Behavioral Biases and Their Effect on Investment Decisions: A Systematic Review

Abstract

This paper aims to investigate and outline various biases influencing investment decision-making by reviewing a wide array of research in the field of behavioral finance. It examines the distinct behavioral patterns exhibited by individual investors, drawing insights from studies published from the foundational work in 1974 to the latest contributions up to 2024. The identified biases are categorized into seven distinct types, providing a structured understanding of how they manifest in investment behaviors. This study also incorporates contemporary research to offer a snapshot of recent developments in the field. The findings are particularly relevant for individual investors, financial advisors, students, and institutions, providing practical insights for informed decision-making. A key feature of this research is its focus not only on fundamental behavioral finance principles but also on emerging concepts, fostering interest in exploring strategies to mitigate the impact of biases in investment choices.