The Impact of Cognitive Biases on Investment and Financial Decision-making in Nigeria

Abstract

Behavioural finance explains how cognitive biases can lead investors to make systematic errors when making investment decisions, potentially resulting in poor or harmful outcomes. Biases such as overconfidence and regret or loss aversion distort investors’ perceptions and judgement, influencing investment and financial decision-making and contributing to suboptimal financial planning and risk-taking behaviour. This study therefore determines the impact of cognitive biases on investment and financial decision-making among investors in Nigeria. A survey strategy was adopted. The study population comprised 400 individual investors selected in Nigeria to ensure diversity in economic development and cultural context. The Taro Yamane formula was used to calculate a sample size of 200. A structured questionnaire containing three sections, A, B, and C, was used for data collection. Two hundred copies of the questionnaire were administered online to participants via Google Forms using a purposive sampling technique; 161 were completed correctly and submitted for analysis. Descriptive statistics (frequency counts, percentages, means, and standard deviations) and inferential statistics, including linear regression analysis, were applied at the 0.05 level of significance. The results revealed that the two selected cognitive biases had a weak and statistically insignificant positive impact on investment and financial decision-making among selected active individual investors in Nigeria (F = 2.641, p = 0.106 > 0.05). In addition, R = 0.128, R2 = 0.016, and adjusted R2 = 0.010 indicate that overconfidence bias and loss/regret aversion bias explained only 1.6% of the variation in investment and financial decision-making. The study was limited by its online survey design, its reliance on self-reported responses, and its focus on two cognitive biases. These constraints should be considered when interpreting the findings on investment and financial decision-making in Nigeria. The study examines the impact of overconfidence bias and loss/regret aversion bias on investment and financial decision-making among Nigerian investors in 2026. study concluded that cognitive biases exerted a weak and statistically insignificant positive impact on investment and financial decision-making among Nigerian investors. It recommended that financial advisers be trained to identify signs of cognitive bias in clients’ decision-making. Regulators, universities, and financial institutions should expand investor education initiatives to raise awareness of overconfidence bias and loss/regret aversion bias. Finally, policymakers should continue to monitor how emerging financial products, including cryptocurrencies and AI-driven investments, interact with cognitive biases.