HOW FINANCIAL LITERACY BUFFERS THE INFLUENCE OF BEHAVIORAL BIASES ON INVESTMENT DECISION MAKING? EVIDENCE FROM AZAD JAMMU AND KASHMIR

Abstract

This study examines how financial literacy buffers the influence of cognitive biases on investment choices. The respondents included randomly selected 253 Kashmiri investors in Pakistan Stock Exchange. We employed a cross-sectional design while data were collected using a survey questionnaire that measured main variables of the study. Using Process-1 in SPSS, the study demonstrated that anchoring bias alone significantly predicted investment decision explaining 8.7% of the variance. However, confirmation bias did not significantly predict investment decision (β = .114, p = .094). Further, the results revealed that financial literacy buffered the influence of behavioral biases on investment choices. This study also presents implications as well as directions for further research.