THE IMPACT OF FINANCIAL LITERACY AND BEHAVIORAL BIASNESS ON INVESTMENT DECISION MAKING IN PAKISTAN

Abstract

The purpose of this research article is to assess the impact of herd mentality, over confidence, behavioral baises and financial literacy of those who engage in local market investment. It also empirically tested the moderating impact of behavioral biases on the relationship between financial literacy and investment decision making. A survey was carried out among 301 different individuals of Karachi using an adopted questionnaire which measures every variable employing a 5 point Likert scale. EViews was the software used to test statistical procedures for data analysis including regression, correlation, and multicollinearity. The results demonstrate a substantial positive relationship between overconfidence, financial literacy, and investment decision-making. Behavioral biases and herd mentality, on the other hand, are two factors that negatively correlate with investing decision-making. The study could not found any moderating impact of behavioral biases between the relationship of financial literacy and investment decision making. This research paper is believed to stand among the first few of its kind conducted in Pakistan. To the best information available on the internet, not many studies have been done on financial literacy measurement.