Behavioral Finance is all related to the behavior of the investor at the time of investing in different market conditions.. same is exhibited in our presentation by compiling different questions related to investment for different investors on the basis of different age groups...

1. BEHAVIORAL FINANCE AND
INVESTMENT DECISION
COMPILED BY : Aashima Malhotra
Mohd. Uzair

2. “The investor’s chief opportunity and even his worst
enemy – is likely to be himself.”
 Investors all over the globe are facing a changing & challenging
financial environment. That constitutes an obvious major
concern for deciding any financial and investment opportunities
across the corporate & individuals, These factors hence
transforms investment into a complex activity.
 The term Behavioral finance is thus generated for corporate
and individuals and all the credit goes to these volatile and
uncertain situations while taking investment decisions.

3.  Behavioral finance, is a sub-field of behavioral economics.
 It proposes psychology-based theories to explain stock
market anomalies, such as severe rises or falls in stock price.
 The purpose is to identify and understand why people make
certain financial choices.
 It is assumed the information structure and the characteristics
of market participants systematically influence individuals'
investment decisions as well as market outcomes.

4. Characteristics of Behavioral
Finance
Four Key Themes of behavioral finance characterized the
field are:-
1. Heuristics
2. Framing
3. Emotions
4. Market Impact

5. Heuristics
 Investors encounter various choices and these are basically
mental shortcuts that simplify the complex methods to make
a judgment.
Framing
 The perceptions of choices that people have are strongly
influenced by how choices are framed. It means choices
depend on how question is framed, even though the objective
facts remain constant.

6. Emotions
 Emotions and associated human unconscious needs,
fantasies, and fears drive much decision of human beings
and their decision making strategies.
Market Impact
 Standard finance argues that investors’ mistakes would not
affect market prices because when prices deviate from
fundamental value, rational investor would exploit the
mispricing for their own profit.

7.  The objective of the paper is To determine how the
behaviour of different individuals in different
situations affects their investments decisions in this
volatile and uncertain market conditions.

8.  During February 2019 a questionnaire was made, containing all the
questions of how the researchers conducted the studies, & which
topics to investigate.
 The questionnaire was distributed among 100 individuals which
comprised of 16 questions out of which 70 responded the
questionnaire.
 Convenient sampling method was used to choose sample out of the
population available to the researchers.
 The topic covered are closely related to behavioral finance and how it
affects the investment decision under different market conditions
and many other things which affects the investment decision of an
investor.

10. Q- How age group forms a consideration in
understanding behavior of the investors while taking
investment decisions...?
“The question isn’t at what age I
want to retire, it is at what income”.
Investment has the power to pay the
best returns to the people who have
the ability to take decisions on time
and this is proved by our result:-
 less than 25 years- 40%
 26-35 years- 38.5%
 36-50 years-20%
 51-65 years- 1.15%
Age Groups

11. Q - What is the major objective of the investment and what
are the most preferred investment options available to the
investors ..?
“INVESTING, DOES NOT
NECESSARILY IS ALWAYS ABOUT
MONEY”
The quote is proved by our result which
shows that different individuals have
different motives of investment some of
which are as follows:-
 Growth in income - 53.8%
 Tax savings - 18.5%
 Capital appreciation - 20%
 Others - 7.7%
Types of investment :-
 Stock & Mutual funds - 53.8%
 Government bonds - 30.8%
 Debt & Liquid funds - 7.7%
 Others - 7.7%
Major Objective Of making
Investment

12. Q- How risk taking ability of individual affect their tenure
of investing…?
“Time is friend of the wonderful company,
the enemy of the investors”
As proved by our results which shows that
investors like to invest in different securities
for different time periods
 Less than 1 year – 31.7%
 1-3 Years – 27%
 3-5 years – 19%
 5-7 years- 5%
 More than 7 years – 17.5 %
Tenure of investment

13. Q - Major factors that affects the investment decision of
different investors …?
“An investment is the knowledge that
pays best interest”
Different investors belief different ways to
get knowledge about the different factors
before investing major are as follows
 information from company – 9.2%
 recommendations and forecast from
professionals investors- 21.5%
 information from newspaper or Tv-1.5%
 Information from internet- 4.6%
 discussion with friends and colleagues-
12.3%
 own analysis of future performance-
20%
 Overall past performance of company -
30.8%
Factors affecting investment
decision

14. Q- What are views of different investors in taking
investment decisions during crisis..?
“The most important quality for an
investor is temperament not intellect”
 Overall past performance of the
company - 24.6%
 Own analysis of future
performance- 23.1%
 discussion with friends and
colleagues- 3.1%
 Information from company- 0%
 Recommendations and forecast by
professional investors – 24.6%
 Information from internet – 1.5%
 Do not invest – 23%
Views of investors while
investment during crisis

15. Q - What are views of different investors in taking
investment decisions during boom..?
“The four most dangerous words in
investing is - “THIS TIME ITS
DIFFERENT”
 Information from company- 9.4%
 Recommendation and forecasts from the
professional investors – 39.1%
 Overall past performance of company –
21.9%
 Information from newspaper and
television - 6.3%
 Information from internet-
 Discussion with friends- 3.1%
 Information from colleagues at work-
3.1%
 Own institution of future performance-
17.2%
Views of investors
during boom

16. Q - Do you think distress in economy leads to less
successful investment or are there any other factors (like
abnormal returns by organisation) also affect it..?
“The stock market is a device for
transferring money from the impatient
to patient”
It is a well proved fact that distress in
economy adversely affects the investment
decision but there are some other factors
also that affect these decisions
 Highly affects – 53.8%
 Moderately affects – 46.2%
 No affects- 0%

17. Q- What according to you is the effect of psychological
factors on investment made..?
“ You can’t reach success in investment if you do not think
independently”
These are the prominent psychological factors which an individual
consider while making investment
 Brand image
 Past performance
 Credibility

18. Q - How do you think regular investing can help investors
to deal with changing situations & volatility..?
“Don’t React & Respond…. Instead Exercise some forethought into
and what you’re about to say and do In the situation”
 Diversifying portfolio
 Risk diversification
 Enough funds for future volatility
 Can guide through adverse effects
 Having more awareness and analytical skills
 Updation of knowledge

19. CONCLUSION…….
“ One thing is for sure ; you cannot choose not to change when the
world around changes . Response to change is mandatory The only
choice is how to respond”
As per above saying we want to conclude in the end by highlighting few
point :-
 Change is inevitable so the best we can do is prepare ourselves for the
worst of scenarios
 Having a diverse mindset.
 Keep updating ourselves with the market conditions.
 One thing to sum up that
VUCA cannot always be a negative event ,it can also be positive
depending upon how the investors analyses the situations and react
upon it….

20. References
Jose Mathews(2005),”A situation based decision-
making process, “The ICFAI Journal of Organization
Behaviour , July, Vol.4, No 3,19-25
Lintner, G. (1998). ‘Behavioral finance , Why
investors make bad decision’, The Planner,(13):7-8
Slovic, P, (1972).’Psychological study of human
judgement: Implications for investment decision
making’, Journal of finance