“Influence of Behavioural Biases on Market Investment Behaviour-Mediating Role of Brand Trust”

Document Type : Research Paper


Department of Finance and Accounting, Apeejay School of Management, Delhi, India


The rationale behind this exploratory research work is to examine the influence of behavioral biases on market investment behavior with the mediating role of brand trust. The research period was of three years (2018-2021). Data was gathered by a self-structured 27-item questionnaire adapted from 3 different scales. Data from 8100 respondents was collected from all Indian states and union territories based on purposive sampling. Meticulous data analysis processes embracing data screening, confirmatory factor analysis, and covariance-based structural equation modeling have been performed. The findings of this study revealed that behavioral biases play an influential role in affecting market investment behavior. However, when an investor develops trust in a brand, the impact of behavioral biases is reduced. Convergent validity and discriminant validity of the questionnaire have been proven along with high-reliability values. The model’s originality is that it is an interdisciplinary model with a combination of behavioral biases and brand trust. The results and findings would augment the current knowledge base. The study results give investors a better grasp of behavioral biases and the role of brand trust in influencing their decision-making.


Main Subjects

  1. Aaker, D. A. (1996). Measuring brand equity across products and markets. California Management Review, 38 (3), 102–120.

    Aaker, D. A., & Keller, K. L. (1990). Consumer evaluations of brand extensions. Journal of Marketing, 54, 27–41.

    Ahmad, M., & Shah, S. Z. A. (2020). Overconfidence heuristic-driven bias in investment decision-making and performance: Mediating effects of risk perception and moderating effects of financial literacy. Journal of Economic and Administrative Sciences, ahead-of-print(ahead-of-print). doi:10.1108/jeas-07-2020-0116. 

    Andaleep, S. S., & Anwar, S. F. (1996). Factors influencing customer trust in salespersons in a developing country. Journal of International Marketing, 4(4), 35–52.

    Asif, S. (2020). Herd Consumption Behaviour of Indian Youth towards Luxury Fashion Brands: The Mediating Role of FOMO. Journal of Xidian University,14 (10).

    Atkinson, A. & Messy, F. (2012). Measuring Financial Literacy: Results of the OECD/International Network on Financial Education (INFE) Pilot Study. OECD Working Papers on Finance, Insurance and Private Pensions, No. 15, OECD Publishing. https://www.oecd-ilibrary.org/finance-and-investment/measuring-financial-literacy_5k9csfs90fr4-en

    Azarmi, T., Lazar, D. & Jeyapaul, J. (2005). Is the Indian stock market a Casino? Journal of Business and Economic Research, 3 (4), 63-72.

    Baig, S. A., Zia-ur-Rehman, M., Jamil, K., Hashim, M., & Iqbal, N. (2019). Impact of Behavioral Biases on Firm Performance: Mediating Role of Entrepreneurial Innovations. Journal of Managerial Sciences, 13(2).

    Banks, S. (1968). The relationships of brand preference to brand purchase, In H. H. Kassarjian and T. S. Robertson (Eds.), Perspectives in consumer behavior. Glenview, IL: Scott, Foresman, and Company.

    Barberis, N., Shleifer, A., & Vishny, R. (1998). A Model of Investor Sentiment, Journal of Financial Economics, 49, 307–343.

    Bashir, T., Fatima, T., Ilyas, H., & Chaudhary, A. (2014). Impact of cognitive profile and information uncertainty on herding behavior of investor, IOSR Journal of Business Management,16, 68–74.

    Bikhchandani, S. & Sharma, S. (2000). Herd Behaviour in Financial Markets. IMF Economic Review, 47, 279-310.

    Biplob, H., & Abdullah, M. F. (2019). The importance of Islamic financial literacy for Muslims: A general review. Islamic and Civilisational Renewal,10, 106–117.

    Boomsma A. (1982). Robustness of LISREL against small sample sizes in factor analysis models. In: Joreskog KG, Wold H, editors. Systems under indirection observation: Causality, structure, prediction (Part I) Amsterdam, Netherlands: North-Holland.

