A Study on Cognitive Factors Affecting Decision-Making of Investors during Covid-19

Decisions of an individual or investors' financial decisions are affected by behavioral or cognitive factors and not just knowledge. Decision-making is not in every case rational by nature. Investors make irrational decisions many times due to the influence of various cognitive factors. Moreover, the ongoing Covid-19 pandemic has added to the uncertainty around us. Every possible sector of business has been affected by it including financial markets. Aberration in investor behavior during this phase has also been observed and has led to deterrence in investors' financial decisions. The present study intends to focus on analyzing empirically and ascertain the impact of Covid-19 on the behavioral & cognitive aspects of financial investment. Primary data has been used for the purpose and was collected by distributing a structured questionnaire among the participating investors chosen by using the convenience sampling method. The sample size of the study is 200 practicing individual investors. Statistical tools like Descriptive Statistics, Correlation, Reliability, and Multiple Regression Analysis were employed for analyzing the data. In this paper, it is found that herd behavior lacks consistency and significance with anchoring having the highest impact on financial decisions taken by investors. The framing effect also has a very high influence on the financial decision-making process of investors. This research will be useful for the government and the policymakers in the country, brokerage houses, retail investors, financial analysts, and asset management companies. As Covid-19 is a time-bound phenomenon, financial decisions of investors may change when the situation normalizes.