The Effect of Financial Literacy on Cognitive Bias and Emotional Bias of Individual Investors Faishal Dzaky Affianto, Maya Sari, and Imas Purnamasari
Universitas Pendidikan Indonesia, Jl. Dr. Setiabudi No.229, Bandung, West Java 40154.
faishaldzaky[at]upi.edu
Abstract
Every single human being will act reasonably in making their financial decisions. However, the psychological characteristics of each human being will also influence financial decision making. Financial literacy, cognitive bias, and emotional bias are important factors influencing investor behavior and the investment decisions they make. The purpose of this study was to determine whether financial literacy has an impact on cognitive biases and emotional biases related to investment. From 100 respondents in the city of Bandung, this study has the result that financial literacy has a significant positive effect on cognitive biases and financial literacy also has a significant positive effect on emotional biases. The results show that almost all investors have a high level of financial literacy. The findings show that the higher the financial literacy possessed by investors, the less cognitive biased behavior and emotional biased behavior will be. This will have a positive impact on investor behavior in financial markets.
