The role of financial literacy in moderating the influence of herding and overconfidence on investment decisions

Purpose: This study aims to examine the influence of herding behavior and overconfidence on investment decisions among members of the Investment Gallery at the Faculty of Economics and Business, UPN Veteran East Java, and to investigate the moderating role of financial literacy in this relationship. Methodology: The research adopts a quantitative approach using primary data collected through a Likert-scale questionnaire. The sample consists of 80 active students of FEB UPNVJT who have conducted at least five stock buy/sell transactions, determined using the Slovin formula. Data analysis was conducted using Moderated Regression Analysis (MRA). Findings: The results indicate that both herding and overconfidence significantly influence investment decisions. Furthermore, financial literacy serves as a moderating variable that strengthens the impact of herding and overconfidence on investment decision-making. Practical and Theoretical contribution: This study highlights the importance for investors to remain cautious in following market trends and in managing their self-confidence. It also emphasizes the need for continuous improvement in financial literacy to enable more rational and directed investment decisions. Research Limitation: This study is limited by the analytical tools employed, which are unable to measure the specific magnitude of influence of each indicator within the variables.