The Role of Behavioural Biases in Economic Decision-Making: A Study of Household Financial Behaviour

The aim of this study is to understand the influence of behavioural biases on household financial decisions. Specifically, the study explores how herding bias, loss aversion, and overconfidence have an impact on the spending, saving, and investment patterns of households in Mumbai. Behavioural finance states that many a times individuals make financial decisions without taking rationality into consideration. They get influenced by many factors such as psychological, emotional, and social pressure.The study was conducted using primary data which was collected through a structured Google Form questionnaire with ۱۰۰ respondents from Mumbai. A five-point Likert scale was used to capture responses related to the three identified behavioural biases.The results indicate that herding bias significantly influences household spending decisions, as many individuals tend to follow financial trends popular within their social groups. Loss aversion was found to strongly affect household saving patterns, with respondents prioritising the avoidance of financial losses over pursuing financial gains. The study also confirms that overconfidence plays a lead role in household financial decisions, as individuals rely heavily on their own judgement and often ignore professional advice.The findings are consistent with previous behavioural finance research and highlight the importance of understanding how psychological biases impact financial behaviour at the household level. The study suggests the need for financial literacy programs and further research on behavioural finance across more diverse population groups

کلیدواژه ها:

behavioural finance ، Household Financial Decisions ، Herding bias ، Loss aversion