Behavioural Biases of Gen Z and Millennial Investors: A Review of Risk Perceptions and Decision-Making in Financial Markets

Abstract

This study provides a comprehensive analysis of the behavioural biases influencing Generation Z and Millennial investors, emphasizing their distinct risk perceptions and financial decisions in contemporary markets. In contrast to traditional investors, these generations exhibit significant digital exposure, reliance on FinTech platforms, and heightened social influence, which amplify cognitive and emotional biases. The paper highlights key biases such as overconfidence, herding, loss aversion, anchoring, confirmation bias, disposition effect, and mental accounting, examining their impact on portfolio decisions, trading frequency, and long-term investing success. The influence of social media, gamification in investment applications, and peer-based financial communities on altering risk perceptions is particularly noteworthy. Evidence suggests that while younger investors exhibit a greater propensity for adopting novel financial products and demonstrate higher risk tolerance, they remain significantly susceptible to behavioural biases that may distort rational decision-making. This research contributes to the growing body of literature on behavioural finance by synthesizing evidence regarding investment psychology across generations and offers implications for policymakers, educators, and financial institutions to formulate targeted interventions that foster informed and resilient investing behaviours among future generations.