The Role of Psychological Biases in Investment Decision Making The Case of: United Bank S.C.

Abstract

The research objective is formulated in order to gain a better understanding of the role of psychological biases on the decision maker’s investment decision making judgments. Quantitative research approach and descriptive research design is employed.Under the quantitative research approach, asurvey method is used. The data were collected using a - 13 - structured and self-administered questionnairesand interviews with some selected officials.Out of the total population the researcher has selected those who have a direct work relation and have the chance to observe the decision makers and also frequently involved in jobs related with the decision makers. Commonly branches at United Bank is classified as Special A,B,C,D,E, the basic criterion to categorize branches are volume of deposit, loan and advance ,foreign currency proceeds and annual income are the major ones. Out of which the researcher has only selected those branches classified as Special A and B, due to the fact they play the major roll and mobilize huge resources to make decision with. To be representative of 120samples were selected according to their proximity to the decision makers and questionnaires were distributed, but only 92 of them, 76% were returned. Also interview has been made with some selected officials about their observation of and their attitudes towards the raised issue at Untied bank S.C. From the survey result it is found that there exists a high degree of behavioral bias during investment decisions by those who have the authority to make investment decisions. In general, from the mean value of the seven perspectives, it is found that there is a bad result, decision are highly affected by the individual decision makers personality, psychological biases specially while they make on the bank’s resources weather to invest or not, in what sector to invest and to whom they have to decide resource to be released. From the observation that most of the decision makers who are involved in the decision making process during investment decisions are found to be biased by the seven cognitive measures.Therefore, the researcherhas recommended primarily o be recognized as one decision making elements during investment decisions and by deeply studying their significance, the have to be incorporated in the bank’spolicy and procedure manuals to mitigate their negative consequences