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Design Engineering A Biblometric Study on Behavioral Finance and Behavioral

Biases in the Context of India

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 ISSN: 0011-9342 | Year 2021
Design Engineering Issue: 7 | Pages: 15630-15637

A Biblometric Study on Behavioral Finance

and Behavioral Biases in the Context of India
Anuradha Samal1
Asst Professor
Department of Business Administration
Sambalpur University

Prof. (Dr.) A. K.Das Mohapatra2

Vice Chancellor
Odisha State Open University

Abstract:
Behavioural Finance has emerged as a branch of finance which proposes psychology based theories
aimed at understanding why people make certain financial choices which includes judgemental
errors. One of the major reasons behind these errors is behavioural biases. Behavioural bias is a
tendency of an individual to make judgemental errors while making financial decisions. There are
various kinds of behavioural biases like overconfidence bias, confirmation bias, anchoring bias,
cognitive dissonance, regret aversion, disposition affect, availability bias and herding bias.
Hence,behavioural biases are considered as the building blocks of behavioural finance which
significantly influence the financial decision making process. But studies related to behavioural
finance and behavioural biases are very limited in India. The main objective of the paper is to find
out through bibilometric analysis the position of India across the world in the field of
BehavioralFinanceandbehavioral biases affecting the investment decision making.

Keywords:Behavioral Finance, behavioral biases, bibilometric analysis

Introduction
Behavioral finance is a discipline that attempts to explain, how the cognitive errors and emotions of
investors influence the decision making process. It focuses upon how investors interpret and act on
information to make informed investment decisions. It is observed that investors take irrational
decisions with regard to building their investment portfolio, owing mainly to biased judgement.
Investors do not always behave in a rational, predictable and an unbiased manner indicated by the
quantitative models. Behavioral Finance places an emphasis upon investor behaviour leading to
various market anomalies. This kind of decisions has contributed to the development of a specific
branch of finance termed as behavioural finance.Behavioural Finance has emerged as a branch of
finance which proposes psychology based theories aimed at understanding why people make certain
financial choices which includes judgemental errors. One of the major reasons behind these errors is

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behavioural biases. Behavioural bias is a tendency of an individual to make judgemental errors while
making financial decisions. There are various kinds of behavioural biases like overconfidence bias,
confirmation bias, anchoring bias, cognitive dissonance, regret aversion, disposition affect,
availability bias and herding bias. Hence,behavioural biases are considered as the building blocks of
behavioural finance which significantly influence the financial decision making process. But studies
related to behavioural finance and behavioural biases are very limited in India.

Literature Review
Abdinet. al. (2017) studied “The impact of heuristics on investment decision and performance:
Exploring multiple mediation mechanisms” in order to examine the mediated links between technical
and financial stock market anomalies for which the data has been collected from 324 investors using
a survey-based method. It was found that out of 4 heuristics mechanisms, accessibility,
representativeness and overconfidence bias are strongly evident among investors.
Joo and Durri (2017) have studied on “Influence of Overconfidence, Optimism and Pessimism on the
Rationality of the Individual Investors: An Empirical Analysis” in order to examine whether
psychological tendencies of individual have a significant effect on their investment choices for which
t and F-test analysis has used and it was found that that number of such inherent psychological
tendencies can be seen in behavioural finance which do have the possibility to affect the investment
choice of an investor.
Shah et. al. (2018) have conducted a study on “Heuristic biases in investment decision-making and
perceived market efficiency: A survey at the Pakistan stock exchange” with an aim to understand
how heuristics influences financial decisions of individuals who are keenly trading on Pakistan stock
exchange for the study the data has been collected through questionnaire from 143 investors. It was
found that heuristic biases like anchoring, availability, representativeness and overconfidence do not
have any impact on the investment decisions of Pakistani investors.
Adebambo and Yan (2018) have studied “Investor Overconfidence, Firm Valuation, and Corporate
Decisions” in order to check whether investor overconfidence leads to overpricing. It was found that
investor overconfidence is significantly related to firm valuation and corporate decisions and firms
with more overconfident investors are relatively overvalued based on market-to-book ratio.
Filizet. al. (2018) studied “Portfolio diversification: The influence of herding, status-quo bias, and
the gambler's fallacy” for examining the influence of gambler's fallacy, herding and status quo bias
on portfolio selection process. It was found that gambler's fallacy does not play a significant role in
the portfolio selection process but neither status-quo bias nor herding bias contributes to portfolio
choices.
Costa et. al. (2019) have conducted a study on “Behavioural economics and finance: a biblometric
analysis of scientific fields” in order to conduct a biblometric analysis in the major areas of
Behavioural Economics and Behavioural Finance for which 2617 articles have been analyzed, data
have been collected using Web of Science database and it was found that the area of behavioural
economics has a wider reach than the area of behavioural finance which in turn is a by product of
behavioural economics.

