Abstract
Asset allocation is a complex phenomenon that cannot be understood without applying
human behavior and heuristic biases to test. This shift from traditional finance to
cognitive domain can assist in predicting behavior and decisions thereof. Early research
had ignored investment decisions taken by a household, therefore, this paper examines
the effect of socio-demographic and behavioral traits upon decisions concerning the
asset allocation of the general community. Since socio-demographics and behavioral
traits have been found to be significant in predicting the investment decisions, these have
been taken as predictors. Literature suggests that financial literacy could moderate these
decisions in the behavioral domain of investment decisions, therefore, the impact of
predictors has been studied while being moderated by financial literacy. The study is
descriptive in nature, and analyzed through the quantitative approach, survey instrument
in the form of questionnaires containing 70 items from 775 respondents. The study finds
significant moderating effect of financial literacy upon investment diversity in relation to
socio-demographics, financial attitude and decision behavior. Moreover, with the
increase in age, education, and income, investment diversity improves. It calls for
policymakers’ attention to declare a financial awareness emergency as 64% respondents
could not understand even the literacy questions. Study recommends the improvement of
financial inclusion and work out a methodology for improving financial awareness for
the optimization of investment decisions
Muhammad Khurram Shehzad Niazi, Qaisar Ali Malik. (2019) Financial Attitude and Investment Decision Making - Moderating Role of Financial Literacy, NUML International Journal of Business & Management, Volume 14, Issue 1.
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