Abstract

The purpose of this study was to examine the impact of behavioral biases, such as overconfidence, disposition effect, herding, risk aversion, and financial literacy, on investment decision making. The sample was collected using a convenient method, and 338 respondents participated in the study. The study utilized descriptive statistics, ANOVA, independent sample t-tests, correlation, and linear regression analysis to analyze the data. The findings of the study suggest that overconfidence, disposition effect, and risk aversion have a significant positive impact on investment decision making, while herding does not have a significant effect. Furthermore, the results indicate that financial literacy moderate’s overconfidence, disposition effect, risk aversion, and herding negatively. This implies that higher financial literacy levels can help mitigate the impact of these biases on investment decisions. The study provides valuable insights for policymakers, stakeholders, and financial institutions to develop policies and strategies aimed at improving financial literacy. It can be useful for researchers and the general public as well, as it provides a deeper understanding of the behaviour bias and investment decision. Future research can broaden the scope of the study by including new independent variables, such as loss aversion and confirmation bias. Additionally, future research can explore the moderating effect of other factors, such as age and gender, on the relationship between behavioral biases and investment decision-making. Overall, the study highlights the importance of understanding and managing behavioral biases in investment decision making, and suggests that increasing financial literacy can help individuals make more informed investment decisions.

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