Behavioral Factors and Investment Decisions: The Moderating Role of Financial Literacy

Abstract

Investment decisions are often influenced by psychological factors that may cause investors to deviate from rational decision-making. This study aims to examine the effect of financial self-efficacy, overconfidence bias, and herding behavior on investment decisions with financial literacy as a moderating variable among students of Universitas Islam Indonesia. This research employed a quantitative approach using survey methods with students who have investment experience as respondents. Data were collected through questionnaires and analyzed using Partial Least Square Structural Equation Modeling (PLS-SEM). The results indicate that financial self-efficacy, overconfidence bias, and herding behavior have positive and significant effects on investment decisions. Furthermore, financial literacy significantly moderates the relationship between behavioral factors and investment decisions. The findings demonstrate that psychological characteristics and financial knowledge jointly influence investment behavior among young investors. This study implies that improving financial literacy through educational programs can help students manage behavioral biases and make more informed investment decisions.