Prospect Driven Biases Affecting Investment Decision Making: Mediating By Risk Perception And Moderating By Robo-Advisory

There is a debate in the investing world that revolves around whether investors adhere to classical theory or accord with the prospect theory.This study aims to examine the impact of prospect theory on the process of making investment decisions.The study has employed a hypothesis deductive technique, in which the suggested research model was tested using structural equation modelling in AMOSS Data that was obtained from 278 individual investors who participated in the Indian stock market for this study.The empirical findings indicate that biases driven by prospect theory have an impact on the irrational decision-making process among individual investors.The study also introduced a second-order measurement invariance related to prospect theory which has not been widely explored before.Investors tend to avoid losses and experience fear about potential losses; consequently, they may make irrational decisions.Surprisingly, even knowledgeable investors are susceptible to biases associated with prospect theory demonstrating significant and a positive relationship between prospect bias and irrational investment decision -making amongst individual investors.Risk perception of individual investors partially mediates and robo-advisory moderates the relationship between irrational investment decision-making and individual investors biases.The study's conclusions exhort individual investors to recognise and assess their prejudices and emotions.This research will assist in raising investor understanding so they can determine their financial capability after weighing all of their options.