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International Journal of Academic Research in Business and Social Sciences

Open Access Journal

ISSN: 2222-6990

Influence of Heuristic Techniques and Biases in Investment Decision-Making: A Conceptual Analysis and Directions for Future Research

Mensah Morris Ayaa, Williams Kwasi Peprah, Maxwell Okpoti Mensah, Adu Bismark Owusu-Sekyere, Bamfo Daniel

http://dx.doi.org/10.6007/IJARBSS/v12-i5/13339

Open access

Purpose: The primary purpose of the study was to examine the roles of heuristic techniques and cognitive biases in Investment decision making and suggest directions for future research.
Design/Methodology/Approach: The study adopted the literature review method to solicit an understanding of the heuristics and biases central to behavioural finance and influence investment decision-making.
Findings: The paper provides conceptual insights into the influence of heuristic techniques and cognitive biases in investment decision-making. Results from the conceptual analysis show that in recent times, investors in their bid to minimise losses and maximize gains employ a range of heuristics which often lead to systematic errors in judgment.
Practical Implications: The paper encourages investors to prioritise financial literacy as a prerequisite to making investment decisions in the capital market and minimise the over-reliance on heuristic techniques which often lead to biases.
Originality/Value: The current study is the first to focus on the influence of both heuristic techniques and cognitive biases in investment decision-making together with suggested future research directions. This article enhances understanding of the behavioural finance approach to investment decision-making.