Financial Literacy and Investment Decision: An Empirical Study from the Palestine Stock Exchange

Fairouz Darwish^1,2*

• ¹Birzeit University, Birzeit, Palestine
• ²Arab American University of Jenin, Jenin, Palestine

This study aims at examining the financial literacy of Palestinian stock market participants and how overconfidence affects the relationship between financial knowledge and investment decisions. Using a self-administered questionnaire based on the OECD survey, 146 investors were selected to participate in the study to determine their financial behavior, knowledge and the role of demographic factors in investment decisions. The results of the study indicate a significant positive effect of financial literacy on investment decisions (β = 0.255, R² = 0.065) that Palestinian investors have a moderate level of financial literacy, and overconfidence works as a strong moderator that increases the impact of knowledge on decision making with explanatory power (R² = 0.282), confirming its substantial influence on investor behavior . These results also suggest that there is a need for more effective financial literacy programs and policy reforms that seek to remedy not only informational deficiencies but also behavioral biases, thus providing a way to enhance decision quality in emerging economies like Palestine. In the end, the study enriches the field of behavioral finance by showing that context-specific variables-cultural, political, and economic variables-can help explain how overconfidence and financial literacy interact to affect investment decisions