The study examines the impact of behavioral biases on portfolio diversification of the investors trading at Pakistan Stock Exchange (PSX). The study also explores the moderating role of social influence in the association between behavioral biases and portfolio diversification. Biases studied in this research are overconfidence and hot hand fallacy. Primary data is collected from investors of Pakistan Stock Exchange using a structured questionnaire. A representative sample of 430 investors trading at Pakistan Stock Exchange is used in this study. The findings of this research have shown that behavioral biases impact negatively the portfolio diversification. The finding of this research also highlights that social influence moderates the association between hot hand fallacy and portfolio diversification. However, findings showed that social influence do not moderate the association between overconfidence and portfolio diversification. This research will be helpful for investors as well as for the regulators. This research will enable the investors to recognize the effect of biases in their ability to diversify the investment portfolio. They will also consider the role that social influence play in the impact of these biases on portfolio diversification. On the other hand, this research also highlighted areas where regulators can educate investors. The study finds a strong support from Theory of Planned Behavior. Previously researches have studied the effect of biases on investment horizon, investment decisions or investment risk. This research is unique in a way that it examines the effect of biases on portfolio diversification.