Heuristics at Play: Can Financial Literacy Lead to Smarter Investment Decisions?

Abstract – The present study attempts to investigate the impact of heuristics bias on investment decision making via the mediating role of financial literacy. The study is based on the behavioral finance theory and conducted through the structural equation modeling (SEM) approach to analyze the relationships that exist between heuristic bias, financial literacy, and investment decisions. The results of the study reveal a noteworthy positive impact of heuristic approaches on investment decisions, as well as the role of financial literacy in shaping those decisions. Moreover, there exists a notable mediating effect of financial literacy on the relationship between heuristics and investment decisions. Key Words: Heuristics Bias, Financial Literacy, Investment Decision