Behavioral Finance Factors Influence on Investment Decision Making of Individual Investors in PSX and PMEX

Abstract

Purpose: This paper explored how investors in PSX and PMEX make investment decisions that either contribute to the success of PSX and PMEX or seem irrational to them because of the same behavioral factors. Design/Methodology/Approach: This qualitative study is aiming at the examination of new features in behavioral finance by shedding light on the representative bias, availability bias, and anchoring bias as they relate to decision making among individual investors in Pakistan. This research will select Stock Broker's Individual Investors in PSX and PMEX to be the unit of analysis for the research of heuristic components. Findings: The analysis of this qualitative research explored that investor in this study use behavioral factors to make their investment decision making, but not have negative experiences using these heuristics. However, their experiences suggest that investors tend to rely on past information from companies which shows that representative heuristic effect investors decision making as well as availability heuristic in investment decision making make investors to take decision irrationally by listening to rumors and tips from broker, friends and family. Implications/Originality/Value: This qualitative study is aiming at the examination of new features in behavioral finance by shedding light on the representative bias, availability bias, and anchoring bias as they relate to decision making among individual investors in Pakistan

Keywords

• Availability Heuristic (AH)
• Representative Heuristic (RH)
• Price Anchoring Heuristic (PAH)