Published Paper Details:

This research analyses how psychological influences-a trader's behaviour regarding stock trades-derive from cognitive distortions that lead to faulty methods of reasoning, which ultimately disrupt their normal decision-making processes, therefore revealing damaging results. Previous research as well as theoretical constructs regarding investment decision-making and other behavioural influences on trader behaviour are illustrated using traditional financial theory, which assumes that all investment decisions are based solely upon rationality; however, in practice, emotional factors, belief systems, peer pressures, and mental shortcuts known as heuristics comprise significant parts of making investment decisions. Therefore, how investment decisions are made may differ from what is theoretically postulated by these traditional financial theories. This paper presents three primary cognitive biases that can affect a trader's buying and selling decisions: overconfidence bias, herd behaviour, and loss aversion. Overconfidence, due to an investor believing they are more knowledgeable and capable than they actually are, may cause an investor to trade excessively or take risks disproportionately; therefore, overconfidence also influences their degree of willingness to pursue investment decisions even during increased risk periods. Herd behaviour is defined as an investor following the direction of another investor rather than using independent analysis during periods of economic uncertainty. Loss aversion bias refers to the fact that investors are much more afraid of losing money than they value making money, and so they frequently hold onto losing stock longer than is necessary or avoid taking investments that could lead to loss, regardless of whether they can profit by taking such an investment. This research will provide a detailed description and analytical analysis of retail investors and traders. The Quantitative method will be applied to obtain primary data from respondents using structured questionnaires. Secondary data will include journals, books, and prior research that have studied behavioural finance. Statistical tools will be utilized to analyse the data and identify any relationship between psychological biases and the production of investment decisions. Statistical techniques will consist of descriptive analysis, correlational analysis, regression analysis, SPSS, and Excel. The purpose of this research is to raise awareness among investors of the existence of hidden psychological influences impacting their trading behaviours. Additionally, this research will add to the behavioural finance literature about investors in a developing market, which in this case is Ranchi. The result of this research will assist investors, financial advisors, and policymakers in formulating effective financial strategies through the provision of financial literacy and to provide investors with better informed and derived decision making in their investments.