Impact of Financial Decision Making On Behavioral Biases: Evidence from Pakistan Stock Exchange

Abstract

The current research has aimed to examine the effects of financial self-efficacy, financial literacy, and financial attitude on behavioral biases. The data has been gathered using quantitative approach from the stock market investors in the context of Karachi, Pakistan. The regression and reliability analysis has been used for data analysis. The results have identified that financial literacy has a negative and significant effect on behavioral biases. The financial attitude has a negative and significant effect on behavioral biases. The financial self-efficacy has a negative and significant effect on behavioral biases. Similarly, individual investors have been found to be willing to make new investments in order to increase their financial returns, but they should proceed with caution when doing so. Thus, Individual investors seek the counsel or recommendations of agents/brokers and fund managers, who have greater knowledge in this industry and can advise them on assuring different securities in which they choose to invest. Additionally, this study suggests that investors should increase their self-assuredness, or self-belief, in their own ability to manage their personal finances and successfully handle any financial challenges they may face.