The Effects of Financial Literacy, Overconfidence, Representativeness Bias on Financial Behavior and Decisions to Continue Investing as Intervening Variables

Abstract

The specific aim of this research is to provide an empirical explanation of the influence of financial literacy, overconfidence, representativeness bias on financial behavior and the decision to continue investing as intervening variables. In analyzing the model studied, this research uses an approach via Partial Least Square with Structural Equation Modeling (PLS-SEM) using Smart PLS. Financial literacy and representativeness bias have a positive and significant effect on the decision to continue investing and financial behavior. This shows that an investor's decision to continue investing is influenced by how much financial literacy he has and his past experience in investing. The higher the financial literacy one has, the higher the influence on the decision to continue investing, as well as representativeness bias. The more past experience an investor has in investing, the greater the influence on the investor's decision to continue investing.