The rationality of investors is disputed because traditional financial theories are unable to explain stock market crises. Stock market crises are one of the consequences of ignorance, and they originate in behaviours that influence the market and cannot be ignored. Therefore, it is crucial for financial professionals to be aware of their own behaviour as well as the behaviour of other participants in the financial markets. Behavioural finance is a distinct field of research that combines behavioural and psychological aspects of economic and financial decision-making. Behavioural finance seeks to determine how emotions and cognitive errors influence investor behaviour. Investors' decisions play an important role in shaping market developments that ultimately influence the economy. Based on the literature reviewed on behavioural finance in the Croatian capital market, a lack of research at both levels - macro and micro - can be identified. There is also a lack of research on the behavioural factors of institutional investors. Since institutional investors play an important role in the capital market, their investment decisions have a significant impact on the performance of individual companies and the capital market as a whole. The importance of this research is reflected in the fact that disruptions in financial markets are an aggregate reflection of inappropriate investment decisions at the micro level, so it is important to understand them. Considering that there is an extensive literature on the behavioural factors of individual investors, which is not the case for institutional investors, the main objective of this dissertation is to investigate the relationship between heuristic factors, prospect theory factors, market factors and the herd effect in the investment decisions of institutional investors in the Croatian capital market. The literature review defines the theoretical framework of the research area, while the empirical part of the paper involves the analysis of primary data. The primary data was collected through a survey using a structured online questionnaire. The research was conducted with a sample of 119 institutional investors trading on the Croatian capital market. In order to test the hypotheses, the methods of descriptive statistical analysis and partial least squares path modelling (PLS-SEM) were applied and the collected data were processed using the SmartPLS4 programme. The research results show that heuristic factors do not have a statistically significant influence on investment decisions. More specifically, the heuristics in question are representativeness and anchoring. The results obtained can be explained by the fact that institutional investors are more familiar with the above-mentioned biases compared to retail investors and therefore avoid the usual cognitive biases. Moreover, they are more systematic in their investment decisions and rely on detailed analysis and research on various data. On the other hand, there is a positive and statistically significant relationship between prospect theory factors, market factors and the herd effect in investment decisions of institutional investors in the Croatian capital market. The analysis of the influence of behavioural factors on investment decisions is important for all participants in the capital market. It should be noted that behavioural factors can have both a positive and a negative influence on investment decisions, but they are certainly not the only determining factors. Institutional investors generally have access to more information, but they also have a fiduciary duty to their clients, which means that they must act in their clients' best interests when making investment decisions. Their investment decisions can have a significant impact on financial markets. It is therefore important for investors, regulators and policy makers to understand how behavioural factors can influence their investment decisions. The scientific contribution of this dissertation manifests itself in the study of behavioural finance, i.e. behavioural factors, which, compared to traditional financial theories, is a new area that is receiving increasing attention in the scientific literature. This dissertation contributes to the development of more effective investment strategies, the detection and understanding of behavioural errors and the improvement of the decision-making process. Since this type of research has not been conducted in the Republic of Croatia before, the results obtained may be useful for future education of institutional investors and development of future regulatory measures.