Purpose: The general objective of the study was to explore how psychological factors and cognitive biases influence investor decisions and market dynamics. Methodology: The study adopted a desktop research methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library. Findings: The findings reveal that there exists a contextual and methodological gap relating to investor psychology and market outcomes. Preliminary empirical review revealed that psychological factors such as cognitive biases and investor sentiment significantly impacted financial decision-making and market dynamics, leading to anomalies like market bubbles and volatility. It highlighted the need for integrating behavioral insights into financial models to better predict and understand market behavior, emphasizing the importance of financial literacy in mitigating adverse effects of these biases. Unique Contribution to Theory, Practice and Policy: The Prospect Theory, Herding Theory and Efficient Market Hypothesis (EMH) may be used to anchor future studies on behavioural finance. The study recommended further development of behavioral finance models to incorporate psychological factors, and for financial institutions to integrate behavioral insights into their services to guide better investment decisions. It also advised policymakers to design regulations enhancing market transparency and protecting investors from biases, while promoting financial literacy and implementing measures to monitor and mitigate systemic risks from irrational behavior.