Abstract:
The physiological behaviors in Colombo Stock Exchange to be discovered as they cause to have market
anomalies in which is not technically driven and there are compared to other countries. The purpose of
this study is to observe whether overconfidence bias and self-attribution bias exist in Colombo Stock
Exchange. This study utilises the Structural Equation Modeling to analyse the collected data by using a
questionnaire survey from 418 active individual investors in Colombo Stock Exchange. Out of the three
stages of rational decision-making theory, it is observed that evaluating alternatives contribute to
overconfidence bias and self-attribution biased significantly. Therefore, it is evidenced that if the
investors do not concern on demand identification and evaluating alternatives correctly, investors may
be influenced to overconfidence bias and self-attribution bias that the investors in Colombo Stock
Exchange follow the theory of rational decision-making which related to evaluating alternatives.
According to the findings of this study, there is a mixed result of both rational and irrational investor
behavior. Hence, the investors in Colombo Stock Exchange display an apparently both rational and
irrational behaviors in making investment decision processes. The findings of this study are imperative
to investors, investment advisors, and policy makers etc. to have rational investment decisions in the
Colombo Stock Exchange.
