THE INFLUENCE OF FINANCIAL LITERACY AND RISK PERCEPTION ON STOCK INVESTMENT DECISIONS AMONG RETAIL INVESTORS IN MEDAN, INDONESIA
Keywords:
Financial Literacy, Risk Perception, Investment Decision, Retail Investors, Behavioural Finance,Abstract
The Indonesian capital market has undergone a structural transformation between 2020 and 2026, with the number of registered single-investor identifications (SIDs) surpassing 15 million by early 2026 and the retail segment—dominated by Generation Z and Millennial cohorts accounting for more than 55 per cent of daily equity turnover. Despite the democratization of market access through digital brokerage applications, artificial-intelligence-based advisory tools, and social-media-mediated information flows, the national financial-literacy index remains modest and behavioural biases continue to shape trading outcomes. This study examines the direct effects of financial literacy and risk perception on stock investment decisions among retail investors, and evaluates the relative importance of each construct in an emerging-market post-pandemic context. A cross-sectional survey was administered to 412 retail investors registered with the Indonesia Stock Exchange (IDX) and domiciled in Medan, North Sumatra. Purposive sampling was applied. Constructs were operationalized through reflective indicators adapted from recent Scopus-indexed studies (2021–2026) and measured on a five-point Likert scale. Partial least squares structural equation modelling (PLS-SEM) was performed using SmartPLS 4, including assessment of the measurement model (loadings, CR, AVE, HTMT) and the structural model (path coefficients, f², Q²_predict, bootstrapping with 10,000 subsamples), complemented by Importance-Performance Map Analysis (IPMA). Financial literacy (β = 0.342, p < 0.001) and risk perception (β = 0.286, p < 0.001) both exert positive and statistically significant effects on stock investment decisions.
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