INVESTMENT BEHAVIOUR AND FINANCIAL DECISION-MAKING IN EMERGING MARKETS

Abstract

Abstract: Investment behaviour and financial decision-making play a critical role in determining household financial security, capital-market development, and economic growth in emerging markets. Unlike developed economies, emerging markets are characterized by information asymmetry, financial-market volatility, relatively lower levels of financial literacy, changing regulatory environments, income inequality, and rapid growth in digital financial services. These conditions significantly influence how individuals evaluate investment opportunities and make financial decisions. Traditional finance theories assume that investors behave rationally and make decisions based on available information and risk-return considerations. However, behavioural finance demonstrates that investors are frequently influenced by psychological factors, emotions, cognitive biases, social interactions, and market sentiment. A hypothetical analytical framework is developed to explain the relationship between financial knowledge, psychological factors, socioeconomic characteristics, and investment decisions. The study concludes that improving financial education, investor protection, transparency, digital literacy, and access to diversified financial products can contribute to more rational and sustainable financial decision-making in emerging markets. Keywords: Investment Behaviour, Financial Decision-Making, Emerging Markets, Behavioural Finance, Financial Literacy, Risk Perception, Investor Psychology, Investment Decisions.