ABSTRACT
This study examined the relationship of one of the important factors observed during the COVID situation where different behavioral biases impact the risk perceptions and investment decisions of fund managers of Pakistan. Data has been gathered from fund managers of various organizations located in Rawalpindi and Islamabad through a structured questionnaire. The snowball sampling technique has been utilized. SPSS has been utilized for the data analysis. To test hypotheses, regression analysis has been done. The mediation and moderation results have been determined through Preacher and Hayes PROCESS macro. Model 7 of PROCESS macro has been utilized as it is best suited with moderated-mediation models. The findings of the study revealed that both the behavioral biases i.e. underconfidence bias and self-attribution bias do not influence the investment decisions of fund managers directly but both indirectly influence investment decisions when mediated with investor's risk perception. Moreover, financial literacy also significantly moderates the relationship between underconfidence bias and investor's risk perceptions and also moderates the relationship between self-attribution bias and investor's risk perception during COVID-19. The study filled the gap by taking into account financial literacy as the moderator on the relationship between behavioral biases (underconfidence bias and self-attribution bias) and investor's risk perceptions. The study is a significant contribution to the behavioral finance literature. This research helps stock market regulators and policy makers to better understand the investment mechanism.