FROM BIAS TO BALANCE: ANALYZING RETAIL INVESTOR BEHAVIOR AND STRATEGIES FOR RATIONAL DECISION-MAKING

Abstract

The study adopts an exploratory research approach to examine the behavioral biases influencing retail investors’ decision-making in stock market investments. It is based on primary data collected through a structured questionnaire designed in line with the study objectives. The sample consists of retail investors from the Hyderabad region of Telangana, selected using a convenient sampling method. The study identifies key behavioral biases such as overreaction, disposition effect, mental accounting, and anchoring that significantly affect investment decisions. These biases often lead to irrational and emotionally driven choices, resulting in suboptimal investment outcomes. The findings highlight a clear gap between theoretical rationality and actual investor behavior in financial markets. The study further emphasizes the role of financial education, transparency, awareness, and reliable information in mitigating these biases. It concludes that promoting disciplined strategies and informed decision-making can enhance investor outcomes and contribute to a more efficient stock market.