    Boomsma, A. (.1985). Nonconvergence, improper solutions, and starting values in LISREL maximum likelihood estimation. Psychometrika. 50, 229–242.

    Boon, S. D., & Holmes, J. G. (1991). The dynamics of interpersonal trust: Resolving uncertainty in the face of risk, In R. A. Hinde and J. Groebel (Eds.), Cooperation and prosocial behavior. Cambridge: Cambridge University Press.

    Brown, T., & Dacin, P. (1997). The company and the product: Corporate associations and consumer product responses. Journal of Marketing, 61, 68–84.

    Butler, J. K. (1991). Toward understanding and measuring conditions of trust: Evolution of a condition of trust inventory. Journal of Management, 17, 643–663.

    Capon, N., & Fitzsimons, T. G. (1994). Affluent investors and mutual fund purchases. International Journal of Bank Marketing,12(3),17-25.

    Chaudhuri, A., & Holbrook, M. (2001). The chain of effects from brand trust and brand affect to brand performance: The role of brand loyalty. Journal of Marketing, 65(2), 81–93.

    Choi, J.J., & Robertson, Z. A. (2020). What Matters to Individual Investors? Evidence from the Horse’s Mouth. The Journal of Finance, 75(4), 1965-2020.

    Churchill, G. (1979). A paradigm for developing better measures of marketing constructs. Journal of Marketing Research,16, 64-73.

    Cooper, D. R., & Schindler, P. S. (2011). Business Research Methods, McGraw-Hill, USA.

    Coviello, N., & Brondie, R. (2001). Contemporary marketing practices of consumer and business-to-business firms: How different are they. Journal of Business and Industrial Marketing, 16, 382–400.

    Coviello, N., Brondie, R., Danaher, P., & Johnston, W. (2002). How firms relate to their markets: An empirical investigation of contemporary marketing practices. Journal of Marketing, 66, 33–46.

    Dacin, P., & Smith, D. (1994). The effect of brand portfolio characteristics on consumer evaluations of brand extensions. Journal of Marketing Research, 31, 229–242.

    Daniel, K., Hirshleifer, D., & Subrahmanyam, A. (1998). Investor Psychology and Security Market Under- and Overreactions. Journal of Finance, 53,1839–1885.

    De Bondt, W., & Thaler, R. (1985). Does the Stock Market Over-react? Journal of Finance, 40(2), 793–805.

    Deutsch, M. (1958). Trust and suspicion. Journal of Conflict Resolution, 2, 265–279.

    Deutsch, M. (1960). Trust, trustworthiness, and the F-scale. Journal of Abnormal and Social Psychology, 61,138–140.

    Dewan, P., & Dharni, K. (2019). Herding Behaviour in Investment Decision Making: A Review. Journal of Economics, Finance, and Trade, 24 (2),1-12.

    Duxbury, D. (2015). Behavioral finance: Insights from Experiments I: Theory and Financial Markets. Review of Behavioural Finance, 7(1), 78-96.

    Esch, F. R., Langner, T., Schmitt, B., & Geus, P. (2006). Are brands forever? How knowledge and relationships affect current and future purchases. Journal of Product Brand Management, 15(2), 98–105.

    Fischer, T. (2012). News reaction in financial markets within a behavioral finance model with heterogeneous agents. Algorithmic Finance, 1(2), 123-139.

    Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39–50.

    Furnham, A., & Boo, H. C. (2011). A literature review of the anchoring effect. The Journal of Socio-Economics, 40(1), 35–42.

    1. S (2021). Impact of Financial Literacy and Behavioural Biases on Investment Decision-making. FIIB Business Review. pp.1-15.

    Goodfellow, C., Bohl, M. T., & Gebka, B. (2009). Together we invest. Individual and institutional investors trading behavior in Poland. International Review of Financial Analysis, 18(4), 212-221.

