Impact of Financial Literacy on the Behavioral Biases of Individual Stock Investors: Evidence from Borsa Istanbul

Ateş, Sinem; Çoşkun, Ali; Şahin, M. Abdullah

doi:10.20409/berj.2016321805

Cited by 56 publications

(54 citation statements)

References 16 publications

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“…Duong et al (2015) found that investor's knowledge and their decisions about investment and savings can be enhanced at their age of retirement and it seems that demographic factors like gender, age, income are associated with the behaviour of the investor. Ateşa et al (2016) describes a substantial association amongst behavioural biases variables and the level of financial literacy. The finding stated that financial literacy shows a negative effect on framing, overconfidence and loss aversion.…”

Section: Financial Literacy and Investment Decisionmentioning

confidence: 99%

How financial literacy moderate the association between behaviour biases and investment decision?

Adil

Singh

Ansari

2021

AJAR

116

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PurposeThe purpose of the study is to examine the impact of behavioural biases (i.e. overconfidence, risk-aversion, herding and disposition) on investment decisions amongst gender. The authors further examine the moderation effect of financial literacy in the relationship between behaviour biases and investment decisions amongst gender.Design/methodology/approachThe study considered a cross-sectional research design. For this survey, the data have been collected through a structured questionnaire from 253 individual investors of the Delhi-NCR region. To analyse the validity and reliability, the Pearson correlation and Cronbach's alpha test have been taken into account respectively. For testing the hypothesis, hierarchical regression analysis has been used in the study.FindingsThe results of the study reveal that amongst male investors, the influence of risk-aversion and herding on investment decision was negative and statistically significant, while the influence of overconfidence on investment decision was positive and significant. However, the influence of disposition was found statistically insignificant. The results stated that amongst female investors the effect of risk-aversion and herding on investment decision was negative and statistically significant. However, the effect of overconfidence and disposition was statistically insignificant influence the investment decision. It has been observed that financial literacy has significantly influenced investment decisions amongst male and female investors. The results of the interaction effect amongst male investors stated that the interaction between overconfidence and investment decision was significantly influenced by financial literacy. However, the interaction of financial literacy with the remaining three biases, i.e. risk-aversion, herding and disposition was found insignificant. The results for the interaction effect of financial literacy with overconfidence, risk-aversion, disposition and herding were found statistically significant amongst female investors.Research limitations/implicationsBased on this present research finding, the study is more productive for the portfolio manager and policymakers at the time of making an investment portfolio for the investors based on their behavioural biases. The study recommends that investors need training programmes, workshops and seminars that enhance financial literacy and financial knowledge of investors which helps them to overcome the behavioural biases while making an investment decision.Originality/valueThe current study aims to explore whether several behavioural biases can affect investment decisions amongst gender. Moreover, the authors would like to examine whether these associations are moderated by financial literacy. In this sense, financial literacy might also show a substantial part in the prediction of investments. The current study might be of the first study that examines the moderation effect financial literacy amongst male and female investors.

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Section: Financial Literacy and Investment Decisionmentioning

confidence: 99%

How financial literacy moderate the association between behaviour biases and investment decision?

Adil

Singh

Ansari

2021

AJAR

116

View full text Add to dashboard Cite

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“…Mouna and Anis (2016) found that people with low financial literacy are less likely and hesitant to invest in the stock market and men are more financially literate than women. Ateş et al, (2016) found that half of the investors lack in financial literacy (parents or friends happen to be their main source of information) and they encounter the behavioural biases at a high level. The biases like over-optimism, representativeness and confirmation have a positive relationship with financial literacy and the biases like loss aversion, overconfidence, framing and cognitive dissonance have a negative relationship with financial literacy.…”

Section: Literature Reviewmentioning

confidence: 99%

The Mediating Role of Risk Tolerance in the Relationship between Financial Literacy and Investment Performance

Kanagasabai

Aggarwal

2020

Colombo Bus. J

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The main objective of this research paper is to study the impact of financial literacy on investment performance, with the mediating effects of risk tolerance. Data was collected using a standardised questionnaire from 203 individual investors in Chennai, India and the results indicate that there is a significant positive relationship between financial literacy and investment performance while the level of risk tolerance is partially mediating that relationship. This study is the first of its kind which has explored the mediating role of risk tolerance, and it demonstrated that higher levels of financial literacy make investors more tolerant towards risk which in turn makes a better and satisfying investment performance. This study has several implications for investors, financial advisors and policymakers. It also aids in understanding the significance of financial literacy for the investors and ameliorating awareness and intention to invest among the non-investors.

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“…Similarly, there is a significant difference in financial literacy among UAE investors across gender, work activity, and education level [29], [30] showed that age and education are positively related with financial literacy and financial well-being. Moreover, men as well as those who are married tend to be more financially literate [30], [31] provided supporting evidence from Borsa Instanbul that female, married, and retirement-age investors exhibit higher level of financial literacy than male, single and working-age investors. [32], [33] confirmed age to be a significant determinant of financial literacy.…”

Section: Are Vietnamese Individual Investors Financially Literate? a mentioning

confidence: 81%

Are Vietnamese Individual Investors Financially Literate? A Preliminary Study

Dang¹,

Nguyen²,

Tran³

2017

JOEBM

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This study provides a preliminary evidence on Vietnamese individual investors' financial literacy. Given most individual investors in Vietnam are unsophisticated, no known study has investigated their financial knowledge which has been found to influence their risk assessment and decision-making. A sample of Vietnamese individual investors (N=231) were recruited by convenient and snowball sampling techniques. Our results show that while most respondents demonstrate a high level of basic financial literacy, they do not appear to have much advanced financial knowledge. Notably, Vietnamese investors seem to be not confident about their financial literacy. Our study also compares financial literacy across various demographic groups. In particular, Top Executive Managers, Department Managers, and students were found to have the highest financial literacy scores compared to other jobs. Interestingly, there is not a significant difference in financial literacy between males and females, single and married investors, or across different levels of education and income.

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Impact of Financial Literacy on the Behavioral Biases of Individual Stock Investors: Evidence from Borsa Istanbul

Cited by 56 publications

References 16 publications

How financial literacy moderate the association between behaviour biases and investment decision?

How financial literacy moderate the association between behaviour biases and investment decision?

The Mediating Role of Risk Tolerance in the Relationship between Financial Literacy and Investment Performance

Are Vietnamese Individual Investors Financially Literate? A Preliminary Study

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