Knowledge, Doubts, and Decisions: Unraveling the Psychology of Objective Investment Behavior
DOI:
https://doi.org/10.52461/sabas.v7i2.4697Keywords:
financial literacy, Financial Self-Efficacy, Objective-Oriented Investment Behavior, Risk Attitude, Financial Disclosure Readability, Behavioral Finance, PakistanAbstract
Despite the increasing importance of financial services and financial investment opportunities, many emerging economy investors still have sub-optimal investment behaviour, which is driven by limited financial knowledge, low confidence in financial decision making and difficulties in understanding financial information. In this study, the financial self-efficacy and risk attitude and financial disclosure readability have been found to act as a mediator and moderator respectively, between financial literacy and objective oriented investment behaviors among investors in Pakistan. The study adopted quantitative cross sectional survey experimental vignette conditions and sample comprised of 173 individual investors from Pakistan. The financial literacy was measured using objective knowledge questions, financial self-efficacy was measured using validated scales, and objective-oriented investment behavior was measured using validated scales. The results suggest that financial self-efficacy is highly influenced by financial literacy as well as objective oriented investment behaviour. Results showed that financial self-efficacy partially mediated the relationship between the financial literacy and investment behavior, suggesting that financial knowledge boosts financial actions by building financial confidence. The paper is significant for behavioral finance research as it shows the importance of including psychological confidence in the investment decision-making process in order to understand investment behavior beyond financial knowledge, in addition to a positive information environment.
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