Abstract:
Purpose:
This study aims to examine the theory and empirical evidence ofinvestor’s behavioral biases
in the lenses of behavioral finance paradigm while making decision with the moderating role
offinancial literacy. It surveys the research specifically focusing on behavioral biases among
institutional investors and retail/individual investors.
Methodology & Design:
The research used in this study is quantitative, and it includes data collection of 230
retail/individual investors and 150 institutional investors of Karachi. A questionnaire is
adopted to collect the data, and then the data was analyzed through SPSS and Jamovi.
Further reliability and moderation analysis were used to check the link between variables.
Findings
The results indicate that behavioral biases exist in investor’s nature while making investment
decision. Additionally, invests financial knowledge plays a vital role in making investment
decision. Furthermore, it is clear from the independent sample t-test that both the types of
investors act differently while making investment decisions.
Limitations
This study was carried out utilizing a survey questionnaire. The answers for this study can be
biased, which can lead to wrong findings. Consequently, the results depend entirely on the
honesty and impartiality of the respondent, making it more difficult to establish the real
results. There is also a time limit throughout this investigation and the study is limited to the
small group ofinvestors in Karachi only Recommendations
These results are better for financial intermediaries and policy makers since they show that
an increase in the financial literacy of consumers can have a significant impact on their
investments. Individual investors seek advice from agents, brokers and fund managers who
are better acquainted with the sector and can advise them about obtaining different securities
they want to invest in. The study suggests eliminating behavioral bias and their impact on
investment through training courses, workshops and seminars, financial knowledge, and the
ability to understand and defend against such biases, which can lead to poor investment
should be improved.