    Gupta L.C. (1991). Share Holders Survey: Geographic Distribution, Manas Publications, New Delhi.

    Gupta, S. & Shrivastava, M. (2021). Herding and Loss Aversion in Stock Markets: Mediating Role of Fear of Missing Out (FOMO) in Retail Investors.  International Journal of Emerging Markets,  ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-08-2020-0933.

    Gupta, Y. & Ahmed, S. (2016). The Impact of Psychological Factors on Investment Decision Making of Investors: An Empirical Analysis. EPRA International Journal of Economic and Business Review, 4 (11), 27-39.

    Gurbaxani, A. & Gupte, R. (2021). A Study on the Impact of COVID-19 on Investor Behaviour of Individuals in a Small Town in the State of Madhya Pradesh, India. Australasian Accounting, Business and Finance Journal, 15(1),70-92.

    Hair, J, F., Matthew H., & Christian N. (2020). Assessing measurement model quality in PLS-SEM using confirmatory composite analysis. Journal of Business Research, 109, 101–110.

    Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2017b). A primer on partial least squares structural equation modeling (PLS-SEM), Sage Publications, Thousand Oaks, California.

    Hair, J. S., Black, W. C., Babin, B. J., Anderson, R. E. & Tatham, R. L. (2006). Multivariate Data Analysis, Prentice-Hall Publications, New Jersey.

    Helm, S. (2007). The Role of Corporate Reputation in Determining Investor Satisfaction and Loyalty. Corporate Reputation Review,10 (1), 22–37.

    Hirshleifer, D. & Teoh, S (2003). Herd Behaviour and Cascading in Capital Markets: A Review and Synthesis. Journal of European Financial Management, 9(1), 25–66.

    Hong, H., & Stein, J. (1999). A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets. Journal of Finance, 54, 2143–2184.

    Hosp, J., Howell, K., & Hosp, M. (2003). Characteristics of behavior rating scales. Journal of Positive Behavioral Interventions, 5(4), 201-208.


     Jain, J., Walia, N., & Gupta, S. (2019). Evaluation of behavioral biases affecting the investment decision making of individual equity investors by fuzzy analytic hierarchy process”, Review of Behavioural Finance, 12(13), 297-314.

    Jon D. Reast. (2005). Brand trust and brand extension acceptance: The relationship. Journal of Product & Brand Management,14(1), 4-13.

    Joo, A, A., & Durri, K. (2015). Comprehensive Review of Literature on Behavioural Finance. Indian Journal of Commerce and Management Studies, 6 (2), 11-19.

    Júnior, G.R., Palazzi, R.B., Tavares, R.S., & Klotzle, C, M. (2022). Market Stress and Herding: A New Approach to the Cryptocurrency Market. Journal of Behavioral Finance, 23 (1), 43-57.

    Kahneman D.  & Tversky A. (1984). Choices, Values, and Frames. American Psychologist, 39 (4), 341-350.

    Kartasova, J. (2013). Factors forming irrational Lithuanian individual investors’ behavior”, Verslo Sistemos in Ekonomika, 3(1).

    Kaustia, M., Alho, E., & Puttonen, V. (2008). How Much Does Expertise Reduce Behavioural Biases? The Case of Anchoring Effects in Stock Return Estimates. Financial Management, 37(3), 391-412.

    Kayhan, T. & Vanessa, R. (2020). The moderating effect of brand orientation on inter-firm market orientation and performance. Journal of Strategic Marketing. 28, 194-224.

    Keynes, J. M. (1964), The General Theory of Employment, Interest, and Money, Harcourt Brace and Company, New York.

    Keynes, M. J (1937). The General Theory of Employment. Quarterly Journal of Economics, 51(2), 209-223.

    Kotler, P. (1999), Marketing management analysis, planning, implementation and control (9th ed.), Englewood Cliffs, N.J. Prentice Hall College Inc.

    Kübilay, B. & Bayrakdaroglu, A. (2016). Empirical research on investor biases in financial decision-making, financial risk tolerance, and financial personality. International Journal of Financial Research, 7(171),1923-4023.

