The effect of financial literacy on cryptocurrency investment decision with the mediation of students' risk tolerance and risk taking
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Zahra Salwa Salsabila(1*)
Economic Education, Faculty of Teacher Training and Education, Sebelas Maret University
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Muhammad Sabandi(2)
Economic Education, Faculty of Teacher Training and Education, Sebelas Maret University
(*) Corresponding Author
Keywords:
Behavioural Finance Theory, Financial Literacy, Investment Decision, Cryptocurrency, Risk Tolerance, Risk Taking Behaviour
Abstract
The growth of cryptocurrency investment among college students has increased significantly. However, this trend is not always accompanied by sufficient understanding or preparedness to manage investment risks. This study examines the effects of financial literacy on cryptocurrency investment decisions, risk tolerance, and risk-taking behaviour, as well as the effects of risk tolerance and risk-taking behaviour on investment decisions and their mediating roles. A quantitative approach was employed using survey data collected from college students who have experience investing in cryptocurrency. The data were analysed using Structural Equation Modelling (SEM) to examine the direct and mediating effects among the variables. The findings indicate that financial literacy significantly influences cryptocurrency investment decisions, risk tolerance, and risk-taking behaviour. Furthermore, risk tolerance and risk-taking behaviour significantly affect investment decisions and mediate the relationship between financial literacy and cryptocurrency investment decisions. This study contributes to the literature by providing empirical evidence on the role of financial literacy and risk-related factors in shaping cryptocurrency investment decisions among college students, offering insights for improving students’ financial decision-making and risk management.
Keywords: Behavioural Finance Theory; Financial Literacy; Investment Decision; Cryptocurrency; Risk Tolerance; Risk Taking Behaviour
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References
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Sjöberg, L., & Engelberg, E. (2009). Attitudes to Economic Risk Taking, Sensation Seeking and Values of Business Students Specialising in Finance. The Journal of Behavioural Finance, 10(1), 33-43.
https://doi.org/10.1080/15427560902728712
Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk. The Journal of Finance, 19(3), 425-442. https://doi.org/10.1111/j.1540-6261.1964.tb02865.x
Thaler, R. H. (1985). Mental Accounting and Consumer Choice. Marketing Science, 4(3), 199-214. https://doi.org/10.1287/mksc.4.3.199
Van Rooij, M., Lusardi, A., & Alessie, R. (2011). Financial Literacy and Stock Market Participation. Journal of Financial Economics, 101(2), 449-472. https://doi.org/10.1016/j.jfineco.2011.03.006
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Accessed from: https://www.weforum.org/reports/world-risk-report-2021
Yoong, J. (2011). Financial Illiteracy and Stock Market Participation: Evidence from the RAND American Life Panel. In Financial Literacy: Implications for Retirement Security and the Financial Marketplace (pp. 76-100). Oxford University Press.
Barsky, R. B., Juster, F. T., Kimball, M. S., & Shapiro, M. D. (1997). Preference Parameters and Behavioural Heterogeneity: An Experimental Approach in the Health and Retirement Study. Quarterly Journal of Economics, 112(2), 537-579. https://doi.org/10.1162/003355397555280
Campbell, S., Greenwood, M., Prior, S., Shearer, T., Walkem, K., Young, S., Bywaters, D., & Walker, K. (2020). Purposive sampling: Complex or simple? Research case examples. Journal of Research in Nursing, 25(8), 652–661. https://doi.org/10.1177/1744987120927206
Chen, H., & Volpe, R. P. (2002). Gender Differences in Personal Financial Literacy Among College Students. Financial Services Review, 11(3), 289-307. https://doi.org/10.1016/S1057-0810(02)00141-7
Faff, R., Mulino, D., & Chai, D. (2008). On the Linkage Between Financial Risk Tolerance and Risk Aversion. Journal of Financial Research, 31(1), 1-23. https://doi.org/10.1111/j.1475-6803.2008.00229.x
Grable, J. E., & Joo, S. H. (2004). Environmental and Biopsychosocial Factors Associated with Financial Risk Tolerance. Financial Counselling and Planning, 15(1), 73-82. https://doi.org/10.2139/ssrn.2023155
Grable, J. E., & Lytton, R. H. (1999). Financial Risk Tolerance Revisited: The Development of A Risk Assessment Instrument. Financial Services Review, 8(3), 163-181. https://doi.org/10.1016/S1057-0810(99)00041-4
Gustafson, C., & Omark, L. (2015). Financial Literacy's Effect on Financial Risk Tolerance - A Quantitative Study on Whether Financial Literacy has an Increasing or Decreasing Impact on Financial Risk Tolerance. (Dissertation). Umeå School of Business and Economics, Sweden.
