CAN FINANCIAL LITERACY DRIVE ACTIVE INVESTMENT STRATEGY? EVIDENCE FROM UNDERDEVELOPED CAPITAL MARKET

Jasmina Okicic

Abstract


The main goal of this paper is to determine the empirically analyse the relationship between financial literacy and investment strategy of individual investors from the underdeveloped capital market of Bosnia and Herzegovina. The OECD INFE Core Questionnaire (2011) was mainly used for measuring financial literacy. Using the purposive sampling technique, 89 individual investors were selected. The research was conducted in Bosnia and Herzegovina during the third quarter of 2019. To gain a better understanding of the relationship between entrepreneurs’ financial literacy and their decision making styles we primarily use structural equation modeling. The research findings have revealed a statistically - significant impact of financial attitudes, financial behaviour and financial knowledge on active investment strategy. Findings suggest that active investment approach may be raised via enhancing the financial literacy of the investors. Therefore, these results may produce useful pieces of information which might be helpful in the creation of tailored-made training programs which would meet the needs of investors in Bosnia and Herzegovina.


Keywords


financial literacy; investment strategy; underdeveloped capital market.

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