Psychological Tendencies in an Emerging Capital Market: A Study of Individual Investors in India

Recent findings in the finance and consumer behaviour literature have shown that investors’ investment decisions are likely to be affected by their psychological tendencies. The focus of this paper is to understand how investors’ psychological tendencies influence purchase postponement of shares. Furthermore, the moderating effects of product involvement on the relationship between psychological tendencies and also purchase postponement are examined. Using a survey research design, data was collected from Indian investors to empirically test the model using moderated regression analysis. Our findings show that investor’s psychological tendencies do significantly impact purchase postponement. Furthermore, a profile of Indian retail investors is presented in the paper. Our findings documents another distinct phenomenon of investors’ persistent departures from rationality as posited by behavioural finance and also provides a better understanding of the nature of individual investor participation in the Indian capital market.