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Relationship Between Financial Literacy and Investor’s Behaviour Improving Investment Decisions

Prepared By:
SHAUNAK SIDDHARTH PATHAK
Ph.D. Scholar (MANAGEMENT STUDIES)
GUJARAT UNIVERSITY

DR. N. D. SHAH
PRINCIPAL
M.C. SHAH COMMERCE COLLEGE,
FORMER DEAN: COMMERCE FACULTY,
GUJARAT UNIVERSITY,
AHMEDABAD .

Abstract
This study examines the role of behavioural finance in shaping investment decisions among individual investors.Traditional financial theories assume rational decision-making, but behavioural finance highlights psychological biases influencing investor behaviour. The research investigates common biases such as overconfidence, loss aversion, herding, anchoring, and mental accounting. Statistical tools including descriptive statistics, independent sample t-test, and one-way ANOVA were applied. The t-test results reveal a significant gender difference in behavioural bias levels. ANOVA findings indicate that financial literacy significantly affects behavioural bias. Investors with lower financial literacy demonstrate stronger psychological biases. Market volatility analysis shows that loss aversion dominates during crash periods. The findings confirm that demographic and knowledge-based factors influence investment decisions. The study concludes that improving financial literacy can reduce irrational investment behaviour.
Key Words:
 Behavioural Finance
 Investment Decision-Making
 Psychological Biases
 Overconfidence Bias
 Loss Aversion
 Herding Behaviour
 Anchoring Bias

 Financial Literacy
 Risk Perception