Does cultural economics affect country’s competitiveness?

Abstract

The increasing involvement of retail investors in India's derivatives market has generated worries about how their behavioral patterns impact their decision-making process. The research study examines how herd behavior influences investor perception and their participation in derivatives trading. The researchers gathered primary data by using a structured questionnaire which they distributed to 320 retail investors while they analyzed the data using Partial Least Squares Structural Equation Modeling (PLS-SEM) through SmartPLS. The study results demonstrate that herd behavior creates significant effects on both investor perception and market participation activities. Retail investors tend to follow the actions and opinions of others which shapes their understanding of risk and return in derivatives markets. The results also show that investor perception serves as a partial mediator of this relationship because herd behavior first impacts investor thoughts before it affects their decision to participate in activities. Financial literacy functions as a moderating factor which affects these relationships by decreasing the effects of herd behavior while it promotes better decision-making based on information. The study demonstrates that behavioral elements and financial knowledge serve as key elements which research the ways retail investors take part in the Indian derivatives market.

Keyword : Herd Behavior, Retail Investors, Derivatives Market, Investor Perception, Market Participation, Financial Literacy