The Influence of Behavioral Biases on Investment Decisions; Moderating Role of Emotional Stability

Abstract

This study examines how six behavioral biases (availability bias, self-control bias, overconfidence bias, prejudice an illusion of control, and representative prejudice) affect investing decisions moderated by emotional Stability. The study employs a theoretical model based on behavioral finance theories and a hypothetic-deductive methodology. Demographic information of 237 active traders on the stock exchange has been examined through quantitative research utilizing SmartPLS 4. The findings construct validity as all items have a loading value >0.60. The proposed model was tested in the study using a two-step process. First, reflective measurement models were used to test the measurement model, and Partial Least Squares (PLS) were employed to analyze the data. The structural relationships between the variables were then examined using structural equation modeling (SEM). The findings revealed that all variables explained 37.53% of the overall variance, indicating no significant issues with friction from the usual technique. The study's findings suggest that behavioral biases considerably influence investment choices and that emotional Stability moderates this relationship.