The Correlation between Education Level and Understanding of Financial Literacy and its Effect on Investment Decisions in Capital Markets

Abstract

This study aims to describe how the educational level of investors influences their understanding of financial literacy and its effect on investment decision making in capital markets. The method used in this research is quantitative descriptive. Data collection was conducted from 7 January to 7 February 2020, by distributing questionnaires to investors who were members of PT Bursa Efek Indonesia. The sample in this study amounted to 108 investors. The research findings show that the level of investor knowledge regarding financial literacy is high. There is a significant correlation between the investor education level and their understanding of financial literacy, thus influencing investors in the financial decisions they make. It can be concluded that, for investment decision making in capital markets, knowledge of financial literacy is necessary. Therefore, to increase investor understanding of various levels of education on financial literacy in the capital market, education, and training on financial literacy as sustainable capital is required.

A Proposed Conceptual Framework on The Determinants of Psychological Biases towards Retail Investor’s Decision Making: Experience as Mediating Role

“…Meanwhile, while both financial literacy and investing experience had significant positive effects on cryptocurrency ownership, in fact the investment experience had a higher influence on cryptocurrency investment behaviour than financial literacy (Zhao & Zhang, 2021). Moreover, according to Baihaqqy et al (2020), there is a correlation between financial literacy and making financial decisions. Factors of financial literacy can help an investor determine which investments to make and how to analyse investment stages to maximise future earnings.…”

“…Furthermore, based on the specific context demonstrated by the previous study, the suggested conceptual framework could include three new factors: herding, emotional, and financial literacy. According to several researchers, herding (Goyal et al, 2021), emotional (Akinkoye & Bankole, 2020), and financial literacy (Baihaqqy et al, 2020) have significant impact on retail investors' decision making.…”

PENGARUH PENGALAMAN INVESTASI, RISK TOLERANCE, DAN SOSIAL MEDIA TERHADAP KEPUTUSAN INVESTASI DENGAN LITERASI KEUANGAN SEBAGAI VARIABEL MODERASI (Studi Pada Investor Generasi Z Jawa Barat)

“…Asumsi tersebut sejalan dengan penelitian yang dilakukan oleh Mandagie et al (2020) yang mampu membuktikan bahwa pengalaman investasi dan toleransi risiko berpengaruh terhadap keputusan investasi. Hal tersebut sejalan dengan penelitian yang dilakukan oleh (Baihaqqy et al, 2020) dan (Mahastanti, 2011).…”

Sharia financial literacy: Decoding the nexus of civil Servants' investment choices

“…Several previous studies have emphasized the pivotal role of financial literacy in the investment decisionmaking process (Chawla et al, 2022). Baihaqqy et al (2020) argue that a higher level of financial literacy enhances an individual's ability to comprehend the risks and potential returns of investments. Additionally, financial attitudes have been identified as a major factor influencing investment behavior (Jayaraj, 2013).…”