The Role of Financial Literacy and Demographic Variables in Influencing Behavioral Biases

Muhammad Arifin Dwi Putranda; Katiya Nahda

doi:10.55927/ijbae.v4i5.387

Authors

Muhammad Arifin Dwi Putranda Universitas Islam Indonesia
Katiya Nahda Universitas Islam Indonesia

DOI:

https://doi.org/10.55927/ijbae.v4i5.387

Keywords:

Financial Literacy, Demographics, Behavioral Biases, Investors

Abstract

This study aims to analyze the influence of financial literacy and demographic factors on investors’ behavioral biases in the capital market, including disposition effect, herding, mental accounting, overconfidence, and representativeness. The research employed a quantitative approach by distributing questionnaires to 152 respondents using purposive sampling. Data were analyzed using Partial Least Squares-Structural Equation Modeling (PLS-SEM) with the assistance of SmartPLS software. The findings indicate that financial literacy has a significant effect on all tested behavioral biases, while demographic factors show no significant effect on most biases. These results highlight that a higher level of financial literacy can help investors reduce the tendency to fall into behavioral biases when making investment decisions.

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