The purpose of this study was to investigating the behavioral factors that having an impact of individual equity
investors' investment decision making process together with investment performance at Pakistan's Stock
Markets. Moreover, the relationship of these behavioral variables with investment decision making process and
performance are also monitored. As in Pakistan, there are limited work is done in the area of behavioral finance,
this study is considered to add significantly to the advancement of this field in Pakistan.
The study starts with the previous theories in behavioral finance. So, on the basis of those theories researcher
develop hypotheses. After that, these hypotheses are tested in the course of the questionnaires which are
distributed to individual equity investor's at Pakistan's Stock Exchanges. Then the collected data are analyzed
by using Statistical software. The Tests used were, Exploratory Factor Analysis (EFA), Descriptive Statistics
(DS), Cronbach's Alpha, Pearson Correlation Coefficient and also Multiple Linear Regression (MLR) alongwith
Soble Test.
The result shows that these are two mainly behavioral factors: Heuristic Theory (Overconfidence Bias) and
Prospect Theory (Loss Aversion Bias), affecting the investment decisions making process and performance of
individual equity investors. Most of the sub-variables of both behavioral biases contain high impact on the
performance of equity investor. And these behavioral biases along with or without mediating variable (partial
mediation exist through Sobel test) also contain positive impact on investment performance of individual
equity investor at Pakistan's Stock Markets.
The findings of this study is not only helpful to the individual equity investors, authors, security companies, but
also for the field of behavioral finance. Because, here the only two behavioral biases (Overconfidence and Loss
aversion) impact is deeply observed and draw the conclusions.