The Influence of Heuristics and Biases on Investors’ Decisions: A Brief Literature Review
Keywords:
Investor Behavior, Cognitive Bias, HeuristicsAbstract
Behavioral finance can assist explain a variety of phenomena that traditional finance can't, such as overpricing and
herd behavior. It also enables investors to have a better understanding of their own behavior by accounting for the
elements that influence their decisions. In this field, the literature is still evolving and being examined from many
perspectives.
Behavioral finance examines investor behaviors and cognitive characteristics to construct an investor profile. Their
ability to make well-informed decisions based on their comprehension and reaction is also taken into account.
Successful investors make suggestions about how to use their abilities in the most competent way to make judgments,
according to findings from empirical studies on behavioral finance and investor biases. Furthermore, the findings
demonstrate what predictions and biases a market player has while making a decision, as well as their role in the
financial structure. This research will compile papers evaluating the effects of bias and trends on investor decisions
in order to conduct a literature review. This paper investigates how human-oriented trends in behavioral finance have
grown over time, with the goal of presenting a coherent framework based on the literature.
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