Variable Relationships in Finance

Variable Relationships in Finance

Understanding how different factors influence financial decision-making.

Behavioural Finance

Exploring the psychological influence on investors.

Independent Variable

Market trends and economic indicators often serve as this.

Mediator Variable

How cognitive biases mediate the effect of market information on financial choices.

Moderator Variable

Financial literacy can moderate the impact of biases on investment decisions.

Financial Literacy

Knowledge base that informs investment choices.

Dependent Variable

Could be the outcome of interventions aimed at improving financial decisions.

Independent Variable

Often a predictor of better financial decision-making results.

Moderator Variable

Modulates how individuals react to market changes and advice.

Behavioural Biases

Innate tendencies that affect judgment.

Mediator Variable

Biases mediate between knowledge and the financial decisions made.

Moderator Variable

The extent of biases can moderate the relationship between market conditions and investor reactions.

Financial Decision-Making

The process leading to financial outcomes.

Dependent Variable

The result of numerous psychological and knowledge-based inputs.

Mediator Variable

Financial literacy level can mediate the decision-making process.

Moderator Variable

Behavioural biases can alter the effect of financial information on decisions.

Individual Investor

A person making investment choices.

Dependent Variable

Individual investors' return on investment.

Independent Variable

Their financial knowledge or capital.

Moderator Variable

The individual's level of risk tolerance can moderate investment choices.

Theoretical Framework of Financial Literacy and Investor Behavior

Understanding the influence of financial literacy on investment decisions and how behavioral biases are mediated.

Financial Literacy (IV)

The knowledge and understanding of financial concepts and risks.

Concept Knowledge

Basic principles of finance and investment.

Risk Comprehension

Understanding of potential gains and losses.


Influence on sound financial decisions.

Financial Education

Impact of educational background on financial understanding.

Financial Decision Making (Mediator)

The process of making choices regarding wealth management.

Investment Choices

Selecting assets or securities to invest in.

Risk Assessment

Evaluating the potential risks involved with investments.

Strategic Planning

Long-term financial planning and goal setting.

Information Utilization

Use of financial information in decision making.

Behavioural Biases (DV)

The psychological factors that influence an investor's decisions.


Excessive belief in one's own abilities affecting trades.

Herd Behavior

Following the crowd without independent analysis.


Relying heavily on the first piece of information encountered.

Loss Aversion

Preference to avoid losses over acquiring equivalent gains.

Behavioural Finance (Moderator)

The field that applies psychology to financial anomaly studies.

Investor Psychology

Examining emotional and cognitive factors.

Market Anomalies

Understanding irregularities that challenge market efficiency.


Mental shortcuts in decision-making processes.

Individual Analysis

Assessing personal traits affecting investment behavior.

Individual Investor (Moderator)

Personal characteristics that shape the investment strategy.

Personal Goals

Objective-based financial decision-making criteria.

Risk Tolerance

Individual capacity to endure investment volatility.

Wealth Status

Impact of personal net worth on investment behavior.


Correlation between age and investment strategy preference.