Abstract

This study investigates the influence of cognitive and emotional biases on market liquidity, focusing on factors such as anchoring bias, investor sentiment, risk perception, and herding behavior. By examining how these biases distort decision-making processes, the research highlights their role in shaping trading patterns and liquidity dynamics in financial markets. The findings reveal that while biases may temporarily enhance liquidity, they can also lead to significant disruptions, particularly during periods of market volatility. The study emphasizes the importance of understanding bias-driven behaviors for developing more robust market frameworks and improving liquidity management strategies.