IMPACT OF COGNITIVE BIASES AND EMOTIONAL INTELLIGENCE ON INVESTMENT DECISIONS – A MEDIATING ROLE OF EMOTIONAL INTELLIGENCE ON CONFIRMATION BIAS

Abstract

Purpose –The purpose of this study is to understand the impact of Emotional Intelligence and cognitive biases on individual investors’ behaviour. This study examines weather higher levels of emotional intelligence can mitigate the adverse effects of cognitive biases, thereby promoting more rational and informed investment decisions of individuals. The basic purpose is to contribute more in the field of behavioral finance exploring the impact of various biases on individual investment decisions.

Design/methodology/approach – The data we analysed from 195 participants individual investors. The research area was the individual investors having basic knowledge about investment in major cities of Gujarat through convenient sampling method. For Statistical testing, SPSS Software have been used, for determining whether EI mediates the effect of confirmation bias on investment decisions.  SPSS PROCESS software is used to test the mediation effect.

Results/Findings – The statistical analysis suggests that among various predictors, risk perception, emotional intelligence, and herding bias are key drivers of investment decisions. While Anchoring Bias and Financial Literacy found significant in a separate test having indirect impact on investment decision. Confirmation Bias and Availability biases did not have a significant impact on investment decisions.