Effect of select cognitive biases on financial and general decision making

Background: People, everday are inumdated with making decisions whether they are big or small. Cognitive psychology plays a major role in how people make their choices. Cognitive bias is known to have an effect on decision making. These biases are based on memory which create a systematic deviation in thinking and processing information. Objective: This paper aims to identify the effect of select cognitive biases i.e., Overconfidence bias, Endowment bias, Ambiguity Aversion bias and Recency bias on General Decision Making of a person as well as Financial Decision Making. The study also explores the differences and similarities in cognitive biases working during general decision making and financial decision making. Method: For this study, a self-administered questionnaire was used to collect data from 416 people and analysis and conclusions were drawn based on it. Results: The results shows that there a significant difference in the style of decision making when financials are in consideration rather than routine decision making. Also Only Overconfidence bias has an influence on both Financial and General decision making. Conclusion: Any decision, be it financial or general is shaped by personality and behavioral charateristics of a person. And, people tend to make decision based on recent information registered in their mind.