The Impact of Behavioral Finance Factors and the Mediating Effect of Investment Behavior on Individual’s Financial Well-being: Empirical Evidence from Pakistan
Abstract
Individual financial well-being is recognized as a major concern for the general welfare and social welfare of society. In this context, it is very important to understand how people can ensure good financial well-being. This article aims to explore the effects of financial literacy, risk tolerance, and risk perception on the financial well-being of individuals, with an emphasis on behavioral investment interventions. Quantitative research methods are used to measure the factors that affect financial well-being. A questionnaire was developed on Google Forms to collect data from people who have bank accounts. The sample of 318 Pakistanis supports the proposed hypothesis. Structural equation modeling (SEM) was used to evaluate the results. The results show that risk tolerance, risk perception and financial literacy influence people's investment behavior and ultimately their financial well-being. Individual financial behavior needs to be improved. In this context, there is an urgent need for financial education programs in the education system and centers of employment, behavioral development and financial literacy.
Future research on this topic could benefit from collecting longitudinal data which could provide more relevant information for Pakistanis seeking to achieve better financial well-being. All measures used are reported separately and individually, measuring the risk that respondents will misinterpret questions and even interpret their behavior.
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