The Role of Behavioral Finance in Shaping Economic Decision-Making: Insights From AI and Big Data Integration

Abstract

This chapter examines how behavioral biases and institutional factors influence investment decisions, bridging gaps in behavioral finance literature. It explores cognitive biases like overconfidence, loss aversion, and herd behavior alongside institutional elements such as regulations and market stability. A mixed-methods approach combines survey data from 320 investors and 30 interviews. Findings show a strong link between biases and decisions, with overconfidence and loss aversion as key drivers. Regulatory transparency reduces bias impact, while uncertainty amplifies emotional reactions. The study highlights the need for clear policies, financial education, and future research on AI's role in mitigating biases.