Impact of Investors Behavioural Factors Leading Investment Decision Making an Empirical Study in a Mediating role of Financial Literacy a Case Study of Local Investors of Pakistan Stock Market.

Abstract

Purpose - In this research paper, we study the behavioral factors that impact investment decision making among the Pakistan stock exchange (PSX) investors in Karachi, considering the aspects of investor sentiments, overconfidence bias, and herding behavior, with financial literacy acting as a mediating factor.
Methodology - A quantitatively designed survey was shared with PXS investors, out of which we received 115 valid responses. SPSS (version 22, SPSS Inc.) and Excel were used to perform correlation and multiple linear regression analysis.
Findings - Investor sentiments, overconfidence, and market herding behaviour are the main factors affecting investment decision making, whereas financial literacy helps to moderate these factors
Implications - Understanding psychological profiling of investors and improving their financial literacy can assist investors, analysts and policymakers to make informed investments and avoid irrational behavior
Originality - This research adds to the behavioral finance literature in the context of Pakistan's PSX by delineating psychological and financial literacy factors affecting investment decisions.
Type of Research - The quantitative study that used survey data and statistical methods to investigate the relationship between prospective investor sentiments, overconfidence bias, herding behavior, and investment decision-making while testing the mediation of financial literacy.