Financial Literacy as Competitive Advantage for Individual Investors’ Decision Making

Abstract

Present study unfolds the impact of individual investor behavior and financial literacy on investment decisions and mediation effect of competitive advantage on individual investors in Pakistani financial markets. Data was collected from a sample of 187 individual investors thorough a personally administered questionnaire. Multiple regression results showed that competitive advantage has a mediation effect among investor behavior, financial literacy and decision making. It concludes that investors’ involvement and optimism are most important for making investment decisions. It is also evident that most of the financially literate investors rely on debt to equity ratio for their investment decisions and use past price movements to predict future price and use technical analysis as a base for decision making purposes. Research guides individual investors, managers and executives of financial institutions for making wise concrete and educated investment decisions, and also helps individual investors to improve personal financial management.