THE MODERATING ROLE OF FINANCIAL LITERACY ON THE IMPACT OF BEHAVIORAL BIASES TOWARD INVESTMENT DECISIONS AMONG GENERATION Z

Wilson Wilson; Yandi Suprapto; Candy Candy

Authors

Wilson Wilson Universitas Internasional Batam
Yandi Suprapto Batam International University
Candy Candy Batam International University

Keywords:

behavioral biases, financial literacy, investment decisions, Generation Z, PLS-SEM

Abstract

Purpose: This study examines the influence of behavioral biases—anchoring bias, herding bias, loss aversion bias, and mental accounting bias—on investment decisions, and evaluates the moderating role of financial literacy among Generation Z investors in Indonesia.

Design/Methodology/Approach: A quantitative survey approach was employed using data collected from 276 Generation Z investors with prior investment experience. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) to assess both direct and moderating effects.

Findings: The results indicate that loss aversion and mental accounting biases have a significant positive effect on investment decisions, while anchoring and herding biases exhibit positive but insignificant effects. Financial literacy is found to significantly moderate the relationships between anchoring bias and herding bias with investment decisions, while no moderating effect is observed in the relationships involving loss aversion and mental accounting.

Practical Implications: Financial literacy plays a selective role in mitigating behavioral biases, particularly those associated with heuristic-driven decision-making. Therefore, targeted financial education programs are required to enhance rational investment behavior among Generation Z investors.

Originality/Value: This study provides evidence that the effectiveness of financial literacy as a moderating mechanism is contingent upon the type of behavioral bias, thereby offering a more nuanced understanding of behavioral finance in the context of emerging market investors.

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