Abstract
This study investigates household investment behaviour in India through a behavioural finance lens, using unit-level data from the 77th Round of the All India Debt and Investment Survey (2019). It examines how demographic and socio-economic characteristics shape the allocation of resources between safe and riskier financial assets. Employing an Ordinary Least Squares (OLS) mixed log-linear model on a sample of 4,127 individuals, the analysis incorporates robust standard errors to ensure reliable inference.
The findings reveal that household size negatively influences investment, suggesting the role of cognitive and liquidity constraints, where larger households may prioritise immediate consumption over future-oriented financial decisions. In contrast, higher consumption expenditure is positively associated with investment, indicating that financial capacity and perceived economic security can reduce risk aversion and encourage asset diversification. Variations across social groups highlight the influence of social identity, access to financial information, and behavioural biases such as trust and familiarity in shaping investment choices.
The positive association between outstanding loans and investment points to behavioural patterns like leverage optimism and aspirational investing, where households use borrowing not merely for consumption smoothing but also for asset accumulation. By distinguishing between safe and risky assets, the study captures heterogeneity in risk perception, loss aversion, and decision heuristics across different demographic segments.
The findings offer important policy insights for designing targeted financial literacy programmes, nudges, and inclusive financial instruments to address behavioural barriers and improve participation in formal financial markets.