Behavioural Biases and Retail Investor Decision-Making: The Moderating Role of Financial Literacy in Emerging Markets — A Critical Review

Retail participation in emerging capital markets has expanded alongside mobile trading, low-cost brokerage, digital financial services and easier access to market information. These changes have made individual investors more visible in capital-market activity while increasing the importance of understanding how psychological tendencies shape decisions. This review examines the ways in which overconfidence, herding, anchoring, loss aversion, the disposition effect, representativeness, availability, mental accounting, regret aversion and affect influence retail investment decisions in emerging-market settings. It integrates behavioural-finance theory with evidence on financial literacy, investor experience, social influence, market volatility, digital platforms and institutional context. The review is organised around a transparent PRISMA 2020-aligned protocol and a structured evidence-extraction framework. Because a complete, auditable export from bibliographic databases was not available during preparation of this draft, numerical screening totals, study-frequency counts and pooled effect estimates are not fabricated. Instead, the paper provides a reproducible protocol, a critical thematic synthesis, an evidence-mapping scheme and statistical procedures that can be executed after the final eligible-study set is verified. The literature suggests that biases are neither uniform nor independent: they may interact with risk perception, financial knowledge, market sentiment, social networks and trading technology. Survey-based studies frequently report associations between self-reported biases and investment choices, but cross-sectional designs, convenience samples, common-method variance and inconsistent construct measures limit causal interpretation and cross-country comparison. The paper proposes an integrated model in which individual biases affect investment decisions directly and indirectly through risk perception and sentiment, while financial literacy, experience; digital information quality and market conditions may moderate these relationships. Its contribution is a critical, context-sensitive synthesis and an analysis plan designed to support reproducible future reviews rather than an unsupported claim of statistical meta-analysis.

Keywords: behavioural finance; retail investors; emerging markets; overconfidence; herding; loss aversion; financial literacy; systematic review; investment decision-making; PRISMA 2020