
A Study on Herding Bias and Investment Decisions of Indian Investors: How Does Financial Literacy Moderate the Relationship?
The conventional assumption about human beings and their behaviour is that they are rational in nature. However, certain theories and frameworks have argued and established the irrationality in human behaviour as well. Drawing from the latter context, we consider a behavioural bias of investors by the name of herding on their decisions made in terms of investment. We hypothesize a significant impact of herding bias on investment decisions and the moderating role of financial literacy in this relationship. The study a survey among 182 individual investors in the Ahmedabad region of India. Using hierarchical regression analysis, the hypotheses were tested. The results of the study revealed the significant impact of herding bias on investment decisions via moderating role of financial literacy. On the basis of these results, certain suggestions are extended to the policy makers and portfolio managers in the area of financial investments. Revealing the importance of financial awareness among investors may function as directive for taking further initiatives in this regard.
KEYWORDS: Investment decisions, herding bias, financial literacy, moderation.