates contribute to increased volatility, especially in the short term. Additionally, interest rate movements affect stock market volatility, with lower interest rates generally associated with higher stock market volatility. Furthermore, factors like GDP growth rate and oil price fluctuations also exhibit varying degrees of influence on stock market volatility in Kenya. Implications to Theory, Practice and Policy: Efficient market hypothesis, behavioral Finance Theory and Asset Pricing Models may be use to anchor future studies on assessing the impact of macroeconomic variables on stock market volatility in Kenya. Investors can benefit from a deeper understanding of how macroeconomic variables impact stock market volatility by incorporating this knowledge into their risk management strategies. Policymakers should consider the implications of macroeconomic policies on stock market volatility when formulating economic strategies.

Relationship between Financial Literacy and Investment Behavior among Millennials

Purpose: The aim of the study was to assess the relationship between financial literacy and investment behavior among millennials. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: Several studies have highlighted a significant relationship between financial literacy and investment behavior among millennials. Findings suggest that millennials with higher levels of financial literacy tend to exhibit more proactive investment behaviors, such as saving for retirement, diversified portfolio allocation, and increased participation in the stock market. Additionally, greater financial literacy correlates with better understanding of investment products and associated risks, leading to more informed decision-making. Conversely, those with lower financial literacy are more prone to behavioral biases, such as overconfidence or risk aversion, which can hinder their investment activities. These findings underscore the importance of promoting financial education initiatives targeted at millennials to enhance their investment knowledge and ultimately improve their financial well-being. Implications to Theory, Practice and Policy: Behavioral finance theory, human capital theory and social learning theory may be use to anchor future studies on assessing the relationship between financial literacy and investment behavior among millennials. Financial institutions, educational institutions, and employers should collaborate to develop tailored financial education programs targeting millennials. Policymakers should advocate for the integration of financial literacy into formal education curricula at both the secondary and tertiary levels.

Young Investor’s Investment Decision Making: The Influence of Heuristic Behavior, Risk Perception, and Herding Bias

Purpose:Theory of Behavioral Finance assumes that there are various things inherent in humans such as emotions, interests, and traits that make them unable to make rational decisions. This study aims to analyze and find out what kind of impact heuristic behavior, risk perception, and herding bias have on investment decision making by young investors.Method:This research is a quantitative study with students at the Faculty of Economics and Business, Lambung Mangkurat University who are or have invested on the Indonesia Stock Exchange as the sample of this study. The research data comes from primary data processed using multiple linear regression analysis.Findings:The findings of this study successfully prove that there is an influence of heuristic behavior, risk perception, and herding bias on investment decisions by young investors.Originality/Value:This study uses students of the Faculty of Economics and Business, Lambung Mangkurat University as a research sample who belong to generation Z with a tendency to have higher emotions and egos, making it difficult to make investment decisions.

Exploring Sustainable Finance: A Qualitative Inquiry into Responsible Investment and ESG Risk Evaluation

This research explores the landscape of sustainable finance, responsible investment, and ESG (Environmental, Social, and Governance) risk evaluation, aiming to understand their complexities and implications for financial markets and sustainability outcomes. Employing a qualitative research approach, the study conducts a comprehensive review and synthesis of existing literature, drawing insights from academic databases, journals, reports, and other relevant sources. The research design involves purposive sampling of literature based on relevance, rigor, credibility, and significance criteria. Data collection comprises systematic review and analysis of scholarly literature, while thematic analysis is employed for data interpretation. The findings underscore the growing recognition of ESG factors' importance in investment decision-making processes, driven by their materiality to financial performance and sustainability outcomes. Institutional investors play a pivotal role in mainstream adoption of responsible investment practices, driven by the acknowledgment of ESG factors' impact on investment risk and return profiles. However, methodological challenges related to ESG data quality, measurement, and comparability persist, hindering effective ESG integration and risk assessment. Regulatory initiatives like the United Nations Principles for Responsible Investment (PRI) and the Task Force on Climate-related Financial Disclosures (TCFD) have contributed to mainstreaming ESG considerations but face challenges of regulatory fragmentation and inconsistencies. Addressing these challenges requires collaborative efforts from stakeholders to develop standardized ESG reporting frameworks, enhance stakeholder engagement, and promote regulatory coherence. This study contributes to understanding sustainable finance dynamics and calls for interdisciplinary collaboration to bridge financial theory, sustainability science, and regulatory policy.

