Irrational Behaviour and Stock Investment Decision. Does Gender Matter? Evidence from Sri Lanka

The research aims to examine the effect of the irrational behaviour of individual investors on stock investment decisions, specifically, anchoring, disposition effect, home bias, herding, overconfidence and risk perception. The research further investigates the moderating role of gender between irrational behaviour and stock investment decision. Finally, it reveals which irrational behaviour is most prevalent. A survey collected the primary data from 432 individual investors. The survey evidence shows that six irrational behaviours, anchoring, disposition effect, overconfidence and risk perception affect the investment decision of individual investors, and risk perception comes out to be the significant irrational behaviour on stock investment decision. The research further explores that gender has a significant moderation for anchoring, disposition effect, herding, overconfidence, risk perception, and stock investment decision. We recommend that if individuals are aware of the behavioural biases, it will help them for making the right stock investment decisions. The study is also relevant for financial advisors, stockbrokers and policymakers as it facilitates them in gaining a better understanding of their clients’ irrational behaviour. The present study gives a unique insight into the individual investors’ profile of gender corresponding to each main irrational behaviour on investment decision under consideration of stock investment.