Interrelations between behavioral biases, financial literacy, and investment decision-making: A bivariate correlational study among Moroccan individual investors

Abstract

In the dynamic and frequently under-researched domain of emerging financial markets, this research rigorously analyzes the influence of behavioral biases and financial literacy on the multifaceted aspects of investment decision-making among individual investors in Morocco. The central aim is to investigate bivariate correlations between eleven behavioral biases categorized across cognitive, emotional, and mental/social dimensions and the three dimensions of investment decision-making: intuition, perceived rationality, and overall satisfaction.

The research adopts a distinctly exploratory design that is firmly situated within a quantitative, hypothetico-deductive paradigm. The sample comprises 411 individual investors who are actively involved in the Casablanca Stock Exchange, selected through a self-administered online questionnaire that was distributed between January and March 2025. The analysis of data was performed utilizing SPSS (version 30), employing non-parametric statistical methodologies, particularly Spearman’s rank correlation coefficient, as a result of the non-normality of the variable distributions, which was substantiated by the Kolmogorov–Smirnov test.

The findings underscore that specific behavioral constructs such as optimism, mental accounting, and financial literacy exert a constructive impact on all three facets of decision-making, characterized by consistently robust and affirmative correlations. Conversely, various biases including anchoring, representativeness, availability heuristic, and gambler’s fallacy exhibit significant adverse associations, particularly influencing perceived rationality and overall satisfaction. Regret aversion emerges as a complex bias, revealing a dualistic nature with a notably positive correlation with satisfaction.

In spite of the methodological limitations related to the application of convenience sampling and a cross-sectional methodology, the research yields considerable theoretical contributions by clarifying the intricate relationships between behavioral biases and cognitive processes relevant to investment. Furthermore, it articulates concrete practical ramifications, particularly the imperative to augment investor cognizance regarding financial literacy and the psychological mechanisms that may compromise the integrity of decision-making quality.

The uniqueness of this investigation is attributed to the concurrent and multifaceted evaluation of behavioral biases, the implementation of an exploratory framework reliant on primary data sources, and its empirical foundation in a relatively understudied emerging market. These characteristics confer both scholarly and contextual relevance to the research, thereby facilitating subsequent inquiries into the behavioral dynamics associated with financial decision-making within Morocco and analogous economies.

JEL Classification: D91; G11; G4; G41.

Paper type: Empirical research