Behavioral Factors in Investment Decisions: Evidence from Retail Investors

Abstract

This study investigates how behavioral biases affect investment decisions among retail investors in the United States, India, and Germany. Using surveys of 2,500 investors and portfolio analysis, the research identifies overconfidence, herd behavior, and loss aversion as significant determinants of portfolio choices and risk-taking. Investors exhibiting high overconfidence tend to trade excessively and experience lower returns, while herd behavior leads to market bubbles during speculative periods. The study suggests interventions including financial literacy programs, behavioral nudges, and digital advisory tools to improve decision-making. These findings contribute to behavioral finance literature and practical investment advisory strategies.