Determinents of Financial Behaviour of Individual Investors: In Context with Financial Literacy, Overconfidence and Herding

Purpose: Financial decisions largely depend upon Financial Literacy and psychological biases of an individual investor. Drawing upon the behavioural finance theory, this paper articulates the association of Financial Literacy, overconfidence and herding bias of individual investors with their financial behaviour. Methodology: The survey method was employed to collect data from 171 salaried individuals, who are living in Delhi, India and investing through Angle Broking Co. (Securities co.). Online structured questionnaires were circulated by using a purposive sampling method to collect the responses. To examine the strength of the relationship between variables, partial correlation and hierarchical regression tests were applied using SPSS software. Findings: The findings revealed that only investor's Financial Literacy have a strong positive association with their financial behavior whereas overconfidence and herding bias have negative impact. Practical Implications: The findings of this study may serve as a guide to policymakers and the management of financial institutions in developing investment policies as per the financial behavior of individuals. Originality/Value: This article in useful for the policy makers, insurance companies and Government agencies should focus on conducting financial education programs for the purpose of increasing financial awareness among individuals.