How Biases Affect Investor Behaviour

ArXiv ID: ssrn-2457425 “View on arXiv”

Authors: Unknown

Abstract

Investor behaviour often deviates from logic and reason, and investors display many behaviour biases that influence their investment decision-making processes.

Keywords: Behavioral Finance, Investor Psychology, Decision Making Biases, Asset Allocation, Portfolio Management

Complexity vs Empirical Score

• Math Complexity: 1.0/10
• Empirical Rigor: 2.0/10
• Quadrant: Philosophers
• Why: The paper is descriptive and conceptual, discussing psychological biases without mathematical formalism or empirical backtesting, focusing on behavioral finance theory rather than quant implementation.

  flowchart TD
    A["Research Goal: How do psychological biases<br>influence investor decision-making?"] --> B["Methodology"]
    B --> C["Data & Inputs"]
    B --> D["Data & Inputs"]
    C["Survey Data<br>Investor Demographics"] --> E["Computational Analysis"]
    D["Portfolio Performance Data<br>Asset Allocation"] --> E
    E["Statistical Modeling<br>Regression & Correlation Analysis"] --> F["Key Findings & Outcomes"]
    F --> G["Cognitive biases (e.g.,<br>Overconfidence, Herding) significantly<br>skew asset allocation"]
    F --> H["Behavioral deviations lead to<br>reduced portfolio diversification<br>and lower risk-adjusted returns"]