Behavioral Finance of an Inefficient Market
According to the prior studies individual investors do not act according to the traditional finance assumption. Rather they take investment decision under the influence of several psychological and other factors. In this paper individual investors of Dhaka Stock Exchange (DSE) were taken under urvey on sample basis who are on the market since 2008 till now. The study was made to identify the most influential factors which affect investment decision of individual investors. For this purpose demographic and social economic variables were asked under different questions. The paper discussed and used relevant theories to select those questions. Investors’ response was used apply under PCA. After factors analysis it was found that Psychological factor is the most dominating influence upon investor’s decision making process. Micro economic factor and social factor also have influence on selecting investment securities. Though not very much but, little influence also has been observed by macroeconomic factor and. Index and knowledge of financial analysis of stock market is not very significant to the investors in fact most of the investors do not understand the process and exact meaning of index. It is suggest that, the amateur investors should gather more knowledge about the market and take every declaration under consideration. In order to avoid herd behavior, investors can gather past data and control their representative bias if they want to seek target profit.