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Cohen, Ayton, Clacher and Thomas (2019) have studied on “Behavioral biases in pension fund
trustees decision making” in order to better understand the monetary choices made by pension
finance trustees and identify future avenues of investment. It was found that trustees are heavily
dependent on the advice of experts; they generally make decisions in groups and also like to make
decisions on behalf of others.
Abreu (2019) studied “How biased is the behavior of the individual investor in warrants?” so as to
understand the socio-economic segment of retail investors of warrants and discusses about the theory
that some behavioral biases do affect the investors. It was discovered that more youthful and less
experienced men invest more in warrants.
Forman and Horton (2019) have conducted a study on “Overconfidence, position size, and the link to
performance” so as to examine whether the relative size is a more meaningful indicator of
overconfidence for which a survey has been done on the retail traders It was found that more refined
and knowledgeable traders exhibit less overconfidence.
Arikan, Gozluklu, Kim and Sakaguchi (2019) have conducted a study on “Primacy in stock market
participation: the effect of initial returns on market re-entry decisions” so as to look at whether
primary returns impact investor choices to return to the share markets following withdrawal. It was
discovered that Individual investors are affected by primacy bias.

Analysis
In case of India the work related to behavioral biases as compared to other countries is minimal as
seen in fig 1.1.
Fig 1.1 Behavioral Finance and Country Analysis.

Fig 1.1 represents country analysis in the form of works done in the area of Behavioral Finance
where the data has been taken from 459 articles collected from the web of science database and

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analyzed in vos viewer. From fig 1.1 we can find that out of 52 countries USA, Germany, England,
Australia, Canada, China and France are the major countries where the work has been prominently
done in the area of Behavioral Finance. India shares a minor portion of the figure which suggests that
there exists a huge scope in India that can be explored.

Fig 1.2 Major research Areas of Behavioral Finance in the world.

Fig 1.2 represents the major or prominent areas in the field of Behavioral Finance where the data has
been taken from 459 articles collected from the web of science database and analyzed in Vos viewer
from which we can find that the major areas of research include majorly rational investor, behavioral
finance theories, herding, portfolio, familiarity bias, experimental finance, prospect theory etc. The
work in the area of investment decision, regret aversion, herding, cognitive dissonance,
overconfidence and loss aversion is found to be minimal.

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Fig 1.3 Major areas of research under the field of detection Herding bias in the world.

Fig 1.3 represents the prominent areas of research in the area of herding bias under Behavioral
Finance in the world, where the data has been taken from 459 articles collected from web of science
database and analyzed in Vos viewer from which we can find that the major areas of research
include majorly Chinese stock market, financial crisis, evidence, trading volume, system, financial
market etc. The work in the area of detection of herd behavior in the Indian Stock Market is found to
be minimal.

Conclusion
It can be found that out of 22 countries, USA, Germany, Australia, UK, China and France are the
major countries where the studies on behavioural finance has been prominently done in which India
is placed at the bottom. The work in the area of investment decision, regret aversion, herding,
cognitive dissonance, overconfidence and loss aversion is found to be minimal as the Indian
Investors especially the retail and small ones are often considered as not so educated with regard to
the intricacies of the stock market and the investments mechanism. For most of the investment has

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become a practice without the support of essential information and knowledge. It is sometimes seen
that the non-predictability of the price fluctuations and the desire to make huge returns in a short
span of time have lead the investors to make irrational judgments caused due to behavioural biases.

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