The current research aims to analyze the impact of financial literacy on investment decisions in Pakistan with mediating role of behavioural biases (self-attribution, illusion of control, and hindsight). The secondary data is collected from 217 investors using self-administered questionnaires. Descriptive and inferential statistics identified that financial literacy has a substantial and positive influence on investment decisions, but has a negative effect on behavioural biases (self-attribution, illusion of control, and Hindsight). Furthermore, the illusion of control bias and hindsight bias partially mediates the relationship between financial literacy and investment decisions, whereas the results of mediation for self-attribution bias were insignificant. The current research is beneficial for the investors as they will be able to recognize the relevance of financial literacy and the biases that impeded their decision-making, as well as create alternative ways to overcome these biases and minimize irrational behaviour.

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IMPACT OF FINANCIAL LITERACY ON INVESTMENT DECISIONS WITH MEDIATING ROLE OF BEHAVIOURAL BIASES

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03 Pages : 26-43

http://dx.doi.org/10.31703/ger.2022(VII-III).03      10.31703/ger.2022(VII-III).03      Published : Sep 2022

Impact of Financial Literacy on Investment Decisions with Mediating Role of Behavioural Biases

Abstract

    The current research aims to analyze the impact of financial literacy on investment decisions in Pakistan with mediating role of behavioural biases (self-attribution, illusion of control, and hindsight). The secondary data is collected from 217 investors using self-administered questionnaires. Descriptive and inferential statistics identified that financial literacy has a substantial and positive influence on investment decisions, but has a negative effect on behavioural biases (self-attribution, illusion of control, and Hindsight). Furthermore, the illusion of control bias and hindsight bias partially mediates the relationship between financial literacy and investment decisions, whereas the results of mediation for self-attribution bias were insignificant. The current research is beneficial for the investors as they will be able to recognize the relevance of financial literacy and the biases that impeded their decision-making, as well as create alternative ways to overcome these biases and minimize irrational behaviour.

    Financial Literacy, Self-Attribution Bias, Illusion of Control Bias, Hindsight Bias, Investment Decisions

    (1) Muhammad Javed Iqbal
    MS Scholar, Department of Management Sciences, National University of Modern Languages, Rawalpindi, Punjab, Pakistan.
    (2) Shoaib Hassan
    Assistant Professor, Department of Management Sciences, National University of Modern Languages, Rawalpindi, Punjab, Pakistan.
    (3) Muhammad Bilal Kayani
    Lecturer, Department of Management Sciences, National University of Modern Languages, Rawalpindi, Punjab, Pakistan.
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Cite this article

APA

    APA : Iqbal, M. J., Hassan, S., & Kayani, M. B. (2022). Impact of Financial Literacy on Investment Decisions with Mediating Role of Behavioural Biases. Global Economics Review, VII(III), 26-43. https://doi.org/10.31703/ger.2022(VII-III).03

CHICAGO

    CHICAGO : Iqbal, Muhammad Javed, Shoaib Hassan, and Muhammad Bilal Kayani. 2022. "Impact of Financial Literacy on Investment Decisions with Mediating Role of Behavioural Biases." Global Economics Review, VII (III): 26-43 doi: 10.31703/ger.2022(VII-III).03

HARVARD

    HARVARD : IQBAL, M. J., HASSAN, S. & KAYANI, M. B. 2022. Impact of Financial Literacy on Investment Decisions with Mediating Role of Behavioural Biases. Global Economics Review, VII, 26-43.

MHRA

    MHRA : Iqbal, Muhammad Javed, Shoaib Hassan, and Muhammad Bilal Kayani. 2022. "Impact of Financial Literacy on Investment Decisions with Mediating Role of Behavioural Biases." Global Economics Review, VII: 26-43

MLA

    MLA : Iqbal, Muhammad Javed, Shoaib Hassan, and Muhammad Bilal Kayani. "Impact of Financial Literacy on Investment Decisions with Mediating Role of Behavioural Biases." Global Economics Review, VII.III (2022): 26-43 Print.

OXFORD

    OXFORD : Iqbal, Muhammad Javed, Hassan, Shoaib, and Kayani, Muhammad Bilal (2022), "Impact of Financial Literacy on Investment Decisions with Mediating Role of Behavioural Biases", Global Economics Review, VII (III), 26-43

TURABIAN

    TURABIAN : Iqbal, Muhammad Javed, Shoaib Hassan, and Muhammad Bilal Kayani. "Impact of Financial Literacy on Investment Decisions with Mediating Role of Behavioural Biases." Global Economics Review VII, no. III (2022): 26-43. https://doi.org/10.31703/ger.2022(VII-III).03