Impact of Heuristic and Frame Dependent Biases on Individual Investment Decision, Moderating Role of Advance Financial Literacy

Abstract

Behavioral biases are the key factors that influence the investment decision of the investors. The aim of this study is to determine the impact of behavioral biases on investment decision of individuals investing in Pakistan stock exchange. To reach the conclusion a group of 160 financial brokers were surveyed using a structured questionnaire. This survey helps us to determine the impact of behavioral biases and moderation effect of financial literacy on investment decision of individuals. The results suggest that there is a positive significant impact of behavioral biases on investment decision of individuals. It was also observed in the study that advance financial literacy has a significant impact directly on the investment decision but as a moderator it poses an insignificant effect. This study has certain limitation like due to shot=rate of time we could approach all three stock markets of Pakistan. To make it convenient we collected data only form the brokers of Islamabad stock exchange. It also provides guidance for the future researchers they can conduct a new study using the gap left in this study. This study can also be replicated using the same model in any other similar set of environment.