Psychological Factors and Investment Decision Making

  • Authors

    • Mr. Tanna Raghu Research scholar,‎ Department of Commerce and Management Studies,‎ Andhra University, Visakhapatnam
    • Dr. Kudumula Venkata Ramana Murthy Associate Professor Department of Commerce and Management Studies,‎ Andhra University, Visakhapatnam
    • Dr. Gangu Naidu Mandala Department of Business Management, Central Tribal University of Andhra Pradesh, Vizianagaram
    https://doi.org/10.14419/ma5ksm08

    Received date: July 11, 2025

    Accepted date: August 14, 2025

    Published date: August 21, 2025

  • Behavioral Biases; Exploratory Factor Analysis; Investment Behavior; Psychological Factors

  • Abstract

    Behavioral finance is focused on an investor’s mental and emotional factors that influence their ‎investment choices, rather than just on logical thinking alone. This project focuses on finding and ‎studying the psychological aspects that affect investment decisions for people in Andhra ‎Pradesh, mainly from Coastal Andhra and Rayalaseema. A sample of 300 people chosen by ‎convenience sampling and a questionnaire using a structured Likert scale are used in the study to ‎conduct Exploratory Factor Analysis (EFA). Based on the outcomes, the researchers found that ‎Investment Confidence (consisting of Risk Tolerance, Overconfidence and Financial Literacy), ‎Behavioral Biases (Emotional Influence, Herd Behavior and Anchoring Bias), Risk Aversion ‎‎(Loss Aversion, Regret Aversion) and Social-Cognitive Framing (Mental Accounting and Social ‎Influence) are the strongest psychological aspects affecting how people cope with finances. ‎According to the KMO value of 0.78 and a significant Bartlett’s Test result, the data has ‎factorability. Considering these four factors, 70.3% of the different factors making up ‎investment behavior are explained. From the evidence, it seems that choosing investments as an ‎individual investor involves knowledge and biases, emotions, and notions from people in ‎society. They have important consequences for financial education, modifying behavior, and ‎designing financial services‎.

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  • How to Cite

    Raghu , M. T. ., Murthy, D. K. V. R. . ., & Mandala , D. G. N. . (2025). Psychological Factors and Investment Decision Making. International Journal of Accounting and Economics Studies, 12(4), 541-545. https://doi.org/10.14419/ma5ksm08