Abstract:
The theory of traditional finance is based on the principle of utility maximization and explains how rational people take their financial decisions. Though the theory provides several insights, observation of real behavior of people was seen to be different from what the theory predicted. Behavioral finance is a new and emerging discipline which integrates psychology and economics. It tries to study the irrational behavior of the investors. Many behavioral economist rely on the basic assumption of traditional finance of individuals being rational was very impractical. Investors are disposed to numerous biases that avoid individuals from making good investment decisions. The traditional finance theories played a very limiting role in understanding the most important factor that of human behavior in the investment process. This limiting factor paved a way for the many researchers to bridge this gap and that has led to the emergence of behavioral finance. This study investigates the impact of behavioral biases (overconfidence, reliance on expert opinion, self-control, adaptive tendency, and spouse effect) on financial satisfaction of investor. Various statistical tools were applied such as, T-test, Correlation, Regression, Cronbach’s Alpha and PCA was calculated. Results of the study revealed that overconfidence bias, reliance on expert opinion, self-control, adaptive tendency and spouse effect have a positive and significant association with financial satisfaction of investor. In the future researchers may use this study as a base and can investigate different behavioral biases as moderating or mediating variables and their effect on financial satisfaction.
