How Financial Literacy Moderate the Relationship Between Psychological Factors and Investors' Risk-Taking Behaviour?

Purpose- Investor behavior is shaped by both cognitive dispositions and financial competencies. Among the psychological factors influencing investment decisions, risk aversion and locus of control have been widely recognized as critical determinants of risk-taking behavior. The present study investigates how financial literacy moderates the relationship between psychological factors specifically risk aversion and locus of control and investors’ risk-taking behavior. Design/methodology/approach- The questionnaire was divided into two segments where first segment includes demographics and second segment include questions related to financial literacy, risk aversion, locus of control and risky investment intention. Convenience and snowball via broker branches/online group is used to collect the data from investors residing in Delhi NCR region. A structural equation modeling (SEM) approach was employed and for this purpose, AMOS software (version 31.0) was used owing to its efficiency in handling measurement and structural models. Findings-The findings revealed that risk aversion, locus of control has a negative impact on risky investment intention. Further, financial literacy has a positive and significant influence on risky investment intention. Also, financial literacy as a moderating variable affects significantly the relationship between risk aversion, locus of control and risky investment intentions. Research implications- Based on this present research finding, the study is more productive for the portfolio manager and policymakers at the time of making an investment portfolio for the investors based on their psychological factors. The study recommends that investors need training programmes, workshops and seminars that enhance financial literacy and financial knowledge of investors which helps them to overcome the effect of psychological factors while making an investment decision. Originality/value- The current study aims to explore whether several psychological factors can affect investors risky intention behaviour. Moreover, the author would like to examine whether these associations are moderated by financial literacy