Impact of Behavioural Factors on Individuals' Investment Decisions: A Systematic Literature Review
Keywords:
Behavioural Finance, Financial Literacy, Expected Emotion, Incidental Guilt, Herding BehaviourAbstract
The present study emphasises behavioural factors that influence the investment decisions of individuals. The researchers performed systematic literature reviews, in which different articles were reviewed. To conduct this systematic literature review, the researchers used PRISMA and structured a research protocol. A total of 75 articles have been selected, but after some exclusions based on several pre-determined criteria, a total of 15 articles have been chosen for analysis purposes. A total of two themes have been identified corresponding to each cluster, which have explored the factors, like, attitudes of the investors during investments and the function of financial literacy in determining the investment behaviour of the individuals. This research study contributes to the area of investment behaviour and different behavioural factors that affect the investment decision-making of individuals. Particularly, it has shed light on financial literacy that can moderate the variables associated with the behavioural factors. By identifying the research gaps, like, impact of demographic profile on investment decisions and the need for primary research in this subject area, this research study can create an avenue in the future for the financial sector and socio-economic policymakers to study the behaviour of individuals during making investment decisions.
Additionally, this study has highlighted how psychological traits, like, overconfidence, herding behaviour, and incidental guilt, can impair rational judgement, especially in uncertain market conditions. These behavioural biases, therefore, if unchecked or ignored, could hinder sound investment choices. Thus, understanding and managing these behavioural biases through enhanced financial literacy can be essential for promoting better investment outcomes and long-term financial well-being among individuals.
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