Gustika, G.S. and Yaspita, H. (2021). The Effect of Financial Literacy on Investment Decisions of STIE Indragiri Rengat Students. J-MAS: Journal of Management and Science, 6(1), 261-269. http://dx.doi.org/10.33087/jmas.v6i1.252
Hair, J. F., Hult, G. T. M., Ringle, C. M., Sarstedt, M., Danks, N. P., & Ray, S. (2022). Partial least squares structural equation modeling (PLS-SEM) using R: A workbook. Springer. https://doi.org/10.1007/978-3-031-01790-8
Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2–24. https://doi.org/10.1108/EBR-11-2018-0203
Huhmann, B. A., & McQuitty, S. (2009). A Model of Consumer Financial Numeracy. International Journal of Bank Marketing, 27(4), 270-293. https://doi.org/10.1108/02652320910968359
Huston, S. J. (2010). Measuring Financial Literacy. Journal of Consumer Affairs, 44(2), 296-316. https://doi.org/10.1111/j.1745-6606.2010.01170.x
Johnson, K. N. (2020). Decentralised Finance: Regulating Cryptocurrency Exchanges. Wm. & Mary L. Rev., 62, 1911. https://scholarship.law.wm.edu/wmlr/vol62/iss6/4
Jonathan, R. & Sumani. (2021). Millennial Investment Decision Analysis. Business and Entrepreneurial Review, 21(2), 279-296.
http://dx.doi.org/10.25105/ber.v21i2.10409
Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision Under Risk. Econometrica, 47(2), 263-292. https://doi.org/10.2307/1914185
Kanagasabai, B., & Aggarwal, V. (2020). The Mediating Role of Risk Tolerance in the Relationship Between Financial Literacy and Investment Performance. Colombo Business Journal, 11(1). https://doi.org/10.4038/cbj.v11i1.58
Khalik, A. K., Sultan, M. S., & Hamzah, M. (2024). The Effect of Financial Literacy, Risk Tolerance and Risk Perception on Crypto Currency Investment Decisions in South Sulawesi. AKMEN Scientific Journal, 21(1), 104-116. https://doi.org/10.37476/akmen.v21i1.4830
Klapper, L., Lusardi, A., & Panos, G. A. (2013). Financial Literacy and Its Consequences: Evidence from Russia During the Financial Crisis. Journal of Banking & Finance, 37(10), 3904-3923. https://doi.org/10.1016/j.jbankfin.2013.07.014
Le Fur, E., & Outreville, J. F. (2022). Financial Literacy, Education and Risk Aversion: A Survey of French Students. Managerial Finance, 48(9/10), 1530-1543. https://doi.org/10.1108/MF-10-2021-0509
Lusardi, A., & Mitchell, O. S. (2011). Financial Literacy and Retirement Planning in the United States. Journal of Pension Economics & Finance, 10(4), 509-525. https://doi.org/10.1017/S147474721100045X
Lusardi, A., & Mitchell, O. S. (2014). The Economic Importance of Financial Literacy. Journal of Economic Literature, 52(1), 5-44. https://doi.org/10.1257/jel.52.1.5
Lusardi, A., & Tufano, P. (2015). Debt Literacy, Financial Experiences, and Overindebtedness. Journal of Pension Economics & Finance, 14(4), 332-368. https://doi.org/10.1017/S1474747215000232
Mahwan, F., & Herawati, N. T. (2021). The Effect of Financial Literacy, Risk Perception, and Locus of Control on Investment Decisions of Young Entrepreneurs in Singaraja. JIMAT (Scientific Journal of Accounting Students) Undiksha, 12(3), 768-780. https://doi.org/10.23887/jimat.v12i3.34599
Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77-91. https://doi.org/10.2307/2975974
Ningrum, P. A. P., Herawati, N. T., & Sinarwati, N. K. (2023). The Effect of Financial Literacy, Risk Tolerance and Overconfidence on Cryptocurrency Investment Decision Making in Students of the Faculty of Economics, Ganesha University of Education. Journal of Professional Accounting, 14(02), 262-275. https://doi.org/10.23887/jap.v14i02.61793
OECD. (2025). Improving the digital financial literacy of crypto-asset users. OECD Publishing. https://doi.org/10.1787/19cfecad-en
Financial Services Authority (OJK). (2022). National Survey of Financial Literacy and Inclusion 2022. Accessed from: https://www.ojk.go.id
Ringle, C. M., Wende, S., & Becker, J.-M. (2024). SmartPLS 4. SmartPLS.
Sjöberg, L., & Engelberg, E. (2009). Attitudes to Economic Risk Taking, Sensation Seeking and Values of Business Students Specialising in Finance. The Journal of Behavioural Finance, 10(1), 33-43.
https://doi.org/10.1080/15427560902728712
Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk. The Journal of Finance, 19(3), 425-442. https://doi.org/10.1111/j.1540-6261.1964.tb02865.x
Thaler, R. H. (1985). Mental Accounting and Consumer Choice. Marketing Science, 4(3), 199-214. https://doi.org/10.1287/mksc.4.3.199
Van Rooij, M., Lusardi, A., & Alessie, R. (2011). Financial Literacy and Stock Market Participation. Journal of Financial Economics, 101(2), 449-472. https://doi.org/10.1016/j.jfineco.2011.03.006
World Risk Report. (2021). Global Risk Assessment and Financial Stability Overview. World Economic Forum Publication.
Accessed from: https://www.weforum.org/reports/world-risk-report-2021
Yoong, J. (2011). Financial Illiteracy and Stock Market Participation: Evidence from the RAND American Life Panel. In Financial Literacy: Implications for Retirement Security and the Financial Marketplace (pp. 76-100). Oxford University Press.
Published
2026-11-01
How to Cite
Salsabila, Z., & Sabandi, M. (2026). The effect of financial literacy on cryptocurrency investment decision with the mediation of students’ risk tolerance and risk taking. Journal of Management : Small and Medium Enterprises (SMEs), 19(3), 2241-2254. https://doi.org/10.35508/jom.v19i3.24374
Section
Articles