Considerations on the discounted cash flow method in the determination of assets

The aim of this theoretical essay is to discuss, in the light of accounting and finance theory, the Judgment - REsp 1.877.331 of the 3rd Panel of the Superior Court of Justice (STJ), which decided that to determine the assets of a retiring partner, unless determined in the Articles of Association, the Discounted Cash Flow (DCF) method is not pertinent. As a basis for the argumentation of this essay, the concepts of assets and their characteristic of generating future economic benefits were incorporated. For the essayist, this characteristic is a beacon for measuring assets and the value of a company, which is made up of a set of tangible and intangible assets. The Discounted Cash Flow is considered one of the main methods for valuing companies. It is essentially financial, derived from the capacity to generate future projected benefits, discounted to present value, adding the value of perpetuity. This method can measure the company in its current situation without the need for growth projections or future macroeconomic factors since case law considers that the future does not belong to the retiring partner. However, the ability to generate these economic benefits cannot be disregarded, which could lead to a valuation that is not fair value, thus harming one of the parties in the dispute. Based on these aspects discussed in the essay, using Discounted Cash Flows in Asset Determination processes is considered pertinent.

DO CHARACTERISTICS OF BOARDS AND SUBCOMMITTEES AFFECT CORPORATE SUSTAINABILITY?

Purpose: This paper explores the level of corporate sustainability in large listed companies in India. It also aims to identify the importance of the board and its subcommittees in improving corporate sustainability. Methodology: This study employs an ordered probit model in a panel data framework. Findings: The study provides evidence of the importance of independence and gender diversity of the board of directors and its committees in the context of corporate sustainability. It also evaluates whether the insights of key theories in corporate finance (like agency theory and stakeholder theory) are applicable in the context of corporate sustainability. Specific characteristics like the independence and gender diversity of the board, and its subcommittees (namely the audit committee, risk management committee and corporate social responsibility committee) were found to impact corporate sustainability. Originality: This is the first study to identify the impact of characteristics of various subcommittees on corporate sustainability. This is also the first study to highlight the significance of a risk management committee in maintaining corporate sustainability. This study would be beneficial for researchers, practitioners and policymakers in the area of corporate sustainability.

Impact of Financial Reporting Transparency on Investor Decision-Making

Purpose: The aim of the study was to assess the impact of financial reporting transparency on investor decision-making in Kenya.
 Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries.
 Findings: In summary, financial reporting transparency significantly impacts investor decisions. It boosts confidence, reduces information gaps, lowers capital costs, enhances stock liquidity, and encourages long-term investments. Moreover, it improves risk assessment, ensures regulatory compliance, and safeguards investor interests.
 Implications to Theory, Practice and Policy: Information asymmetry theory, agency theory and behavioral finance theory may be use to anchor future studies on assessing the impact of financial reporting transparency on investor decision-making in Kenya. Companies should recognize the potential variation in the impact of financial reporting transparency across industries. Policymakers should work towards promoting the adoption of global reporting standards that encourage consistent and transparent financial disclosures.

Impact of Behavioral Biases on Investors’ Stock Trading Decisions: A Comprehensive Quantitative Analysis

Objective: This paper aims to investigate the impact of specified behavioral biases on investors' stock trading decisions in North India. It has been observed that most of the research works are based on financial theories, which affect investment decisions. But besides the theories nowadays, behavioral biases also play an important role in investment decisions, which was less focused in the previous literature. Methods: The study used primary data collected from a sample from North Indian States (Uttar Pradesh, Delhi, Haryana, and Punjab) through a structured questionnaire to analyze the impact of specified behavioral biases on investors' stock trading decisions. We used structural equation modelling to find out the significant impact of behavioral biases on stock trading and investment decisions. Findings: The investigation determined that the majority of the designated cognitive biases, such as the Overconfidence Bias, the Representativeness Bias, and the Herding Bias, exert a significant influence on the decisions about stock trading and investment made by investors. Novelty: The ample research in this domain has primarily occurred in various countries, with only a limited number of studies conducted specifically at the Indian level. Nevertheless, based on the literature review, it is evident that this study is groundbreaking in North India. The objective of this research is to enhance the effectiveness of financial advisors by gaining a deeper understanding of the psychological aspects of clients. This, in turn, will aid in developing portfolios tailored to individual behavior, aligning with client preferences. Recognizing and addressing behavioral biases is crucial for individual investors as they strive to make informed and successful financial decisions. Keywords: Behavioral Biases, Overconfidence (OC) bias, Representativeness Bias (RB), Herding Bias (HB), Structural Equation Modelling

