AN EMPIRICAL STUDY OF BEHAVIORAL BIASES AFFECTING MUTUAL FUND INVESTMENTS: WITH SPECIAL REFERENCE TO THE TWIN CITIES OF GUNTUR AND VIJAYAWADA, ANDHRA PRADESH

Abstract

The effect of behavioral finance on mutual fund investment choices in Guntur and Vijayawada, Andhra Pradesh, is investigated in this research article. Though mutual funds are a widely diversified investment instrument, investors may show psychological biases that stray from sensible financial decisions. The study looks at how important behavioral biases—overconfidence, loss aversion, herd behavior, and anchoring—are to mutual fund performance.
Two hundred mutual fund investors were polled, and multiple linear regression was applied to the data. This method of analysis evaluated the interactions among these behavioral tendencies and investment performance. According to the findings, overconfidence and loss aversion have bad effects on investment results, which causes too much trading and clinging onto underperforming assets. Herd behavior turned out to have a beneficial short-term effect since market movements helped investors. We found that mental accounting and anchoring limited effective portfolio diversification.
The results underline the need for investor knowledge in order to minimize the consequences of these prejudices. This study offers insightful information for financial advisers to create plans that support logical decision-making, therefore enabling investors to get higher long-term returns. The study provides useful advice to improve mutual fund investing methods and helps clarify behavioral finance in newly developed Indian financial markets.