The Effect of Stock Market Literacy on Individual Investor’s Investment Decisions: Evidence from Borsa Istanbul

Abstract

In stock market investing, there are many factors that affect the decision-making process. Investors’ financial literacy is one of these factors that affect investment decisions. In this study, financial literacy regarding the stock market was determined by a questionnaire applied to 1140 individual investors and the factors that affect decision-making were clustered according to the K-means technique. Then, the effect of stock market literacy levels on investment decisions was analyzed with random forest regression. As a result of the analysis, the demographic characteristics of the investors and their stock market literacy were also associated. From the findings, it was concluded that the factors of unbiased information in the group with low stock market literacy, and the factors of advice and unbiased information in the group with high stock market literacy are effective in investment decisions.