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EEO. 2020; 19(3): 1886-1897


Nidhi jain, Dr Bikrant kesari.


Background and Introduction
The theme of financial investment is of grave concern as the probability of psychological bias and the existence of huge financial risk. In financial investment,decision making is very important for individual investors to be conscious withtheir personality traits and financial risk tolerances due to the chance of occurrenceof psychological biases.
We intended to conduct a systematic review of the concepts related to psychological biases and financial risk tolerance of mutual fund investors residing in India and abroad by reviewing previous researches. Further, to identify the most commonly occurring biasesand also to find research gaps on this topic.
Methodology /Design
The literature review wasperformed by retrievingthepreviously published data from the year 1973-2018 period of time.Theliterature selection criteria were based on keywords like Psychological bias, Cognitive bias, Emotional biases, Availability bias, Cognitive-Dissonance bias, Confirmation Bias, Conservatism bias, Framing bias, Representativeness bias and financial risk tolerance of the mutual fund investors. The review also emphasized the details of the list of journals, countries of research conductance, conceptual and empirical researches over the period of time on behavioral bias and financial risk tolerance.
The literature survey resulted in 9 studies (>100 respondents), 45 journals, and 12 countries with empirical researches, 48 studies comprising conceptual (38) and empirical (10) researches that covered the topic over the stipulated period.
Study Findings
Most of the literature review on behavioral bias shows the limited research in developingeconomies, the ascendency of secondary source data of empirical research, and lack of empirical research on individuals displaying group behavior. The reviews of studies indicate a significant correlation between the psychological biases and personality traits of the investors and affected their financial risk tolerances.
Our systematic analysis of psychological bias and risk tolerance significantly covered the research published during the period of time from 1973-2018. The data will be of great value to the researchers, academics, and professionals working in the field of finance in understanding the impact of psychological biases on financial risk tolerance. Further, more detailed studies are required to determine the prevalence of different cognitive biases and personality traits and their potential impact on mutual fund investors.

Key words: Psychological bias, financialrisk tolerance, personality traits,financial investment, mutual fund investors.

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