Financial literacy and investment decisions of UAE investors

Abstract Purpose – The purpose of this paper is to assess the financial literacy of the UAE individual investors who invest in the local financial markets. In addition, it examines the relationship between financial literacy and the influence of the factors that affect the investment decision. Design/methodology/approach – A modified questionnaire has been developed divided into three parts. The first part covers demographic variables. The second part identifies 37 factors affecting the investment decision of the UAE investors. The third part is devoted to financial literacy using exam‐type questions of true or false and includes 18 questions. A convenient sample of 290 of UAE national investors is used. Findings – The results indicate that the financial literacy of UAE investors is far from the needed level. The financial literacy level is found to be affected by income level, education level, and workplace activity. High‐income respondents hold high educational degrees, and those who work in the field of finance/banking or investment had as expected a higher financial literacy level than others. Whereas, financial illiteracy exists regardless of the age of the respondents. A significant difference in the level of financial literacy was found as well between the respondents according to their gender. Specifically, women have a lower level of financial literacy than men. Finally, the results indicate that there is a significant relationship between financial literacy and investment decisions. The most influencing factor that affects the investment decision is religious reasons and the least affecting factor is rumors. Originality/value – The current study is considered the first of its kind conducted on the UAE. To the best of our knowledge, no such studies have been conducted regarding measuring financial literacy in the UAE or the relation between financial literacy level and the factors that influence the investment decisions.