Expert recommendations and investor psychology: a qualitative study of behavioural biases in investors’ response

Purpose The popularity of expert recommendations is increasing, as investors seek assistance in making investment decisions. However, such advice may be risky, as it can affect perceptions and induce biases, leading to uncertainty and risky investment behaviour. Building on signalling and prospect theory, the study aims to explore several expert-induced biases that affect investors’ intentions and behaviour regarding investment in the stock market. Design/methodology/approach The study uses a qualitative research approach, with open-ended survey questionnaires, to collect the viewpoints of 55 Indian investors on the importance and concerns associated with expert recommendations or financial advisors. Data is evaluated using Gioia’s thematic coding process to identify various biases influencing investors’ intentions. Findings The findings identified four main categories of biases among investors: cognitive biases, emotional biases, social biases and informational biases when following expert recommendations or other similar financial advice sources when making investment decisions. The study indicated that expert advice may induce uncertainty or biased judgement among investors, thereby directly affecting their decision-making. Originality/value The present study extends the signalling and prospect theory literature in the domain of investors’ psychology by discussing the informational role of expert recommendations and how these recommendations may lead to several cognitive, emotional and social biases in investors’ decision-making. The present study fills a gap by examining content-specific and heterogeneous biases among investors, based on their experiences and interactions with experts or financial advisors.