Retail investors' investment decision-making process from a behavioral finance perspective with a focus on confirmation and overconfidence biases

This study implemented a quantitative analysis method to evaluate how overconfidence and confirmation biases have an influence on the decision-making process of retail investors. The study's sample population comprises 329 individuals who have prior experience in investing and come from various demographic backgrounds. In the financial markets, the research intends to investigate how these psychological biases are linked to the decision-making patterns observed among retail investors. The study's outcomes indicate that retail investors' tendency to overestimate their abilities significantly influences their investment choices. Retail investors often misjudge their capability and downplay the risks associated with their investments. This pattern of excessive self-assurance ultimately results in suboptimal trading behavior, inadequate portfolio variation, and heightened possibilities of making unwise investment choices. Retail investors' decision-making processes are significantly influenced by confirmation bias. According to research, they have a tendency to only consider information that validates their beliefs and opinions while ignoring or undermining contradictory data. This bias reinforces their already existing overconfidence, which can result in a lack of analytical thinking and predispose them to biased investment choices. The study suggests that retail investors should be conscious of how their overconfidence and inclination to confirm their own beliefs can affect their decision-making process. They should strive for rational and objective thinking to make wise investment choices.