The Effect of Financial Literacy, Investment Decision, and Overconfidence on Mental Accounting in The Term of Investing in Cryptocurrency

Abstract

Investment is a financial activity known by many people. With the advance of technology, people can now invest in digital currency. The purpose of this study is we would like to know the factors affecting mental accounting. Whether financial literacy, investment decision, and overconfidence affect mental accounting regarding investment activities in cryptocurrency. To do this, we use a quantitative method with six-point Likert scale questionnaires as a measurement to collect samples. The questionnaires are shared with individuals from different regions that have or do not have an experience in investing activities. In addition, the demographic is further categorized into age, gender, and education level. We got 279 samples, mainly from Southeast Asia and a few from East Asia, Europe, and North America. The data will be processed using SEM-PLS software to conduct the result. The finding implies that investing in cryptocurrency is strongly affected by the investor’s behaviour, such as mental accounting. Overconfidence is a significant factor contributing to investors’ mental accounting and investment decisions, while financial literacy is only associated with decision-making and not related to mental accounting.