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Navigating intricacies of behavioural finance and its impact on investment stability - Biz Today
Naviga ng intricacies of behavioural finance

and its impact on investment stability

Posted on December 29, 2023 UTC

Seraj Khan, Managing Director of Orient Finance
Seraj Khan, Managing Director of Orient Finance

By Seraj Khan, Managing Director of Orient Finance

The broad realm of finance has been often defined by numbers, data and rational calculations.
The financial industry is generally considered to be developed upon complex algorithms and
economic theories, which have been used to predict, optimise and control outcomes. But it is

not all about funds and computations, there is a human factor which is often left overlooked.

The financial sector is significantly influenced by human behaviour. This may sound like a

groundless claim, however, in the past few years, several studies have underscored the
implication of behavioural finance, as industry professionals strive to perceive the connection
between human psychology and investment decisions. The idea behind behavioural finance is to

explain how investors make financial decisions and the influence of psychological factors.

The basic foundation of behavioural finance is realising the cognitive biases that impact

investment decisions, which often lead to unpredicted consequences. For instance, confirmation
biases drive decision-makers to be in a constant pursuit of information that confirms existing

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