Investor Behavioral Bias as a Socio-Economic Challenge in Capital Markets: Trends and Future Directions
Year: 2026
Type: article
Abstract: Traditional finance explains stock prices and portfolio choice through market efficiency and rational investors. A growing body of evidence, however, shows that psychological biases and emotions systematically affect how investors process information and respond to market conditions, creating socio‑economic challenges for capital‑market stability. This study employed a Scopus-based bibliometric review to map the evolution of research on investor psychology and decision-making. By applying a validated Title–Abstract–Keywords search query for the period 2010 – 2025, VOSviewer was used for mapping publication trends, themes, and citation. The results showed a sharp post-2018 expansion in outputs and the publication activity peaked in 2020, 2023 and 2024. The study showed the highest average citation of 42 per article across six publications during the study period. The leader in publication was India followed by China and the United States respectively. The map of bibliographic coupling depicted three dense communities namely field specialist outlets with investor psychology studies at core, method-oriented publications, and diffusion from behavioral finance topics into ESG contexts. Moreover, the study prevailed with thematic clusters covering overconfidence, herding, sentiment, risk perception, and financial literacy. Hence, the study reflected a scholarly attention to systematic departures from purely traditional choices based on rationality. The findings conclude behavioral finance as a central framework for understanding the real market investment behavior. Therefore, policy priorities should include bias-aware financial literacy, clearer disclosure and investor-facing decision environments. Future research works should extend to causal identification with higher-frequency data, investor surveys, and comparative studies across emerging and frontier markets to address the socio-economic challenges in the elevated context of the existing capital market in the country.
Source: SocioEconomic Challenges
Authors: Janga Bahadur Hamal, Dilli Raj Sharma
Institution: Tribhuvan University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7155565651
FWCI:
Cites:
Cited by:
Related to: