This study aimed to examine behavioral factors influencing investment decision of individual investors in North Gondar zone namely, availability bias, overconfidence, representativeness bias, mental accounting bias, loss aversion bias, regret aversion bias and herding behavior. The study employed an explanatory research design with a target population of individual investors who invested their money in manufacturing, trade and service sectors. The data for the study was collected via a closed ended questionnaire from 266 individual investors and analyzed using multinomial logistic regression model. The study revealed that representativeness bias, mental accounting, loss aversion bias, regret aversion bias and herding behavior has significant influence on investment decision of individual investors. Accordingly, government should give attention through formulating and, implementing better policies to minimize negative impact of behavioral factors on investment decision, and investors should evaluate information objectively and independently before relying on others investor’s action.
Keywords: Earlier Finance Theory, Behavioral Finance, Psychological Factor, Individual Investors, and Multinomial Logistic Regression