EXAMINING THE RELATIONSHIP BETWEEN INVESTMENT DECISIONS AND SOCIOECONOMIC STATUS, RISK TOLERANCE, AND FINANCIAL LITERACY: A STRUCTURAL EQUATION MODELING APPROACH

Abstract

This study examines the relationship between investment decisions and socioeconomic level, risk tolerance, and financial literacy. A descriptive research design is employed, focusing on variables such as age, gender, income level, marital status, educational qualification, and occupation. The sample consists of 389 investors engaged in the investment decision-making process. Data analysis is conducted using AMOS 23 and SPSS 27, with Confirmatory Factor Analysis (CFA) and Structural Equation Modeling (SEM) as the primary statistical techniques.  The findings highlight the significant influence of socioeconomic status and risk tolerance on investment decisions, whereas financial literacy does not exhibit a direct association. Risk tolerance demonstrates a path estimate of 0.188, with a highly significant p-value (***) at the 0.001 level, indicating that individuals with higher risk tolerance are more inclined toward aggressive investment choices. The study underscores the pivotal role of socioeconomic factors and risk appetite in shaping investment behaviour, providing valuable insights for financial advisors and policymakers.