Behavioral Biases and the Rationality in Stock Market Investments; Evidence from Sri Lanka

Prospect theory and its evolution, the behavioural finance, suggests that investment decisions could deviate from rationality. This study aims to investigate biases influence of stock market investors in Sri Lanka. We have collected primary data 250 active Colombo Stock Exchange. used Structural Equation Modelling technique test our hypotheses. find overconfidence bias herding significantly Moreover, familiarity bias, availability confirmation disposition are found be significant at 10%. no evidence support representative loss aversion bias. Our has important implications for regulators. Investors should aware possible may hinder their decisions. Further, regulators closely monitor movements minimize manipulations initiated by a few who capitalize on such as personal advantage.