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Behavioral finance has been a developing area that observes human
behavior in finance. The behavioral finance theories are built on human
psychology; which attempts to understand the effect of emotions and
cognitive errors on individual investor behavior. The objective of the
present study was to identify the leading behavioral biases such as
overconfidence, anchoring, herding, and mental accounting which affect
the individual investor investment performance in two selected regions i.e.
Peshawar and Islamabad. For the collection of primary data, adopted
questionnaires have been used. The sample of the study was 302 individual
investors as determined by using G power software, 151 each from
Peshawar and Islamabad. For testing hypotheses of the study structural
equation modeling has been used by using Smart PLS version 3.2.7. The
results of the study indicated that individual investors in Pakistan
incorporate behavioral biases in their investment decision-making.
Moreover, the results of MGA reported that there were no significant
differences among the investors' behavior were recorded in both Islamabad and Peshawar regions. The study is likely to contribute to the current
literature on behavioral finance and particularly in the Pakistani context as
no such study was conducted by comparing the individual investor
behavior of different cities. Moreover, the study can be helpful in better
decision-making by avoiding behavioral biases.
Said Wali, PhD, Shams Ur Rehman, PhD, Muhammad Zahid, PhD. (2022) Behavioral Factors and Individual Investor's Behavior: A Comparative Study of Islamabad and Peshawar using Partial Least Squares Approach, Journal of Behavioural Sciences, volume-32, issue 1.
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