Behavioural Biases and Investment Decision-Making: A Multigroup Analysis of Demographic Differences Using PLS-SEM

Abstract

The purpose of this study is to investigate the influence of behavioural biases on investment decision-making and the moderating effect of demographic variables using Partial Least Squares Structural Equation Modelling (PLS-SEM) and multigroup analysis (PLS-MGA). Data were collected from 385 MSME entrepreneurs of North-Eastern India using a structured questionnaire. The result indicates that anchoring bias, herding bias, overconfidence bias, illusion of control bias, and regret aversion significantly influence investment decision-making. Herding emerged as the most influencing factor. Age and education level was also found to moderate certain relationships between behavioural biases and investment decisions, whereas gender and income have no significant moderating effect. The study adds to the limited empirical evidence from emerging market contexts and contributes to behavioural finance literature. It also highlights the importance of incorporating behavioural finance insights into investor education programmes and policy frameworks.