The relationship of financial literacy and behavioral finance: Example of Erzincan province

The understanding of investment and savings of individuals who have knowledge about finance is positively affected.The erroneous investment decisions of individuals due to financial literacy deficiencies and the resulting financial failures have a negative impact on both investors and national economies. Behavioral finance theory, assumes that investors make decisions under the influence of their emotions, instead of acting rationally by considering only risk and return. The starting point of the study is the idea that there may be a relationship between the level of financial literacy of individual investors and the rational attitude or behavioral tendencies they display while making investment decisions. The aim of this study is to examine the relationship between financial literacy and behavioral finance biases.For this purpose,a questionnaire was applied to 409 individual investors aged 18 and over in Erzincan.SPSS 21.0 statistical program was used to analyze the data. In the results of working; it has been determined that the financial literacy levels of individual investors are low to medium and the investors'tendencies towards behavioral finance biases are strong. It has been determined that some demographic factors play a mediating role in the relationship between individual investors' financial literacy and behavioral finance bias and errors and strengthen this relationship. In this study, unlike the literature, the moderating effect of demographic factors in the relationship between financial literacy and behavioral finance was investigated. As a result of analyzing the relationships between financial literacy level and behavioral finance trends;Although financial literacy levels of individual investors have increased,it has been observed that behavioral finance biases cannot be prevented. It has been determined that a high level of financial literacy reduces only the herd behavior bias, which is one of the behavioral finance tendencies. In addition, it has been determined that some demographic factors play a mediating role in the relationship between financial literacy and behavioral finance and strengthen this relationship. Keywords: Financial Literacy, Behavioral Finance, Behavioral Finance Bias, Moderating Effect.