THE IMPORTANCE OF FINANCIAL LITERACY IN CAPITAL MARKETS

The article examines the importance of financial literacy in the development and efficient functioning of capital markets. Financial literacy enables investors to make informed decisions, properly assess risks, and effectively allocate their financial resources. Higher levels of financial knowledge increase investor participation in capital markets, encourage portfolio diversification, and improve overall financial outcomes. In contrast, insufficient financial literacy often results in poor investment decisions, higher exposure to financial risks, and limited engagement in market activities. The study also highlights the role of financial education in shaping rational investor behavior and strengthening market stability. In addition, improving financial literacy contributes to the creation of a more transparent, efficient, and inclusive capital market system.