The roles of financial literacy and overconfidence in investment decisions in Saudi Arabia

Abdullah Hamoud Ali Seraj; Elham Alzain; Ali Saleh Alshebami

doi:10.3389/fpsyg.2022.1005075

The roles of financial literacy and overconfidence in investment decisions in Saudi Arabia

Front Psychol. 2022 Sep 30:13:1005075. doi: 10.3389/fpsyg.2022.1005075. eCollection 2022.

Authors

Abdullah Hamoud Ali Seraj^{1

2}, Elham Alzain^{1

3}, Ali Saleh Alshebami^{1

3}

Affiliations

¹ The Saudi Investment Bank Chair for Investment Awareness Studies, The Deanship of Scientific Research, The Vice Presidency for Graduate Studies and Scientific Research, King Faisal University, Al Ahsa, Saudi Arabia.
² College of Business Administration, King Faisal University, Al Ahsa, Saudi Arabia.
³ Applied College in Abqaiq, King Faisal University, Al-Ahsa, Saudi Arabia.

Abstract

Financial literacy has gained much attention amongst scholars, policymakers and other stakeholders due to its role in backing up investment decisions, improving personal financial management and increasing financial wellbeing. This study examines the influence of financial literacy on investment decisions with the moderating effect of the overconfidence behavioural bias. Data were collected from 180 respondents in Saudi Arabia using a questionnaire, and a convenience sampling technique was applied. The study's findings were analysed using the partial least squares structural equation modelling (PLS-SEM) technique. It was found that financial literacy positively and significantly influenced investment decisions. Moreover, the results show that overconfidence positively affected investment decisions and that the relationship between financial literacy and investment decisions was positively and significantly moderated by overconfidence.

Keywords: Saudi Arabia; bias; financial literacy; investments; savings.