BEHAVIORAL BIASES AND INVESTMENT DECISION-MAKING AMONG UNDERGRADUATE STUDENTS: EVIDENCE FROM A SIMULATED PORTFOLIO EXPERIMENT
Keywords:
behavioral finance, investment decisions, overconfidence bias, loss aversion, herding, financial literacy, undergraduate educationAbstract
This paper investigates the influence of behavioral biases — specifically overconfidence, loss aversion, and herding — on investment decision-making among undergraduate finance students. Using a structured simulated portfolio experiment conducted over one academic semester, we analyze patterns of irrational decision-making that deviate from the assumptions of classical financial theory. Results indicate that overconfidence is the predominant bias, with 71% of participants overestimating their portfolio performance relative to a benchmark index. Loss aversion was observed to cause premature liquidation of profitable positions, while herding behavior was triggered primarily by peer discussion. These findings have important implications for financial literacy education, investment pedagogy, and the design of introductory finance curricula. The study contributes to the growing body of behavioral finance literature by focusing on an academically underrepresented demographic — undergraduate students — as decision-makers in training.
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