The Impact of Behavioural Biases on Attitudes and Intentions of Institutional and Retail Investors Towards ESG Investing
Year: 2025
Type: article
Abstract: This paper examines the impact of behavioral biases on the attitudes and intentions of both institutional and retail investors towards Environmental, Social, and Governance (ESG) investing. Behavioral biases, such as loss aversion, overconfidence, and confirmation bias, can significantly influence investment decisions, often leading to irrational behavior in the face of complex and uncertain information related to ESG factors. By avoiding behavioral biases, investors can more easily make rational decisions based on available data and logical processes. This study primarily focuses on overconfidence and the disposition effect, emphasizing how these biases affect investors' perceptions. Additionally, the paper underscores the importance of recognizing and addressing behavioral biases and outlines methods to do so. The study shows that behavioral biases, particularly representativeness bias, significantly influence retail investors, often leading them to make decisions against market trends and potentially resulting in losses. In contrast, while institutional investors are also subject to behavioral biases, their expertise enables them to effectively mitigate or even leverage these biases to achieve positive outcomes. Ultimately, the paper calls for further research into the ways that behavioral finance can inform practices that enhance the adoption of sustainable investment strategies among all types of investors.
Author: Ziyun Ding
Institution: University of Edinburgh
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4408417100