A Study on Financial Literacy, Investors’ Sentiment, and Financing Decisions with the Moderating Role of Investors’ Experience: Evidence from Pakistan

Abstract

This study ventures into uncharted territory by delving into the distinctive interplay between investor sentiments, financial literacy, and investment decisions, all while considering the moderating influence of investors' experience. To enhance the precision of our findings, the study incorporates age and education of investors as control variables in this intricate relationship. Therefore, empirical research is conducted to understand the behavioral pattern of individuals which can stabilize their investment decisions in an emerging market context such as Pakistan. In this study, we intertwine the theoretical perspective of cognitive psychology with investment decisions. To achieve this, three hypotheses are formulated to scrutinize the relationships among investor sentiments, financial literacy, investor experience, and investment decision-making. Data from 100 investors in Pakistan are collected for the analysis. SPSS 23.0 is used to compile analysis results by applying different techniques such as Factor Analysis, Simple & Multiple Regression, and moderating techniques. The outcomes of the study explain that H1 is accepted, which explores that there is a positive relationship between financial investment and investment decision. Similarly, H2 is also accepted and reports that there is a direct association between investor sentiments and investment decisions. Furthermore, H3 indicates a significant finding, suggesting partial moderation in the link between investor sentiment and investment decisions, while demonstrating full moderation in the relationship between financial literacy and investment decisions.