Impact of Financial Literacy on Investment Decisions: An Empirical Evidence From District Peshawar

Abstract

The current research aims to assess the impact of financial literacy on investment decisions in stock market. The research approach of deductive research and quantitative research design was used. The data has been gathered from university students studying in different universities and degree awarding institutes of Peshawar. The students were approached through convenience sampling and sample of 200 students was selected. The online questionnaires were sent to the students. Out of 200 respondents 182 responses were collected for data analysis. The data gathered was statistically treated. Descriptive statistics, regression, and correlation analysis were conducted on the gathered data. The results revealed that financial literacy including, financial skills, usage of financial products, knowledge of investment and money management had significant effect on the investment decisions of the students. It implies that the more the above factors the higher or better would be the investment decisions of the student investors. The research suggested that government and financial markets, banks and stock exchange and educational institutions should join hands together to develop a comprehensive strategy and policy framework for a viable investment plan. It includes training of the students, awareness of the investors, modifications and adaptions in the curriculum, government policies for investors’ protections. Knowledge of the investment projects or stocks, information about such endeavours, and whether or not they are practicable should form the basis for the training. In addition to that, it offered investors guidance and tactics that they would find useful while they are trading stocks on the stock market. This can be particularly beneficial for investors who are new to the stock market.

Key words: financial literacy, investment decisions, PSX, Pakistan