Measuring validity of determinants of individual investor decision making investing in Islamabad stock exchange of Pakistan

Behavioral finance shows the impact of psychology on the behavior of individuals and is important to study because it shows the main factors behind market inefficiency. Individual investors of the stock market are therefore thought to take rational decisions while making judgments and investment decision. The empirical evidences of previous studies conclude that the involvement of behavioral biases and psychological impacts on investor's judgments and decision making that leads investors towards irrational decision making. Overall discussion in previous studies conclude the presence of behavioral biases in decision making process of investors. All the previous literature that is available has concluded contradictory results so far on the impact of fear and anger on individual investor's judgment and decision making. Keeping this in mind the present study has focused on exploring the real impact of affect heuristic, fear and anger on individual investor's judgments and decision making considering the present scenario in Pakistan. The population of present study was the individual investors trading all over the three stock exchanges of Pakistan. A survey method was conducted with thirty four items to gather the data from 270 investors investing in Islamabad Stock Exchange. Confirmatory Factor Analysis is used to measure the validity of three determinants of individual investor investment decision making.