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.
Raghu et al. (Thu,) studied this question.
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