Volume 3 Issue 2 July - December 2026

Abstract

This study examines the determinants of individual investors' intention to participate in the Nepalese stock market by extending the Theory of Planned Behaviour (TPB) with financial literacy and past behaviour bias. The primary objective is to analyse how attitude, subjective norms, perceived behavioural control, financial literacy, and past behaviour bias influence investment intention. A descriptive and causal research design was employed using survey data collected from 391 experienced investors selected through convenience sampling. Data were analysed using SPSS and SmartPLS, incorporating descriptive statistics, correlation analysis, multiple regression, and structural equation modelling. The findings reveal that all TPB constructs — attitude, subjective norms, and perceived behavioural control — significantly and positively influence investment intention, with perceived behavioural control emerging as the strongest predictor (β = 0.348). Financial literacy (β = 0.183) and past behaviour bias (β = 0.104) also show positive but comparatively weaker effects. The extended model explains 43.7 percent of the variance in investment intention (R² = 0.437, F = 59.647, p < 0.001). The study concludes that investment intention in Nepal is driven primarily by psychological and social factors, while financial literacy and past behaviour serve as supporting influences, and offers implications for policymakers, financial institutions, and investment educators. Keywords: Investment intention, financial literacy, past behaviour bias, attitude, subjective norms, Theory of Planned Behaviour, Nepal.

Abstract

This study explores how behavioral biases affect individual investors' investment decisions in the stock market in Nepal, particularly the overconfidence, representativeness, availability, anchoring and herding biases. The research stems from theories in behavioral finance like Prospect Theory and Heuristics and Biases program, which has identified a lack of knowledge about investor psychology in the developing stock market of Nepal, NEPSE, where conventional rational assumptions are not always applicable. The type of research design used was descriptive and causal-comparative research design. A total of 385 individual investors from the convenience sample of Rupandehi of Nepal were contacted to collect the primary data of this study through a structured questionnaire. Cronbach's alpha (> 0.68 for all constructs) was used to measure reliability. Descriptive statistics, Pearson correlation and multiple regression was used in SPSS for data analysis. The findings show statistically significant positive correlations between all the behavioural biases and investment decisions (r = 0.61 – 0.69; p< 0.01). The five biases accounted for 62% of the variation in investment decisions (R = 0.79, R 2 = 0.62, F = 94.37, p < 0.001) in multiple regression analysis. The most important predictor was availability bias (β = 0.301); the others were the anchoring effect (β = 0.254), overconfidence (β = 0.241), representativeness (β = 0.226), and herding (β = 0.219). All hypotheses were accepted. The results support the notion that there are psychological and cognitive biases that are a major factor affecting the investment decisions of the Nepalese investors apart from rational analysis. The study makes several important contributions to the behavioral finance literature in developing markets and it has implications for investor education, for financial market regulation by SEBON and NEPSE, for brokerage services and for improving financial market development by strengthening financial literacy and information transparency. Keywords: Behavioural finance, overconfidence, representativeness, availability bias, anchoring, herding, investment decision.