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Herd Behavior of Investments: An Assessment of Indian Stock Market

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Abstract

Behavioral finance theorists contradict market efficiency and propose that investment decision making is not always rational. Investors base their decisions on factors in addition to stock fundamentals and such factors include cognitive biases such as loss aversion, herd behavior, regret aversion, price anchoring and the like. This paper makes an attempt to analyze the influence of two major factors – herd behavior and market factors on investment decision making and in turn it's mediating effect on perception of investment performance. Structured questionnaire was used for collecting the sample for study and structural equation modeling was performed. The study presents evidence to ascertain significant influence of both the factors – herd behavior and market – on investment decision making. The mediating effect of investment decision making on perception of investment performance was also observed to be strong and significant.

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  • , Aisdl, 2019. "Herd Behavior of Investments: An Assessment of Indian Stock Market," OSF Preprints 324nu, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:324nu
    DOI: 10.31219/osf.io/324nu
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