Impact of Financial Literacy on the Investment Decision-making in the Commodity Market of Pakistan: Analyzing the Mediating Effect of Political and Economic Uncertainty

Abstract

Under the current study, the researcher assesses the effectiveness of financial literacy on commodity-market financial decision making in Pakistan, focusing especially on the mediator role of political and economic uncertainty. With the use of a quantitative paradigm and Structural Equation Modeling (SmartPLS), 102 individual investors were sampled and interviewed of the Pakistan Mercantile Exchange (PMEX). It is shown empirically that informed and strategic investment behaviour is significantly improved through the availability of financial literacy. Political uncertainty is also a positive mediator meaning that a high levels of financial literacy make investors to see political events as strategic. The reverse also emerges: the economic uncertainty acts with the negative mediating effect and it reveals that macroeconomic volatility may cause a loss of investor trust even in financially literate people. Dual-mediation pathway was also established, meaning the political unrest will worsen economic uncertainty which further depresses the investment behaviour. Such results highlight the necessity to put financial education in the perspective of political and economical macro contexts. The study provides policies that can be implemented into actions regarding investor education, stability of regulation, and development of markets as per SDGs worldwide in line with Sustainable Development Goals (SDGs), specifically SDG 4 (Quality Education), SDG 8 (Decent Work and Economic Growth) and SDG 16 (Peace, Justice, and Strong Institutions).