Role of heuristic on individual investment performance

Abstract

This study's main objective is to investigate the role of heuristic behaviour on the investment performance of individual investors at Colombo Stock Exchange (CSE). Investment needs for effective use of accumulated money and, in return receiving the optimal return. Therefore, the stock market plays a backbone to the economy’s development by extending the country's investments, especially for Sri Lanka as a developing country. This study begins with the heuristic theory in behavioural finance, based on which a hypothesis is proposed. Then, these hypotheses are tested through the questionnaires distributed to individual investors. The sample size is 100 individual investors, those respondents were selected under the Proportionate stratified random sampling method. The collected data are analyzed by using SPSS. Statistical techniques include Correlation Analysis and Regression Analysis. The result shows that, overall Heuristic factors have a positive significant influence on investment performance. In addition to this, while individual factors wise analysis, Representativeness and Anchoring variables have significant influence, whereas other factors namely Availability bias, Gambler’s fallacy and Overconfidence, which do not have a significant influence on investment performance.