Financial Investment Behaviour and the Role of Behavioural Biases among Higher Education Workforce

Abstract

Professional investors are highly influenced by psychological and cognitive biases in undertaking financial decisions that are systematically non-rational. This paper will look at the effect of behavioural biases particularly overconfidence, loss aversion, herding, anchoring and mental accounting on the financial investment behaviour of higher education employees in the National Capital Region (NCR) of India. To illustrate the differing professional traits of this demographic, which encompass both education and economic stability, the study focuses on examining how different elements of cognitive bias are lightened or intensified by focusing on the specific features of this population segment. Quantitative cross-sectional research design was implemented based on a structured questionnaire that was distributed to 420 employees of higher education that were sampled using a stratified convenience sampling method. Validated five-point Likert-scale measures of five behavioural biases and investment decision-making behaviour were used to gather the data. Statistical methods with descriptive statistics, reliability measure (Cronbach alpha), Pearson correlation, one way ANOVA and multiple regression were conducted using SPSS statistical software. Results show that herding behaviour (M = 3.321) is the most common bias caused and then it is anchoring (M = 3.279) and loss aversion (M = 3.267). Only anchoring (r = 0.139, p = 0.004) and herding (r = -0.116, p = 0.018) are statistically significant predictors of investment decision-making. The multiple regression analysis establishes a significant without being high overall effect of all the five biases (R² = 0.041). There are no significant differences in investment decision-making behaviour based on demographic variables such as gender, age, education and income (p > 0.05). These results apply the behavioural finance theory to a professional group that has not been studied extensively previously and offer empirical insights on implementing specific financial literacy programs.