The main aim of this paper is to analyse the behavioural finance theory and its impact on return on investments. Other objectives of this work are to assess the extent to which psychology of the mind of an investor affects investments decisions, and also to examine the behavior of investors and managers toward risk and returns. Also the study identifies how investors design their portfolios according to the rules of their behavior, and investors hope for riches at a lower level of aspirations. The paper gives an insight in understanding how emotions and cognitive errors influence investors and the decision making process. The methodology used for this study was research from the field of psychology in order to have a better understanding of financial decision and create the discipline of behavior finance. Data obtained for the study was through primary source by asking 10 investors that has to do with their behavior and attitude toward risk averse, risk seekers and risk neutral in investments, and secondary sources such as journals from the field of psychology and finance. The method used for analyzing the data was obtained through the use of statistical tools called the Cochran Q test. The study revealed that there was no significant difference between the behavior of investors attitude towards the different kind of risk, investors fear loss of cash in case the business do not augur well for them, they are of the opinion that they only strike on opportunity when it comes their way.
Behavior Finance, Investment, Risk, Expected Returns, Portfolio Investors
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