A Study on The Relationship Between Financial Literacy and Behavioural Biases Among Young Investors

This study examines the relationship between financial literacy and behavioural biases among young investors, addressing a critical gap in behavioural finance literature that often treats these constructs in isolation. Moving beyond the assumption that access to information alone leads to rational decision-making, the paper argues that financial literacy interacts conditionally with cognitive and emotional biases such as overconfidence, herding, loss aversion, and anchoring. Drawing on prior empirical research and behavioural theory, the study proposes a structured analytical framework to explain how varying levels of financial literacy influence investment behaviour under different market conditions. The findings suggest that while higher financial literacy reduces certain biases, it may simultaneously intensify others—particularly overconfidence—thereby challenging the linear view of investor rationality. The study concludes with practical recommendations for educators, investors, and policymakers aimed at improving financial decisionmaking and market stability.