Abstract:
Investment decisions are a process influenced by both emotional and logical
elements. Although financial literacy is very important, many psychological biases,
including FOMO, herding behavior, optimism bias, and overconfidence bias, can
significantly influence investor decisions, especially among Generation Z, who are
very linked to technology and social media. This study is to examine how financial
literacy and psychological biases affect Gen Z's investment decisions in Jakarta,
Bogor, Depok, Tangerang, and Bekasi (Jabodetabek). Using Structural Equation
Modeling–Partial Least Squares (SEM–PLS), a quantitative method was applied.
The data were gathered from 131 valid respondents using a Likert-scale
questionnaire that was distributed using cluster sampling across five cities: Jakarta,
Bogor, Depok, Tangerang, and Bekasi. The findings show that investing decisions
are significantly influenced by herding behavior, optimism bias, and financial
literacy. On the other hand, overconfidence bias and FOMO do not have a
significant impact. These results suggest that Gen Z, while very financially
knowledgeable, is still vulnerable to social dynamics like a tendency to follow the
crowd (herding) and too optimistic in investing results (optimism bias). This
research suggests that financial education programs should be developed to assist
young investors in making more informed and resilient investment decisions by not
only highlighting technical knowledge but also increasing awareness of
psychological influences.
