Introduction
A society and an individual's financial well-being are dependent on their investment decisions and these decisions are affected by psychological and mental factors as the global economy continues to develop.

Using investment decision-making as a context, this study examines the relationship between overconfidence bias and herding behaviour mediated by financial and digital literacy.

A person's overconfidence bias refers to his or her tendency to overestimate their knowledge and abilities in a specific field, such as investment decision-making. An excessively optimistic outlook regarding investment prospects is a consequence of this bias, which leads investors to express unwarranted confidence in their assessments of risk and potential success.

People who follow others' investment decisions, on the other hand, are said to be herding. This means they tend to imitate their decisions rather than rely on their own analysis. Assuming that a collective judgment is more accurate or informed than an individual's, it is primarily driven by a lack of knowledge and a desire for conformity.

Investment decisions are clustered due to herding behaviour, causing market inefficiencies and amplifying market movements. Many factors influence this behaviour, including social acceptance, fear of missing out (FOMO), and conformity. (Luo & Qin, 2020; Bikhchandani and Sharma, 2000)
 
Several studies have concluded that herding behaviour has a significant impact on the dynamics of markets and the stability of financial systems (Bikhchandani & Sharma, 2000; Chang et al., 2000; Scharfstein & Stein, 1990).

In order to manage and mitigate the risks associated with herding behaviour, it is important to investigate and understand the factors involved.

Financial literacy and digital literacy also influence overconfidence bias and herding behaviour on investment decisions. A person's financial literacy is their understanding of how to use financial services to make better financial decisions, such as budgeting and investing.
 
In contrast, Digital literacy refers to the ability to make better decisions with the help of digital media platforms.
 
A digital era in which investors have access to multiple digital investment platforms and a wealth of financial information requires both literacy skills.

Similarly, digital literacy has been found to improve an individual's ability to access and process financial information, enabling more informed investment decisions.

Thus, considering everything mentioned above, this study seeks to investigate the influence of overconfidence bias and herding behaviour on investment decisions, with a specific focus on the mediating role of financial literacy and digital literacy. 

By examining the relationship between these cognitive biases, literacy levels, and investment decisions, this study aims to provide valuable insights that can inform policy interventions, educational programs, and investor decision-making strategies. 






LITERATURE REVIEW

Overconfidence Bias on investment decision 
•	According to Barber and Odean (2001) Overconfident Investors make more frequent trades, which increases transaction costs, and lower investment returns.

•	Similarly, Odean (1998) discovered that overconfidence bias contributes to suboptimal investment decisions, as investors show extreme surety in their stock-picking abilities, leading to a poor portfolio performance.

•	Consistent with these findings, Grinblatt and Keloharju (2001) examined the impact of overconfidence on trading behaviour and performance. They found that overconfident investors tend to be more active in the market and engage in hypothetical trading strategies, resulting in higher trading costs and lower investment returns. 

•	Moreover, Gervais and Odean (2001) demonstrated that overconfident investors are prone to overestimate their ability to predict future stock prices, leading to increased trading and suboptimal portfolio performance. 

•	Further supporting the impact of overconfidence bias on investment decisions, Daniel et al. (1998) conducted a study that revealed overconfident investors tend to have a higher propensity to hold undiversified portfolios. This lack of diversification exposes them to greater risk and can lead to significant losses in their investment portfolios. 

Herding behaviour on investment decisions 
•	Bikhchandani and Sharma (2000) conducted a conclusive study that provided strong evidence regarding the herding behaviour in financial markets. The study highlighted that investors often engage in herding behaviour driven by a desire for conformity, assuming that collective judgment is more accurate or informed than individual judgment.

•	Building on these findings, Chang et al. (2000) examined herding behaviour in the context of mutual fund flows. The study revealed that investors tend to follow the investment decisions of others, resulting in herd-like movements of funds and significant fluctuations in market prices. 

•	Scharfstein and Stein (1990) investigated the impact of herding behaviour on market dynamics and financial stability. Their research demonstrated that herding behaviour can lead to the formation of investment bubbles, as the actions of one investor influence others to follow suit, resulting in excessive buying or selling in the market. Expanding the understanding of herding behaviour.

•	Christie and Huang (1995) investigated the influence of sentiment and information diffusion on herding in stock markets. The study found that herding behaviour was more prevalent during periods of high market sentiment and when there was a rapid dissemination of information among investors.

•	Furthermore, Devenow and Welch (1996) explored the impact of herding behaviour on stock returns. The study demonstrated that herding behaviour had a positive effect on short-term stock returns but led to subsequent reversals, indicating the presence of price bubbles and inefficiencies resulting from herding.

•	Luo and Qin (2020) conducted a study on herding behaviour in the context of cryptocurrency markets. The research revealed that herding behaviour was widespread in cryptocurrency trading, driven by social media discussions and a fear of missing out (FOMO). The findings suggested that herding behaviour in emerging digital asset markets can have profound effects on price dynamics and market stability. 

•	Additionally, Wang et al. (2016) investigated the role of herding behaviour in the Chinese stock market. Their study revealed that herding behaviour was prevalent among individual investors and significantly influenced stock return volatility. The results emphasized the importance of understanding and managing herding behaviour to promote market efficiency and stability. 

Financial Literacy on investment Decisions 
•	Lusardi and Mitchell (2011) concluded that the individuals with higher level of financial literacy make better investment decisions, they have reduced reliance on heuristics and biases than the individual with lower level of financial knowledge.

•	Extending the research on financial literacy, Hung et al. (2009) investigated the influence of financial literacy on investment behaviour in a cross-country study. The findings revealed that individuals with higher financial literacy levels were more likely to engage in long-term investment strategies, make informed investment decisions, and achieve better investment outcomes. 

•	A study by Fernandes et al. (2014) explored the mediating effect of financial literacy on the relationship between behavioural biases and investment decisions. The research demonstrated that individuals with higher financial literacy were less susceptible to biases such as overconfidence and herding, thereby making more rational and informed investment choices. 

•	Moreover, Kim and Lyons (2018) examined the impact of financial literacy on retirement investment decisions. The study found that individuals with higher financial literacy were more likely to engage in retirement planning, diversify their investment portfolios, and accumulate greater retirement savings. In the digital era, digital literacy has become increasingly important in investment decision-making. 

Digital Literacy on Investment Decisions
•	Levine et al. (2020) highlighted the positive impact of digital literacy on accessing and processing financial information, enabling more informed investment decisions. 

•	Lusardi and Tufano (2015) further emphasized that digital literacy enhances individuals' ability to utilize digital investment platforms effectively, facilitating better decision-making and increased financial engagement. Expanding on the significance of digital literacy in investment decision-making, 

•	Huang et al. (2018) explored the relationship between digital literacy and online trading behaviour. The study revealed that individuals with higher digital literacy levels were more likely to engage in online trading, make timely investment decisions, and experience improved investment performance. 

•	Additionally, Wang et al. (2019) investigated the mediating role of digital literacy in the relationship between financial inclusion and investment behaviour. The research indicated that digital literacy played a crucial role in enabling individuals to access and utilize digital financial services effectively, leading to greater financial inclusion and more informed investment decisions. 

•	Furthermore, Zhu and Chen (2019) examined the impact of digital literacy on robo-advisory adoption. The findings indicated that individuals with higher digital literacy were more likely to embrace robo-advisory platforms, utilize algorithm-based investment recommendations, and achieve improved investment outcomes.
(just rewrite my human/ai passages as if it were a college sophomore or what have you. I don't want AI plagiarism checker to catch it, i want it AI plagiarism free)