Emotional and social factors affecting investment decision
Answers
Most of the investors are subject to human emotions while making investment decisions albeit not expressing openly..Emotions occupy a powerful position in making investment decisions. It drives human behavior that is consistent with economic predictions while making investments. Emotions play an important role while making decisions on investments just like any other business decisions. Behavioral finance seeks to combine behavioral and cognitive psychological theory with conventional economics and finance, to provide explanations for why people make irrational financial decisions. The aim of the present article is to understand whether emotional aspects affect investors’ decisions in different investment situations basing on levels of uncertainty. Positive emotions like self-confidence, challenge, and hope increase the decision-makers inclination to intensify the commitment and negative emotions namely embarrassment and strain do not. When financial markets are at their doldrums due to recession throughout the whole financial world, the question that arises is to find out the relationship how the emotions like fear associated with investment in financial markets influences the investment decisions. Further, it focuses on examining the impact of emotions on the composition and returns of the selected investment decisions. This paper also deals with identifying the factors that are the driving force of their investment decision making process and the role of emotions behind such decisions. This article takes into account the theoretical perspectives and does not cover the empirical details. Keywords: Emotions; behavioral finance; investment decision making; psychology of investor; Decision-making.