Impact of Financial Literacy and Behavioural Biases on Investment Decision-making

Title

Impact of Financial Literacy and Behavioural Biases on Investment Decision-making

Creator

Suresh G

Description

Investors financial literacy entails making sound investment decisions and the behavioural biases or irrational behaviour in decision-making that are collectively formed by heuristic bias, framing effect, cognitive illusions and herd mentality factors. The present study examines the combined impact of financial literacy and behavioural biases on investment decisions. A questionnaire was developed using Likert scaling technique to elicit study variables and collected data was analysed using SEM technique. The results showed that heuristic bias had a significant positive association with the creation of behavioural bias in decision-making. However, the framing effect, cognitive illusions and herd mentality have negative associations in the formation of behavioural biases. Further, investors often practice and follow heuristic biases rather than other irrational techniques for making investment decisions. Therefore, the financial literacy of individual investors has a significant impact on affecting stock market investment decisions. 2021 Fortune Institute of International Business.

Source

FIIB Business Review, Vol-13, No. 1, pp. 72-86.

Date

2024-01-01

Publisher

Sage Publications India Pvt. Ltd

Subject

behavioural bias; cognitive illusions; Financial literacy; framing effect; herd mentality; heuristics; investment decisions

Coverage

Suresh G, Department of Commerce, CHRIST (Deemed to be University), Karnataka, Bangalore, India

Rights

Restricted Access

Relation

ISSN: 23197145

Format

Online

Language

English

Type

Article

Identifier

https://doi.org/10.1177/23197145211035481

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