The Impact of Behavioural Factors on Investment Decision Making in Colombo Stock Exchange

Abstract

The present study has investigated the Impact of Behavioral Factors on Investment Decision Making in Colombo Stock Exchange (CSE) of Sri Lanka with overconfidence, availability bias, conservatism and herding effect to identify the most significant behavioral factor that influence investor's investment decision making. The key objective of this study was to identify the main behavioral factors on investor's investment decision making in Colombo Stock Exchange and secondary objectives were to identify the relationship between overconfidence, availability bias, conservatism and herding effect for the investment decision making in CSE. Structured questionnaire based on five-point Likert scale was used and it was able to collect data from 75 investors in Western Province according to convenient sampling method. Multiple regression analysis was applied as main statistical tool to test hypothesis of the study while internal consistency of questionnaire measured from Cronbach's alpha on all variables indicated the values greater than 0.7 by implying a satisfactory level of reliability. The findings of this study concluded that overconfidence, availability bias and herding effect emphasized positive significant relationship between investment decision making in CSE excluding conservatism which indicated a negative relationship with investment decision making but statistically significant at 0.01 level. Based on the findings it can be generalized that overconfidence, availability bias and herding effect are the most prominent factors for investor sat investment decision making in CSE.