BEHAVIORAL FACTORS AFFECTING INVESTMENT DECISION-MAKING BEHAVIOR IN A MODERATING ROLE OF FINANCIAL LITERACY: A CASE STUDY OF LOCAL INVESTORS OF PAKISTAN STOCK MARKET

Purpose - This study investigates “the behavioral factors affecting investment decision-making behavior in a moderating role of financial literacy”. This study has analyzed four behavioral factors like investor sentiment, overconfidence, over / underreaction, and herd behavior as independent variables while investment decision-making behavior and financial literacy have been used as a dependent & moderating variable. Methodology - A structured survey questionnaire is used for testing all the hypotheses. Due to time and financial constraints, the targeted population of the study is PSX investors especially individual investors who lived in Karachi city only. Total 105 questionnaires were distributed among PSX investors; out of 105, 5 were incomplete and 2 were outliers, therefore, 98 had been used in the analysis. Correlation and simple multiple linear regression have been applied to the data with the help of SPSS and Excel software. Findings - The study has found a positive impact of over / under-reaction & financial literacy on investors' decision making, and the insignificant impact of investor sentiment, overconfident, and herd behavior in investors' decision-making behavior. Furthermore, when financial literacy was included as a moderator, the study found an insignificant relation between behavioral factors and investors' decision-making. Implication - That means financial literacy does not play any significant role as a moderator in the Pakistani context and the behavior of Pakistani investors affects their investment decisions because in Pakistan most of the investors are financially illiterate, hence, there is no impact on financial literacy as a moderator in investors decisionmaking behavior. Originality - There is a lack of research on the behavioral aspect of finance in the Pakistani context so this research is covering that gap by finding the effect of behavioral factors on PSX investors.