RELATIONSHIP BETWEEN DEMOGRAPHIC FACTORS AND BEHAVIORAL BIASES

Abstract

Abstract

Purpose: The purpose of this paper is to examine the influence of demographic factors (Age, Annual Income, Educational Qualification and Total earning members in family) on behavioral biases (Availability bias, Confirmation bias, Conservatism bias and Loss-aversion bias) of investors of life insurance. Design/ methodology/ approach: The influence of demographic factors on behavioral biases derived are based on the structured questionnaire survey designed to collect responses from 407 respondents residing in Bihar, India using convenient sampling technique. Findings: Four biases were measured of which one belongs to emotional biases (Loss-aversion bias) and three belongs to cognitive biases (Availability bias, Confirmation bias and Conservatism bias). The results shows that behavioral biases are influenced by demographic factors (Age, Annual Income, Educational Qualification and Total earning members in family) as there is a significant difference across the categories of various demographic factors with the respective behavioral biases. Research limitations/ implications: The study suggests that behavioral biases affect the decisions of the investors so they need to take their decisions by avoiding these biases and also improve their investment strategies. This study is important to investors and insurance companies both in order to understand the investing behavior. It is helpful for the policyholders in understanding the behavioral biases they undergo while taking their investment decisions and take the needful steps to minimize these biases. Originality/ Value: This study contributes to the limited research done in the area of investment decision making by investors in life insurance. It contributes to the lacking academe on life insurance.