Role of Reference Group in Investing in The Stock Market: An Empirical Study

Abstract

The use of reference groups is crucial while trading on the stock market. A framework for social comparison is provided by reference groups, which has an impact on people's attitudes, behaviours, and perceptions of risk. They provide investors with useful sources of knowledge and guidance as they traverse the complexity of the stock market and make educated selections. As people look to their peers for acceptance and conformity, reference groups can influence how people perceive danger. Positive results seen within the reference group might lower perceived risk and boost investor confidence. Additionally, during times of market turbulence, reference groups provide emotional support, which affects the choices and results of investors. However, use caution to prevent succumbing to a herd mentality that might result in subpar financial outcomes.