Impact of Demographic Factors on Behavioural Biases: An Empirical Study

Abstract

This study examines the influence of demographic factors on behavioural biases among retail investors, with a focus on heuristics and prospect theory constructs. The research addresses a critical gap in existing literature, which often isolates these biases rather than exploring their interrelationship. The study aims to identify the most prominent behavioural biases and to assess the extent to which demographic variables impact susceptibility to these biases. Data were collected from 171 retail investors in the Dakshina Kannada district, Karnataka, India, through a structured questionnaire. The analysis involved descriptive statistics, multivariate analysis of variance, and structural equation modelling. Findings reveal that gender significantly influences prospect theory-related and overall behavioural biases, while other demographic factors show limited impact. Among the heuristic biases, self-attribution and recency bias emerged as the most influential, whereas the disposition effect was dominant under prospect theory. A strong positive correlation was found between heuristic and prospect theory constructs, indicating that cognitive and emotional biases are interconnected in shaping investment behaviour. The study highlights the need for targeted investor education and financial literacy programs, suggesting that policy interventions should consider behavioural patterns to promote rational decision-making in financial markets.