Evaluation of Behavioral Economics in Individual Investment Decision-Making

Abstract

The complexity of capital market dynamics and the prevalence of irrational investment behaviors stemming from psychological influences have underscored the importance of behavioral economics in understanding individual investment decisions. This study aims to analyze the role of behavioral economic factors—specifically cognitive biases and emotional influences—in shaping individual investment strategies. Using a qualitative approach, data were collected through in-depth interviews, focus group discussions, and document analysis involving experienced individual investors. Thematic analysis was applied to identify patterns in cognitive and emotional tendencies that affect decision-making. The results reveal that overconfidence, anchoring, and emotional fluctuations have a significant influence on investors' risk assessments, leading to suboptimal investment outcomes. These findings are consistent with prior research and underscore the persistent impact of psychological factors on financial behavior. The implications suggest a critical need for educational strategies, behavioral interventions, and financial literacy programs to help investors recognize and manage psychological biases. This study contributes to a more comprehensive understanding of behavioral economics and offers practical insights for improving investor decision-making in volatile market environments.