Name: Thrishul G.S & S Venkatesh
Country: India

Year: 2025
Volume: Volume No: 12, Issue No: 2, Year: 2025 (Special Issue)
Page Number: 196-208
DOI: https://doi.org/10.5281/zenodo.17867575

ABSTRACT:
This study investigates the impact of risk perception and behavioral biases on the
investment decisions of mutual fund investors in Karnataka. Traditional finance assumes
investors are rational, but behavioral finance shows that emotions and cognitive errors
often affect their choices. The study focuses on key biases, including overconfidence,
herding, loss aversion, and anchoring, and examines how these interact with investors’
perceptions of risk. Primary data were collected from 412 mutual fund investors through a
structured questionnaire. The data were analyzed using descriptive statistics, correlation,
and Partial Least Squares Structural Equation Modeling (PLS-SEM). The results indicate
that behavioral biases have a significant impact on investment behavior, with risk
perception serving as a key mediator of this effect. Overconfidence and herding encourage
high-risk and group-driven investments, while loss aversion and anchoring lead to cautious
decisions. The study highlights the importance of financial literacy in mitigating bias and
improving decision-making. The findings offer practical insights for mutual fund
companies, financial advisors, and policymakers.
KEYWORDS: Behavioural Finance, Risk Perception, Behavioral Biases, Investment
Decisions, Mutual Fund Investors, Financial Literacy, Karnataka