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How Millennials Make Investment Decisions: Financial Literacy and Financial Behavior

Author

Listed:
  • Dewi Tamara

    (Binus Business School Master Program, Bina Nusantara University, Jakarta, Indonesia)

  • Anita Maharani

    (Binus Business School Master Program, Bina Nusantara University, Jakarta, Indonesia)

Abstract

This study investigates the effect of financial literacy, financial attitude, risk perception, and financial behavior on investment decisions. Employing a survey method with 342 respondents in Jakarta, the findings reveal that financial literacy has a negative and insignificant effect on investment decisions. In contrast, risk perception plays a crucial role in influencing investment decisions. Furthermore, financial behavior has an indirect mediating effect between financial literacy and risk perception on investment decisions but does not affect financial attitude. This study concludes that risk perception and financial behavior are important factors in investment decisions. Future research may consider incorporating other variables such as herding behavior or overconfidence.

Suggested Citation

  • Dewi Tamara & Anita Maharani, 2024. "How Millennials Make Investment Decisions: Financial Literacy and Financial Behavior," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 70, pages 132-146, December.
    • Handle: RePEc:lpe:efijnl:202409
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    References listed on IDEAS

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    1. Zhong Chu & Zhengwei Wang & Jing Jian Xiao & Weiqiang Zhang, 2017. "Financial Literacy, Portfolio Choice and Financial Well-Being," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 132(2), pages 799-820, June.
    2. Yang, Jiping & Qiu, Wanhua, 2005. "A measure of risk and a decision-making model based on expected utility and entropy," European Journal of Operational Research, Elsevier, vol. 164(3), pages 792-799, August.
    3. Puneet Bhushan & Yajulu Medury, 2014. "An Empirical Analysis of Inter Linkages between Financial Attitudes, Financial Behaviour and Financial Knowledge of Salaried Individuals," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 5(3), pages 58-64, September.
    4. Hoffmann, Arvid O.I. & Post, Thomas & Pennings, Joost M.E., 2013. "Individual investor perceptions and behavior during the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 60-74.
    5. Parul Kumar & Md. Aminul Islam & Rekha Pillai & Mosab I. Tabash, 2024. "Risk Perception-Perceived Investor Performance Nexus: Evaluating the Mediating Effects of Heuristics and Prospects With Gender as a Moderator," SAGE Open, , vol. 14(2), pages 21582440241, May.
    6. Cho, Jinsook & Lee, Jinkook, 2006. "An integrated model of risk and risk-reducing strategies," Journal of Business Research, Elsevier, vol. 59(1), pages 112-120, January.
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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy

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