Financial Literacy and Investment Behaviour: How Knowledge and Anticipated Emotions Shape Stock Market Participation Intentions and Financial Word-of-Mouth.

Abstract

This paper investigates how financial literacy and anticipated emotions jointly shape individuals’ intentions to participate in the stock market and their propensity to engage in financial word-of-mouth (WOM). We propose a model where financial literacy increases participation intentions and financial WOM both directly and indirectly through increased perceived behavioural control. Anticipated emotions — specifically anticipated pride and anticipated regret — exert direct effects on participation intentions and WOM and moderate the influence of financial literacy on intentions. We outline a rigorous cross-sectional empirical design for surveying adult retail investors/potential investors (N ≈ 600), validated measures for objective and subjective literacy and anticipated emotions, and a structural equation modelling (SEM) approach complemented by moderation and mediation tests. The paper offers theoretical integration of cognitive and affective determinants of investment behaviour and provides actionable implications for policy makers, financial educators, and platforms seeking to broaden informed equity participation. Key practical recommendations include pairing numeracy-based literacy training with emotionally-aware experiential interventions (simulations, phased entry) and using literate investors’ WOM strategically while curbing misinformation.