The Effect of Herding Behavior on Investment Decision: Moderating Effect of Over-Confidence

The main objective of the present study is to investigate the relationship between herding behavior (HB) and investor investment decision (ID). A questionnaire adapted from past research was used to gather data from 400 SME investors in Khyber Pakhtunkhwa, Pakistan. The researcher manually collected data using a random sample approach, developing a cross-sectional survey questionnaire for the study. Using SPSS V-24, regression analysis showed that herding behaviour affects SME investor investment decisions, confirming the study's hypotheses and providing insight into Pakistani SME investors' investment decisions. The reliability statistics showed that all the variables are reliable. Herding behavior, overconfidence, and investment decisions are positively and significantly correlated. The regression model shows that herding behaviour affects investors' investing investment decisions. HB and ID are moderated by overconfidence. Moreover, this type of study is carried out utilizing cross-sectional data. This information can only reveal the full impact that an indicator variable has on a certain model variable at a given moment. Hence, it is recommended that longitudinal research be carried out instead in order to get more significant insights from the participants.