Lay People Beliefs in Professional and Naive Stock Investors' Proneness to Judgmental Biases

This paper is an empirical study about lay people beliefs in professional and naïve stock investors proneness to judgmental biases. Such biases are potential threats to the efficiency of financial markets and judgmental biases not a big threat to market efficiency rather the number of lay investors is large. There are various studies showing that investors are generally not rational while deciding for investment or markets may not be efficient and therefore prices may significantly vary from fundamental values because of irrational investors. The objective of the study is to re-standardize a measure for beliefs of lay people and naive investors in professional stock investors in making more rational and less biased judgments .Identification of underlying factors of lay people’s beliefs in professional stock investors in making more rational and less biased judgments. The underlying factors of naïve stock investors in making more rational and less biased judgments are also studied. And it was found out whether there is a difference between lay people beliefs in professional stock investors and naïve stock investors in making more rational and less biased judgments. The study is descriptive in nature and survey method used to collect responses from the residents of Gwalior city with sample size was of 198 respondents including 99 lay investors and 99 naïve investors. The paper reviewed the judgmental biases of lay people and naïve investor's in stock market. The result from t Test concluded that the variance between two is same.