abstract

Cognitive biases significantly impact financial decision-making, often leading to suboptimal outcomes. This study examines the prevalence and influence of three major cognitive biases-loss aversion, overconfidence, and anchoring-among financial decision-makers. Utilising a survey-based approach, the research employs a published scale to measure these biases and their correlation with financial behaviours. The sample consists of 300 financial managers from diverse demographic backgrounds, providing a comprehensive overview of how these biases manifest across different groups.

Results indicate a high prevalence of loss aversion, with 70% of respondents exhibiting a strong preference for avoiding losses over acquiring gains. Overconfidence was identified in 65% of participants, reflected in excessive risk-taking and frequent trading. Anchoring bias was prevalent in 60% of the sample, leading to reliance on initial information even when new data was available. Correlation analysis revealed significant relationships between these biases and various financial behaviours, such as investment strategies and risk management practices.

Demographic factors, including age, income, and education, were found to influence the extent of these biases. Younger, less experienced managers showed higher levels of overconfidence, while older managers exhibited greater loss aversion. Higher income and education levels correlated with reduced anchoring effects but increased overconfidence.

The study's findings underscore the need for targeted interventions to mitigate the impact of cognitive biases in financial decision-making. Recommendations include implementing structured decision-making frameworks, enhancing financial education, and promoting awareness of biases among financial managers. Future research should explore long-term strategies for reducing these biases and improving financial outcomes.