THE INFLUENCE OF HERDING BEHAVIOR, OVERCONFIDENCE, AND RISK TOLERANCE ON INVESTMENT DECISIONS WITH FINANCIAL LITERACY AS A MODERATING VARIABLE

Eligia Shela Utami, Hendro Widjanarko, Khoirul Hikmah

Abstract


This study aims to analyze the effect of herding behavior, overconfidence, and risk tolerance on investment decisions among Generation Z in DKI Jakarta, as well as to examine the role of financial literacy as a moderating variable. This research employs a quantitative approach using a survey method through the distribution of online questionnaires based on a 1–5 Likert scale. The sampling technique used was purposive sampling, with criteria including Generation Z individuals domiciled in DKI Jakarta who have actively invested in stocks at least twice in the past two years. A total of 421 respondents met the research criteria. Data analysis was conducted using the Partial Least Squares–Structural Equation Modeling (PLS-SEM) method with the assistance of SmartPLS 4.0. Validity and reliability tests were performed using SPSS based on a pilot study involving 30 respondents. The results indicate that herding behavior, overconfidence, and risk tolerance have a positive and significant effect on investment decisions. Furthermore, financial literacy is proven to significantly moderate the relationship between the three independent variables and investment decisions, strengthening the influence of psychological factors on investment decision-making. These findings suggest that psychological factors and the level of financial literacy play an important role in shaping the investment behavior of Generation Z. This study is expected to contribute to the development of behavioral finance literature and provide insights for regulators, financial industry practitioners, and educational institutions in enhancing financial literacy and improving the quality of investment decision-making among young investors.
Keywords: herding behavior, overconfidence, risk tolerance, financial literacy, investment decision, Generation Z

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DOI: https://doi.org/10.31846/jae.v14i2.1071

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