The Influence of Emotional Intelligence and Behavioural Biases on Financial Decisions: Evidence from India

Abstract

Investment decisions are not mere transactions but are shaped by the psychology of the investor in action. The northern part of Odisha is a region with unique socio-economic characteristics, which is a perfect region to understand the interface between emotional intelligence and behavioural biases in financial investment decisions. Despite research in behavioural finance, relatively little is known about the interplay between emotional intelligence and reducing behavioural biases, especially in a jurisdiction like Odisha. The question is how can a clear understanding of emotional intelligence’s role in investment decisions change our financial planning? The current study was conducted to understand the role of emotional intelligence and behavioural biases, moderated by gender, on investment decisions. The study intends to bridge the knowledge gap in understanding how mental conditions influence financial behaviour within subdomain areas of investors. The current study utilised the convergent quantitative research design collecting quantitative data from structured questionnaires. The targeted population included 350 investors chosen randomly but reflected all the different categories of investors in the northern part of Odisha. SEM was used to analyse the data collected from respondents. The study showed that behavioural bias does not significantly influence Investment Decision and also Emotional Intelligence does not on Investment Decisions. The study also revealed that Behavioural Biases and Emotional Intelligence on Investment Decisions do not differ significantly between male 2024and female groups. The current research sheds light on whether increased emotional intelligence can help people reduce investment biases. It is also essential for advisors to consider equipping themselves with emotional intelligence skills so that they can advise their clients accordingly, which may also help their clients make investment decisions responsibly. Additionally, this will be a significant contributor to the knowledge of behavioural finance and will also contribute to the literature on how emotional intelligence can be helpful in coloration with other elements in mitigating psychological biases in potential financial behaviour. Hence, this research presents new knowledge that could be used to regulate irrational financial behaviour among investors in the Northern Odisha region and the world at large.

Keywords: Emotional Intelligence, Behavioural Biases, Investment Decisions, Financial Psychology, Gender Moderation

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