The assumption of investor rationality had been central to developing
an understanding of financial markets and decision outcomes. But the
formation and consequent burst of tech-stock bubble changed the paradigm and shifted
towards the behavioral interruption aspect of investor psychology. The study aimed to
investigate the relationship of two heuristics and one emotional bias with financial
decisions and the moderating effect of financial literacy on the said relationship. Primary
data is gathered through questionnaire from 208 clients of national savings. Moderation
analysis was done and the effect of biases on the financial
decisions was found significant enough. Furthermore,
financial literacy moderates this relationship positively
only for heuristics but no moderation found for selfcontrol. The policymakers can design their financial
instruments and strategies by keeping in view the
implication of biases on investor’s decision. Moreover,
periodic financial literacy sessions can be arranged to
create awareness among investors and advisors.
1-Faisal Mehmood Ph.D. Scholar,Management Sciences,Bahria University, Islamabad Campus, Pakistan.2-Taqadus Bashir Associate Professor, Department of Business Studies,Bahria University, Islamabad Campus, Pakistan.3-Altamash Khan Lecturer,Lahore Business School, University of Lahore, Islamabad Campus, Pakistan.