The Impact of Behavioural Biases on Beginner Investors’ Decisions During Market Volatility

Abstract

This thesis examines the impact of behavioural biases on beginner investors' decisions during stock market volatility. The study identified key biases influencing these investors and how volatility affects their choices, aiming to develop mitigation recommendations. The central question explored which biases drive decisions and their role in volatile markets. Limitations included a student sample and self-reported data. Data was collected through an online survey (N=41) incorporating Likert scale questions assessing the influence of various factors, the frequency of experienced emotions, reactions to volatility, and the perceived effectiveness of bias reduction strategies. Descriptive statistics were the primary method of analysis. Key theories from behavioural finance, such as loss aversion, overconfidence, and herding, provided the theoretical framework for interpreting the findings. The results indicate that beginner investors' decisions are influenced by emotional factors like excitement and fear, and that their reactions to volatility range from passive holding to active selling. Awareness of bias reduction strategies was mixed, with financial education perceived as most effective, though implementation varied. The study concludes by offering practical recommendations for beginner investors, emphasizing continuous learning, long-term planning, diversification, and emotional awareness. Future research should focus on longitudinal studies with more diverse samples and explore the effectiveness of specific educational interventions.