Impact of Overconfidence, Illusion of control, Self Control and Optimism Bias on Investors Decision Making; Evidence from Developing Markets

The study is conducted to explore the impact of behavioral biases on Investment Decision by incorporating the behavioral model. For this purpose four behavioral biases have been selected i.e. optimism, overconfidence, illusion of control and self-control. Data for behavioral biases and investment decision was collected from investors in Karachi Stock exchange through questionnaires. A total of 100 questionnaires were distributed but only 50 questionnaires were received back. For the analysis of data regression was used to check the impact of the behavioral biases under study on investment decision. All four biases (Overconfidence, self-control, illusion of control and Optimism) are found to have significant and positive impact on investment decision. The results of study reveal that in Pakistan investors are biased while making investment decision. This study has certain limitations such as the sample used in the study is too small for generalization of results. The biases used in this study are only four which can be extended to other investors biases for further study.