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    Behavioral Bias Factors on Making Socially Responsible Investment Decisions: Evidence from Individual Investors in Gampaha District
    (Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Sandakelum, H. R.; Ranjani, R. P. C.
    Introduction: This research investigates how behavioral biases such as herding, overconfidence, and loss aversion affect socially responsible investment (SRI) among individual investors in Gampaha District, Sri Lanka. It aims to fill empirical and geographical gaps in the field of behavioral finance by exploring the adoption of ESG-focused investments in a developing country's context. Methodology: 386 responses were collected through a questionnaire distributed to 400 investors, and they were subjected to quantitative analysis. The validity and reliability of the questionnaire were tested through a pilot test, and statistical techniques such as correlation and regression were performed using SPSS software. Findings: The study found that biases such as herding, overconfidence, and loss aversion positively affect socially responsible investment (SRI) decisions. Herding shows that investors tend to follow their friends instead of making independent choices. Overconfidence can lead to underestimating and ignoring their advice, especially regarding ESG factors. Loss aversion leads them to think higher in SRI compared to traditional investments, limiting their involvement in ESG investments. Accordingly, this implies that these biases create barriers to the wider adoption of ESG investments. Conclusion: Through the study, exploring SRI decision-making in Sri Lanka, a largely under-researched context in Sri Lanka, advances knowledge related to behavioral finance and SRI. It proposes policy interventions to improve financial literacy and reduce cognitive bias, promoting a more informed and sustainable investment culture. It also highlights the importance of investor behavior in driving sustainable investment trends while providing valuable insights for research scholars, financial professionals, and policymakers by addressing empirical and geographical gaps.
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    Behavioral Bias Factors on Making Socially Responsible Investment Decisions: Evidence from Individual Investors in Colombo District
    (Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Shashipaboda, M. M. S.; Ranjani, R. P. C.
    Introduction: This research investigates the impact of behavioral biases on socially responsible investment (SRI) decisions among individual investors in the Colombo District, Sri Lanka. It focuses on three specific behavioral biases: Herding, Overconfidence, and Loss Aversion. The study aims to fill empirical and geographical gaps in the field of behavioral finance by exploring the adoption of ESG-focused investments in a developing country context. Methodology: The study used a quantitative approach, and the data were collected by distributing a Likert scale questionnaire among 385 individual investors. The following statistical tools were employed to assess the relationship between the variables: reliability test, descriptive analysis, correlation analysis, and regression analysis. Findings & Discussion: Further, the findings reveal a significant positive correlation between herding, overconfidence, loss aversion bias, and socially responsible investment decisions. Also, the regression analysis highlights that loss aversion bias has the most significant impact, followed by overconfidence and herding. Conclusion: According to the results obtained, they underscore the importance of addressing behavioral biases to promote rational decision-making in socially responsible investing. This study helps policymakers, financial institutions, and investment advisors to design targeted strategies to mitigate the negative impact of these biases. Understanding these biases correctly could enhance investor awareness as well as the preference towards the SRI.
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    Behavioral Biases in Investment Decision Making: A Review
    (Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Sewwandi, W.G.T.
    In traditional finance theory, the investors are expected to be rational decision makers going along with the expected utility theory. Behavioral finance, in contrary to this, heavily criticize this rational perspective and they argue that the investors tend to deviate from rationality whenever making investment decisions. Several behavioral biases that may occur in investment decision making have been studied and empirically tested over the history. This paper attempts to review the literature related to some behavioral biases based on the different studies done in different contexts. The focused biases are overconfidence, disposition effect, herding and home bias. The studies have been done focusing on the multiple causes associated with those biases. The studies have proven that the demographic factors such as gender, wealth, experience and age have a direct impact on overconfidence. Disposition effect is found to be influenced by the demographic factors such as income, occupation, education, wealth, and gender and the tax considerations of the investor. The desire to be with the group, reputational and remuneration concerns were found to be affecting herd behavior. The Investment Barriers, Transaction Costs, Information Asymmetry, Inflation Herding, and Non-Tradable Assets are found to be the causes of home bias.