Published Online:April 2026
Product Name:The IUP Journal of Applied Finance
Product Type:Article
Product Code:IJAF030426
DOI:10.71329/IUPJAF/2026.32.2.54-75
Author Name:Sahifa Moosa Muradbi Mazgaonkar
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:54-75
This paper studies the relationship between peer influence and the investment decision of retail investors in stock market, and the mediating role of herding behavior in the context of urban retail investors in India. As more and more point-of-sale customers are likely to take into account emotion and other social factors while making financial decision, explaining the psychological factors that lead to this type of behavior would be conducive for promoting rational investment behavior. The study is quantitative in nature and is based on the primary data collected from 859 respondents aged between 18 and 60 years from the city of Mumbai, using simple random technique. Data on peer influence and herding behavior and retail investment decisions like investment instrument choice and risk management and diversification strategy were collected through a structured questionnaire. The data were analyzed using structural equation modeling (SEM) in SPSS Amos to test the direct and mediating relationships of the variables. The results revealed a significant effect of peer influence on investment decision-making of retail investors both directly and indirectly via herding behavior.
In today’s ever-changing investment landscape, retail investors, especially those in metropolitan areas such as Mumbai, find it increasingly challenging to make their most reliable financial choices. The rise of digital platforms and investment products has transformed these decisions from purely financial to heavily influenced by social factors and behavioral biases (Manjunatha et al., 2025). Among these psychological influences, peer pressure and herd mentality are the two primary factors that shape investor choices.