BEHAVIOURAL FINANCE IN A POST-COVID ERA: ANALYZING RETAIL INVESTOR TRENDS AND MARKET DYNAMICS

  ABSTRACT: COVID-19 period was exceptional disruption that indeed reset the world financial markets and altered initial conditions of investors of all sorts. Due to this great uncertainty resulting from the seismic catastrophe, market performers behave in a manner as often theorized in literature from the neoclassical financial theory. Psychological factors, risk perception change, and changes in decision making of the retail investors are found to be unique in the period during and after the epidemic. In the current global conditions after the COVID-19 pandemic, such psychological factors such as herd behavior, overconfidence, and loss aversion appeared more vivid. For this reason, the extent of loss aversion, greed, and fear of missing out, or FOMO, respectively, retails investors’ behaviours deviated from the rationality viewed in the market. At the same time, the economic concerns of the pandemic led to significantly changing the risk perception; thus the investment strategies which were used included aggressive risks and extremely cautious approaches. Considering the definitions of behavioral finance, this article provides detailed information about shift in the retail investor behaviors in the after COVID period and is rich in insight about such changes. The scholarly approach to the study of deviations from rational behavior in investing is available through behavioral finance, a psychological, as well as economical concept. The purposes of this study is to shed light on the drivers of retail investor behaviour during this critical phase by examining the interplay of emotions, cognitive spectra, and external stimuli such as news flow, market conditions and shifts, and advancement in technologies. The ultimate purpose of this study lies in contributing knowledge for market participants, lawmakers, and financial trainers.