Cognitive Biases in Capital Market Investments:The Indian Perspective

"BE FEARFUL WHEN OTHERS ARE GREEDY AND BE GREEDY WHEN OTHERS ARE FEARFUL". The wrong timing of greed and fear among investors creates volatility in the stock markets. Rational and successful investing is about controlling and channelizing these emotions and understanding behavioral finance, not market sentiment, crowd behaviour or company performance. Behavioral finance is an area where psychology has an impact on the behaviour of investors and financial analysts. Influences and biases are considered sources to explain different types of market conditions. This particularly applies to market anomalies in the stock market when it comes to rises and stock prices. The stock market is one area of finance where psychological behaviour is quite evident. The psychological behaviour of an individual usually decides how one reacts to the stock price which ultimately affects the rise and fall. However, there are many other factors that influence individuals' behaviour and financial choices. In behavioral finance, it is recognized that investors and financial analysts are not fully rational and self-controlled individuals, but have psychological influence with general and self-controlled tendencies.