The Impact of Financial Literacy and Artificial Intelligence (AI) on Investment Decision Making

Abstract

This research study examines the impact of financial literacy and artificial intelligence on investment decision making, and how investor confidence can be used to bridge these variables and actual investment decisions. For many investors, it is becoming increasingly harder to make good financial decisions and they encounter difficulties because digital tools and financial products are becoming more sophisticated. Understanding these tools and having financial knowledge can help counter these difficulties. However, earlier researches have focused on financial literacy and artificial intelligence individually, few studies have investigated the interaction between the two variables that influence investment behavior in emerging economies such as Pakistan. A quantitative method was applied, and 300 Pakistani investors were targeted in order to use a structured questionnaire to obtain the necessary information. The data was analyzed through descriptive statistics, reliability tests, correlation analysis and multiple regression mediation analysis. The findings revealed that both financial literacy and artificial intelligence have a strong and positive impact with investor confidence and investment decision making. The mediating role of investor confidence was also significant enhancing the impact of knowledge and technology on investment outcomes. The results indicate that there is a necessity to enhance financial literacy and provide more convenient AI-powered tools to support investors. The research provides valuable insights for researchers, financial institutions and policymakers who want to enhance financial decision making in Pakistani digital investment setting that is increasingly expanding.