    Kumar, R. & Goel, N. (2014). Factors Affecting Perception of Investors towards Mutual Funds. International Journal of Research and Development - A Management Review, 3(4).

    Lai, M. (2001). Are Malaysian investors rational? Journal of Psychology and Financial Markets, 2(4),210–215.

    Lewis, J. D., & Weigert, A. (1985). Trust as a social reality. Social Forces, 63(4), 967–985.

    Limaye, V. (2019). The rise of small-town investors in Indian equity market. https://economictimes.indiatimes.com/markets/stocks/news/the-rise-of-small-town-investors-in-indian-equity-markets/articleshow/71270423.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst.

    Lye, A. (2002). Don’t throw the baby out with the bath water: Integrating relational and the 4P’s concepts of marketing. The 10th International Colloquium in Relationship Marketing, pp. 223–233.

    Mallik, A.K., Unir, A.M & Sarwar, S. (2017). Impact of overconfidence and loss aversion biases on investor decision-making behavior: Mediating role of risk perception. International Journal of Public Finance, Law & Taxation, 1(1), 13-24.

    Mardia, K. V. (1970). Measures of multivariate skewness and kurtosis with applications. Biometrika, 57, 519-530.

    Mardia, K. V. (1974). Applications of some measures of multivariate skewness and kurtosis in testing normality and robustness studies. Sankhya: The Indian Journal of Statistics, Series B, 36,115-128.

    Mishra & Metilda (2015). A Study on the Impact of Investment Experience, Gender and Level of Education on Overconfidence and Self-Attribution Bias. IIMB Management Review, 27(4), 228-239.

    Muhammad, A., Kayhan, T, & Rizwan, U. (2020). Entrepreneurial finance and new venture success ‐ the moderating role of government support. Business Strategy and Development. 3.

    Mushinada, N.V., & Veluri, S.V. (2018). Self-attribution, Overconfidence, and Dynamic Market Volatility in Indian Stock Market. Global Business Review, 21(3), 1-20.

    Patra, S.R., & Mohapatra, S.R. (2022). Stock Market Evidence on Investor’s Predispositions Impacting Portfolio Return. In: Borah, S., Mishra, S.K., Mishra, B.K., Balas, V.E., Polkowski, Z. (eds) Advances in Data Science and Management. Lecture Notes on Data Engineering and Communications Technologies, vol 86. Springer, Singapore. https://doi.org/10.1007/978-981-16-5685-9_11.

    Patro, A. & Kanagaraj, A. (2012). Exploring the Herding Behaviour in Indian Mutual Fund Industry. Asian Journal of Finance and Accounting, 4(1), 207-222.

    Pompian, M. (2006). Behavioural finance and wealth management – How to build optimal portfolios that account for investor biases. Financial Markets and Portfolio Management, 21(4), 491-492.

    Qasim, M., Hussain, R.Y., Mehboob, I., & Arshad, M. (2019). Impact of herding behavior and overconfidence bias on investors’ decision-making in Pakistan. Accounting.

    Rahayu, S.T., Rohman, A., & Harto, P. (2021). Herding Behavior Model in Investment Decision on Emerging Markets: Experimental in Indonesia. Journal of Asian Finance, Economics, and Business, 8, 53-59.

    Raheja S., & Dhiman, B. (2019). Relationship Between Behavioral Biases and Investment Decisions: The Mediating Role of Risk Tolerance. DLSU Business & Economics Review, 29(1), 31–39.

    Ritika & Kishor, N. (2020). Development and validation of behavioral biases scale: A SEM approach. Review of Behavioral Finance, Vol. ahead-of-print No. ahead-of print. https://doi.org/10.1108/RBF-05-2020-008.

    Saren, M., & Tzokas, N. (1998). The nature of the product in market relationships: A plury-signified product concept. Journal of Marketing Management, 14, 445–464.

