DYNAMICS OF DECISION-MAKING: FINANCIAL & HERDING BEHAVIOR EFFECTS ON RETAIL INVESTORS' INVESTMENT CHOICES: THE MODERATED MEDIATION APPROACH

Abstract

The aim of this study is to investigate the intricate relationship between financial behavior, financial literacy, herding behavior, risk perception, and investment decision-making in specific environment of Pakistan Stock Exchange. To achieve the intended objective, study approach using cross-sectional design was used. A sample of 250 participants was selected in conventional financial institutions situated in Lahore. The data collecting procedure included the implementation of structured survey that used a five-point Likert scale. Data analysis used PLS-SEM. The results of study revealed statistically significant relationship between financial behaviors and both financial literacy and investment decision-making along with other desired relations. The results of mediation research suggest that there is a mediating effect of financial literacy on associations between financial behavior, herding behavior & investment decision-making. Research has shown moderating effects that indicate presence of external variables that influence association amid financial behavior & decision-making process in investing activities.