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Interim Report

Interim Report

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Manish Choudhary
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55 views4 pages

Interim Report

Interim Report

Uploaded by

Manish Choudhary
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Interim Report

1. Objectives of the Study

The study aims to delve into the psychological factors that affected retail investor behavior
during the COVID-19 pandemic, focusing on:

- Examining Changes in Risk Tolerance, Loss Aversion, and Herd Behavior : The
pandemic's market volatility led to significant shifts in risk tolerance, with investors
often becoming more risk-averse. The study seeks to understand these changes,
particularly how loss aversion—a tendency to strongly avoid losses over acquiring
gains and herd behavior, where investors mimic others' actions, became prominent as
uncertainty grew.

- Identifying the Impact of Cognitive Biases and Emotional Factors on Investment


Decisions: Factors like overconfidence, recency bias (focusing on recent events), and
fear played an outsized role in decision-making during the crisis. This study examines
how these cognitive and emotional influences diverged from standard risk-return
analysis.

- Assessing Long-Term Psychological Implications: The research evaluates whether


these psychological shifts are temporary or have lasting effects on investment
attitudes. By looking at changes in investor psychology before, during, and after the
pandemic, this objective aims to uncover enduring impacts on future investment
strategies.

- Exploring the Role of Digital and Social Media : The study examines how platforms
like Reddit and Twitter influenced retail investors, particularly regarding herd
behavior and decision-making without fundamental analysis. It evaluates how these
channels affected decision-making dynamics, as online forums became increasingly
central to investor communication and guidance during the pandemic.

2. Scope of the Study


The scope is confined to retail investors who actively participated in financial markets across
three key phases:

- Pre-Pandemic: Establishing a baseline for risk tolerance, psychological drivers, and


information sources helps differentiate between normal behavior and pandemic-
induced changes.

- Pandemic Onset and Peak: The onset phase captures immediate investor reactions to
severe market swings and high uncertainty, highlighting short-term cognitive and
emotional responses.

- Post-Pandemic Stabilization: Observing behaviors as markets stabilize provides


insight into whether shifts in risk tolerance and investment strategies were situational
or enduring, particularly if they show lasting conservatism or new reliance on
digital/social media for guidance.

3. Methodology

The study follows a mixed-methods approach, balancing quantitative data (surveys) and
qualitative data (interviews) for a comprehensive view of investor behavior:

- Quantitative Component: Structured online surveys are designed to quantify


psychological factors like risk tolerance, loss aversion, and herd behavior among a
diverse sample of retail investors. This allows for measurable comparisons across
demographics (e.g., age, income).

- Qualitative Component: Semi-structured interviews provide nuanced insights into


personal experiences, emotions, and cognitive processes that influenced investor
decision-making. These interviews capture unique perspectives on the pandemic’s
impact, from fear and uncertainty to the influence of online investment communities.

4. Research Design
The research design integrates quantitative and qualitative analyses to draw both broad and
personalized insights:

- Quantitative Data: Surveys quantify behavioral trends and psychological factors,


using Likert scales and demographic variables for cross-sectional analysis. Statistical
tools identify patterns that generalize the impact of the pandemic on investor
behavior.
- Qualitative Data: Interviews with investors and professionals probe deeper into the
emotional and cognitive motivations behind investment choices. This element
addresses psychological drivers not fully captured by numerical data, such as personal
anecdotes of fear-driven selling or FOMO (fear of missing out) in social trading.

5. Data Collection Method

The study uses both primary and secondary data to create a well-rounded analysis:

- Quantitative Data Collection: Online surveys are distributed to retail investors, with
questions on psychological factors like risk tolerance, loss aversion, herd mentality,
and the influence of digital media. The surveys include both structured questions for
statistical analysis and open-ended questions for additional qualitative feedback.

- Qualitative Data Collection: In-depth interviews are conducted with retail investors
and financial professionals. These interviews explore psychological and emotional
responses to the pandemic, including fear of loss, confidence shifts, and dependency
on online communities. Participants are asked to reflect on how their strategies
evolved and how social media influenced their investment decisions.

6. Sampling Method

The study employs convenience sampling due to pandemic restrictions and the urgency of
timely data collection:

- Justification: Convenience sampling, though less representative, allows for rapid


recruitment, crucial for analyzing real-time behavior shifts during a crisis.
- Limitations: The method may not fully represent the diversity within the retail
investor population (e.g., in terms of age, income, and experience). To address this,
the study aims to include a diverse demographic spread among respondents. Future
studies could use stratified or random sampling for more representative data.

7. Data Analysis Tools

Both quantitative and qualitative analysis techniques are used to interpret data:

- Descriptive Statistics: Summarizes key characteristics of the sample, such as age,


investment experience, risk tolerance, and psychological traits. It provides an
overview of respondents' baseline profiles.

- Regression Analysis: Examines relationships between psychological factors (e.g., risk


aversion, emotional bias) and investment decisions during the pandemic, isolating the
effects of each variable.

- Sentiment Analysis: Uses text analysis on open-ended survey responses to gauge


emotional tones (e.g., fear, optimism). This helps track shifts in sentiment across
different stages of the pandemic.

- Thematic Analysis: Applies coding to interview responses to identify recurring


themes, such as herd behavior, loss aversion, or emotional resilience. This analysis
helps understand the nuanced personal experiences driving decision-making.

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