    Sattar, M., Toseef, M., & Sattar, F.M. (2020). Behavioral Finance Biases in Investment Decision Making. International Journal of Accounting, Finance and Risk Management, 5 (2), 69-75.

    Schlenker, B. R., Helm, B., & Tedeschi, J. T. (1973). The effects of personality and situational variables on behavioural trust. Journal of Personality and Social Psychology, 25, 419–427.

    Setyowati, A., Harmadi, H., & Sunarjanto, S. (2018). Islamic financial literacy and personal financial planning? A socio-demographic study. International Journal of Economics Management, 5,149–168.

    Sharma, C P. (2019). Identification of factors influencing investor perception towards Investment in mutual funds. Journal of Commerce and Accounting Research, 8(3), 18-24.

    Sharma, C P. (2019). Influence of Branding of financial instruments on investment decision: Mediating role of Behavioral Biases. Advances in Management Research, Ed. 1, Publisher: Taylor and Francis, Boca Raton, Florida, United States.

     Shehzad U., Ahmad S., Iqbal K., Nawaz M., & Usman S (2014). Influence of Brand Name on Consumer Choice & Decision. Journal of Business and Management. 16(6), 72-76.

    Sheth, J., & Parvatiyar, A. (1995). The evolution of relationship marketing. International Business Review, 4(4), 397–417.

    Shiva, A., Narula, S., & Shahi, S. (2020). What drives retail investors’ investment decisions? Evidence from no mobile phone phobia (Nomophobia) and investor fear of missing out (I-FoMo). Journal of Content, Community & Communication,11, 2-20.

    Singh, B. (2012). A study on investors’ attitude towards mutual funds as an investment option. International Journal of Research in Management, 2(2), 61-70.

    Slovic, P. & Lichtenstein, S. (1971). Comparison of Bayesian and regression approaches to the study of information processing in judgment. Organizational Behaviour and Human Performance, 6, 649 -744.

    Slovic, P. (1967). The relative influence of probabilities and payoffs upon perceived risk of a gamble. Psychonomic Science, 9, 223–224.

    Soltani, F, Soroushyar, A., & Fooladi, M. (2021). The Impact of Anchoring Bias and Disposition Effect on Momentum Profit: The Role of Stock Liquidity. Iranian Journal of Finance, 6(1), 83-116.

    Stracca, L. (2004). Behavioural Finance and Asset Prices: Where Do We Stand? Journal of Economic Psychology, 25(3), 373-405.

    Taylor, B., Sinha, G., & Ghoshal, T., (2006). Research Methodology: A guide for researchers in management and social sciences, Prentice Hall of India Private Limited, New Delhi.

    Tversky, A., & Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases. Science, New Series,185(4157), 1124-1131.

    Waweru, N. M., Munyoki, E., & Uliana, E. (2008). The effects of behavioural factors in investment decision-making: A survey of institutional investors operating at the Nairobi Stock Exchange. International Journal of Business and Emerging Markets, 1(1), 24–41.

    Welch, I. (2000). herding among security analysts. Journal of financial economics, 58(3), 369-396.

    West, S. G., Finch, J. F., & Curran, P. J. (1995). Structural equations with non-normal variables: Problems and remedies, In R. H. Hoyle (Ed.), Structural equation modeling: Issues and applications. Sage Publications. Newbury Park, CA.

    Yates, J. F., Lee, J., & Bush, J. G. (1997). General knowledge overconfidence: Cross-national variations, response style, and reality. Organizational Behaviour and Human Decision Processes, 70(2), 87–94.

    Yuan, F., & Zhan, H. (2022). Stock Market Investment Behavior Based on Behavioral Finance Based on Data Fusion Algorithm. IETE Journal of Research. Retrieved through https://doi.org/10.1080/03772063.2021.2016507.

    Zahera, A.S., & Bansal, R, (2018). Do investors exhibit behavioral biases in investment decision making? A systematic review. Qualitative Research in Financial Markets, 10(2), 210-251.