Abstract:
1. Introduction
Using two behavioral factors, overconfidence and herding behavior, and
one mediating factor, risk perception, this study examines how those two
behavioral factors affect the investment decision-making activities of
graduates. This tries to investigate a specific issue within the context of the
Sri Lankan investment market and how psychological biases affect the
investment decisions of graduates. It also assesses the mediating effect of
risk perception and how two main independent variables, overconfidence
and herding behavior, directly and indirectly, affect investment decisions.
2. Research Methodology
The study uses a qualitative research strategy based on a structured
questionnaire with a sample of 384 respondents. The purposive sampling
method is used to select the sample, and SEM is used to analyze and
possess the data using SPSS and AMOS statistical packages.
3. Findings and Discussion
The findings show that the direct effect of independent variables,
overconfidence and herding behavior, with the dependent variable,
investment decision, has a positive significant effect, and the mediating
effect for both relationships has a significant effect. An overall mediating
variable, risk perception, has a partial mediating effect on both
independent variables.
4. Conclusion and Implications
The results indicate that overconfidence and herding behavior are the most
relevant derived from graduates’ investment decisions, while risk
perception is an important mediator. This might imply specific financial
literacy programs directed at addressing cognitive biases such as
overconfidence and the influence of social factors in making effective
investment decisions.