Fama and French Five- Factor Study of Stock Market in Indonesia

In general, contemporary finance theories agree that the Fama and French Five-Factor model provides a more comprehensive explanation for average stock returns compared to its predecessors. Previous research on the five-factor model in Indonesia has yielded inconclusive results, and none of the studies has attempted to compare the significance of the five factors over shorter and longer periods, or even within shorter periods. As a result, the researchers of this study endeavor to ascertain the importance of the five elements – the profitability (RMW), market, size (SMB), profitability (RMW), book-to-market (HML), and investment (CMA) factors – to an excess return on the portfolio over shorter and longer periods. The findings indicate that SMB and CMA factors exhibit statistically insignificant, significantly negative, and significantly positive correlations with excess portfolio return, respectively, over the three shorter periods and the longer period. A significant negative correlation is observed between the HML factor and excess portfolio return over the longer period, while the relationship is deemed insignificant over the three shorter periods. No significant relationship was found between the RMW factor and excess portfolio return over the (2005-2019) period and two (2010-2014, 2015-2019) periods, but one shorter period is significantly positive.

Market Behaviors and Economic Crisis: Insights from Financial Economics

The research abstract encapsulates a comprehensive exploration of market behaviors during economic crises within financial economics. The study aims to elucidate the intricate dynamics of market behaviors amidst crises and their implications for theory and practice in financial economics. Employing a mixed-methods approach, the research integrates theoretical frameworks with empirical evidence to offer insights into the complexities of market dynamics. The study design thoroughly examines theoretical constructs and empirical investigations, drawing upon established frameworks such as the Efficient Market Hypothesis and behavioral finance theories. The research unravels the interplay between rational and irrational factors driving market outcomes during crises through empirical studies, including analysis of historical market data and examination of investor behavior. The findings underscore the need for a nuanced understanding of market behaviors, emphasizing the integration of rational and behavioral perspectives in financial economics theory and practice. The study's implications extend to policymakers, investors, and market participants, providing actionable insights to navigate turbulent economic environments effectively and foster stability in global financial markets.

Behavioral Finance and Stock Market Anomalies: Exploring Psychological Factors Influencing Investment Decisions

Behavioural finance questions the rational decision-making process that is based on the information and economic realities of traditional finance. This study investigates the impact of emotions and irrationality on financial decision-making. The increase in study on stock market anomalies leads to an investigation of the psychological factors that influence irrational investor behaviour and market inefficiencies. This research challenges the principles of rational finance theories by examining the significant impact of behavioural finance on stock market anomalies. The study demonstrates the impact of biases, emotions, and cognitive errors on human behaviour, highlighting specific cognitive faults such as anchoring bias, overconfidence, and loss aversion. These flaws lead to distorted decision-making and contribute to market anomalies The study of investing social dynamics explores the phenomenon of herd mentality and the unreasonable increases in asset values. In addition to questioning established financial theories, behavioural finance has the potential to assist investors, politicians, and market regulators. The study aims to construct intricate models that accurately depict financial decision-making by examining psychological variables that give rise to market oddities. The incorporation of behavioural finance into investment decision-making has transformative consequences for investors and financial professionals. Investors acquire the ability to make more astute decisions, spread out risks, and manage market instability by using emotional intelligence. Behavioural data may assist financial professionals in enhancing client-advisor relationships, refining communication methods, and increasing competitiveness in an evolving financial landscape. Behavioural finance provides a constantly evolving understanding influenced by biases and emotions, which poses a challenge to financial practices.