Abstract

An In-depth Analysis of the Overconfidence Bias and its Impact on Investment Decision-Making: Evidence from Indian Investors

Srishti Agarwal

Volume: 14 Issue: 3 2024

Abstract:

This study investigates the role of overconfidence in shaping investor decision-making, drawing from primary survey data of 152 respondents in Delhi, India. Overconfidence, defined as inflated self-belief in knowledge, skills, or predictive ability, is a critical behavioral bias influencing asset allocation, risk perception, and trading patterns. Using descriptive statistical analysis of questionnaire responses, the study identifies significant evidence of overconfidence among Indian investors. Findings indicate that investors frequently overestimate their ability to outperform markets, misattribute success to personal skill, underestimate risks, and engage in speculative trading. The results corroborate behavioral finance literature, highlighting overconfidence as a key determinant of suboptimal portfolio performance. This research underscores the necessity of investor education, behaviorally informed advisory frameworks, and regulatory safeguards to mitigate systemic risks posed by psychological biases.

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