Analysis of Investor Decision Deviation from the Perspective of Behavioral Finance Theory

Abstract

From the perspective of behavioral finance theory, this paper discusses the common cognitive and behavioral biases in the decision-making process of investors. By systematically combing and summarizing the existing literature, this study summarizes the main types of bias in investor decision making, including overconfidence, anchoring effect, bandwagon effect, loss aversion and mental accounts. On this basis, the paper analyzes the impact of these biases on investment behavior and market efficiency, as well as their performance differences in different market environments and investor groups. The research finds that these decision-making biases often lead investors to make irrational investment decisions, affecting asset pricing and market efficiency. In response to these problems, this paper proposes some possible solutions, such as strengthening investor education, improving information disclosure mechanism, and improving market supervision. At the same time, the paper also discusses the application prospect of behavioral finance theory in investment practice, and points out the possible direction of future research. The purpose of this study is to deepen the understanding of investor behavior and provide theoretical basis and practical guidance for improving the quality of investment decisions and market efficiency.