Effect of Emotional Intelligence on Investment Decision Making With a Moderating Role of Financial Literacy

Abstract

This study explores the impact of emotional intelligence on investment decision making with a moderating role of financial literacy. The data are collected by using convenient sampling technique through a 5-point Likert scale questionnaire from a sample of 160 investors from stock exchange and banks. We found a positive and significant relationship between emotional intelligence and investment decision making and the same between financial literacy and investment decision. In addition, when we examined these two relationships under financial literacy, the relationship between emotional intelligence and investment decision making was further strengthened and significantly associated. The results suggest that to make suitable investment decisions, investors should have control on their emotions. Moreover, financial literacy of investors moderates this relationship. Investor's decision making may depend on other factors that need to be explored for in addition to what we have found in our study.The sample size and geographical coverage should increase to consider the importance of this study.

Financial Literacy, Behavioral Biases and Investor's Portfolio Diversification: Empirical Study of an Emerging Stock Market

“…Very few studies have focused on behavior and portfolio diversification (Shinagawa, 2014;Jacobs, Muller, & Weber, 2014;Fuertes, Muradoglu, & Ozturkkal, 2012;Mouna & Anis, 2015). In addition, few studies have been conducted in Pakistan slightly related to this study (Ghaffar & Sharif, 2016a;Awais, Laber, Rasheed, & Khursheed, 2016;Hadi, 2017). But to the best of our search and knowledge, very rare studies can be found on this topic, particularly in developing country like Pakistan.…”

Emotional Quotient and Intelligence Quotient on Behavioral Finance and Investment Performance

“…Effect of Emotional Quotient (EQ) on Investment Performance or Decisions Emotion and perceptions are critical components of behavioral finance that significantly influence the decision-making processes of investors. Several studies have been conducted in the past to examine whether emotional quotient positively affects the investment performance and decisions (Tanvir, Sufyan & Ahsan, 2016;Dhiman & Raheja, 2018;Sashikala & Chitramani, 2017;Pirayesh, 2014;Hadi, 2017;Tariq & Hassan, 2017;Dhiman & Raheja, 2018). Tanvir, Sufyan, and Ahsan (2016) examined the impact of an investor's emotional intelligence on investment decisions.…”

“…The emotions from past experiences, for instance, may override rational thinking when making decisions (Hadi, 2017;Charles & Kasilingam, 2014). Investors are likely to be driven by their emotions based on past performances.…”

“…In effect, it contributes to positive investment decisions that recognize the nature of stock performance. According to Hadi (2017), the ability of an individual to control emotions often creates the path towards successful investment decision-making. The intrinsic elements of an individual such as empathy and self-control are helpful in the planning, assessment, and implementation of quality decisions.…”

Role of Financial Literacy in Investment Decisions: Exploring the Individual Investors’ Perspective through a Qualitative Approach

“…However, secondary markets known as capital markets works through stock exchanges in the economies and provides investment opportunities in various financial instruments like bonds, stocks, shares and securities (Shahbaz et al, 2015). Past studies have been conducted to check the impact of financial litearcy on investment decisions in various sector of the economy (Ahmad & Ali, 2020;Hadi, 2017;Rooij, Lusardi, & Alessie, 2011).…”