Financial Literacy, Behavioral biases and Risk Perception: Evidence from the London Stock Exchange

Abstract

The primary Objective of the study is analyzing impact of Financial Literacy on the behavioral biases of individual investor mediated by risk perception evidence from London Stock Exchange. By means of data gathered from 458 LSE investors, the study validates that FL dramatically lowers BB by raising RP. The results show that financially knowledgeable investors are more suited to evaluate risks precisely, thereby reducing prejudices such loss aversion, overconfidence, and anchoring. As a vital intermediary, RP converts financial information into more logical investing choices. Emphasizing the need of focused financial education programs to improve investor decision-making, the study helps behavioral finance by offering empirical data from one of the most powerful financial markets worldwide. Although the cross-sectional character of the study restricts causal inference, the findings provide insightful analysis for legislators, financial institutions, and teachers trying to create more stable and efficient markets by raising financial literacy.