Behavioural Finance: Influencing Investment Decisions in the Philippine Equity Market

This research evaluates the influence of Behavioural Finance on the overall investment performance of investors in the Philippine Equity Market. Moving beyond traditional finance's assumption of rational decision-making, behavioural finance explores the psychological and emotional aspects that impact investment choices. The study investigates four key behavioural finance concepts: Heuristic Theory (including biases like overconfidence, anchoring, and the gambler's fallacy), Prospect Theory (covering loss aversion, regret aversion, and mental accounting), Market Factors (related to price changes, information, trends, and fundamentals), and Herding Effect (the tendency to follow other investors). Utilizing a quantitative-descriptive survey methodology, data was collected from existing investors in the Philippine Stock Exchange via an adapted and reliable questionnaire distributed through snowball sampling. The findings indicate that Behavioural Finance factors significantly influence investment decisions among Filipino investors. Among the factors studied, Market Factors were identified as the most dominant influence. Crucially, the research established a negative relationship between the practice of these behavioural finance factors and investors' investment performance. Herding Effect showed the most negative correlation. The study concludes that behavioural finance strongly affects Filipino investors' decisions, and that awareness and avoidance of these biases are associated with better investment performance. This highlights the importance of creating awareness to potentially improve investment outcomes and programs in the Philippine market.