Vol: 7, Issue: 2 2017

Page: 48-60

Understanding the Investor Behavior of Individual Investors

Namratha Goutamchand

This study fits under the broad subject of behavioural finance, which examines how psychology affects the conduct of financial professionals and has a knock-on effect on stock markets. Research in behavioral finance has been addressed mostly in developed countries like U.S. However, in Indian context, this area is still at a nascent stage. The Indian stock market has seen turbulent times in the recent past. It has experienced a sharp dip in 2008 from the heights of 2006, followed by a series of ups and downs in the subsequent years, till 2013. This was the period when markets observed sharp swings in sentiments in a very short span of time. Thus, a research based on investor behavior becomes relevant and interesting. This research work is an attempt in this direction. It tries to unveil the influence of behavioral biases in investment decisions with the help of market trends and indicators. Moreover, it also identifies the situations and characteristics that make the Indian investors susceptible to certain biases. The methodology makes use of both primary and secondary data that provide real time and historical insights of investor behavior. The impact of these biases on market indicators like return dispersion, risk premium, volatility and transaction volume is detected with the help of secondary data.