- Original authors / creators
- Sajid Mohy Ul Din; Shabra Khalid Mehmood; Arfan Shahzad; Israr Ahmad; Alla Davidyants; Ayman Abu-Rumman
- Original publication
- Frontiers in Psychology · Frontiers Media SA · 2021-02-04
- License & retained notices
- CC BY 4.0
Copyright © 2021 Din, Mehmood, Shahzad, Ahmad, Davidyants and Abu-Rumman.
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© 2021 Din, Mehmood, Shahzad, Ahmad, Davidyants and Abu-Rumman. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) . The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms. - Edition changes
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- Evidence limits
- Adjacent research, not a directly sampled family-office study. Applicability to a family office requires separate assessment. The study aimed to investigate the impact of behavioral biases on herding for Islamic financial products with the mediation of shariah literacy. An adopted questionnaire from several published studies was used to collect data. The data were collected from 410 respondents and were analyzed with SmartPLS. The results for the direct impact showed that self-attribution, illusion of control, and information availability have a positive and significant impact on herding for Islamic financial products while shariah literacy showed an insignificant impact on herding. The results for mediation showed that previously significant and positive impact turned to insignificant when shariah literacy was introduced as mediating variable between the illusion of control, self-attribution, information availability, and herding. From a theoretical perspective, this study would contribute to the existing body of knowledge of financial decision making from shariah literacy point-out. On the other hand, the findings of this study may be useful for investors to avoid herding in the Islamic financial markets. The authors synthesize the contribution made by behavioral finance studies in extending the knowledge of herding behavior in Islamic financial products with a mediating role of shariah literacy. The key limitation of the study includes data that were collected from three districts of Punjab, Pakistan. Due to cognitive biases and low shariah literacy, individual investors follow herd behavior in Islamic Financial Products. Our study acknowledged/documented the influence of cognitive biases information availability, illusion of control, and self-attribution on individual herd behavior in Islamic financial products. Islamic financial literacy is not developed enough, so our study shows the effect of cognitive biases in individual investor decision making. Usually, investors are not financially literate; they are unable to evaluate the good investment products. Most of the investors do not have shariah literacy, or they are not intelligent enough to convert information into knowledge. Thus, in an uncertain situation where information is not fully available, investors indulge in herding behavior because they thought others are better in accessing the good investment decision. Results indicate that cognitive biases information availability, illusion of control, and self-attribution encourage herding behavior in Islamic financial products, but shariah financial literacy mitigates the result of herding behavior in Islamic financial products. The outcome of this study helps us to tell why investors indulge in herding behavior in taking an investment decision. This will also be helpful for investors to predict the different biases in their behavior. This study focuses on the only individuals located in Sialkot, Gujrat, and Gujranwala; and due to time limitation, the sample size is also small. Further research can be done on a large sample size in many different cities to get more general conclusions.
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