Challenges of Integrating Emotion into a Theoretical Framework in a Higher Education Investment Course

Kiky, Andreas

doi:10.25120/jre.2.1.2022.3915

Cited by 4 publications

(5 citation statements)

References 45 publications

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“…Without emotion (a coin flip), the decision maker could be blind to the potential danger (risk) that awaits from the early asset selection. Teaching this emotional aspect also can be tricky and challenging due to the lack of learning competencies to avoid behaviour bias (Kiky, 2022).…”

Section: Discussionmentioning

confidence: 99%

Emotionless Decision. A Coin Flip Investment Decision, Is That Worthed?

Kiky

2022

ULTIMA Management

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Abstract- This article tries to test whether emotionless decisions (a coin flip) in investment decision-making could outperform human judgment due to superiority in avoiding behaviour bias caused by emotion. However, research about a coin flip in the investment decision is rarely can be found due to a lack of a solid foundation. Research problem in this article: Would the coin flip in investment decisions outperform human judgment in terms of investment wealth under the short-term trading range? The originality of this research is no prior research has been interested in checking the superiority of coin flip decisions in real investment due to the risk of uncertainty. This research finds a suitable environment (stock market competition) as the place to check the validity of the idea. This research uses a simple coin flip experiment to decide whether to sell or hold the investment asset during the stock competition. The result of investment wealth from the coin flip will be compared with the rest of the participants. A standard normal distribution (z) and (t) is used to check whether the coin flip wealth consistently falls into the top 5% or 1% of the right tail. Before that, the Kolmogorov-Smirnoff test is conducted to ensure the distribution follows the normal distribution shape. Using a coin flip for investment decisions is not outperform human judgment and winning the competition. Investment decision-making is an art between handling complex rational thinking about risk and managing the emotion in the process. Keywords: Coin Flip Decision; Investment Decision; Stock Competition; Emotionless Decision

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Section: Discussionmentioning

confidence: 99%

Emotionless Decision. A Coin Flip Investment Decision, Is That Worthed?

Kiky

2022

ULTIMA Management

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“…The sudden rise of retail investors could be a problem, especially for new entrants to investment. Proper competencies in theory and emotion are needed to mitigate their investment risk (Kiky, 2022). One of the problems in investment decisions addressed in this paper is the disposition effect.…”

Section: Framing Effect and Disposition Effect 883mentioning

confidence: 99%

Framing effect and disposition effect: investment decisions tools to understand bounded rationality

Kiky,

Atahau,

Mahastanti

et al. 2024

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PurposeThis paper aims to explore the development of investment decision tools by understanding the rationality behind the disposition effect. We suspect that not all disposition decisions are irrational. The decisions should be evaluated based on the bounded rationality of the individuals’ target and tolerance level, which is not covered in previous literature. Adding the context of individual preference (target and tolerance) in their decision could improve the classic measurement of disposition effect.Design/methodology/approachThe laboratory web experiment is prepared to collect the responses in holding and selling the stocks within 14 days. Two groups of Gen Z investors are observed. The control group makes a decision based on their judgment without any system recommendation. In contrast, the second group gets help inputting their target and tolerance. Furthermore, the framing effect is also applied as a reminder of their target and tolerance to induce more holding decisions on gain but selling on loss.FindingsThe framing effect is adequate to mitigate the disposition effect but only at the early day of observation. Bounded rationality explains the rationality of liquidating the gain because the participants have reached their goal. The framing effect is not moderated by days to affect the disposition effect; over time, the disposition effect tends to be higher. A new measurement of the disposition effect in the context of bounded rationality is better than the original disposition effect coefficient.Practical implicationsGen Z investors need a system aid to help their investment decisions set their target and tolerance to mitigate the disposition effect. Investment firms can make a premium feature based on real-time market data for investors to manage their assets rationally in the long run. Bounded rationality theory offers more flexibility in understanding the gap between profit maximization and irrational decisions in behavioral finance. The government can use this finding to develop a suitable policy and ecosystem to help beginner investors understand investment risk and manage their assets based on subjective risk tolerance.Originality/valueThe classic Proportion Gain Realized (PGR) and Proportion Loss Realized (PLR) measurements cannot accommodate several contexts of users’ targets and tolerance in their choices, which we argue need to be re-evaluated with bounded rationality. Therefore, this article proposed new measurements that account for the users’ target and tolerance level to evaluate the rationality of their decision.

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“…Untuk memahami dinamika pengambilan keputusan, pendekatan eksperimen akan lebih baik untuk memahami bagaimana seorang individu memproses informasi dan mengambil keputusan yang digolongkan sebagai efek disposisi. Tantangan di masa depan adalah bagaimana mengintegrasikan kemampuan kognitif yang rasional terkait keputusan investasi dengan kapasitas emosional yang baik (Kiky, 2022).…”

Section: Pembahasanunclassified

“…Sehingga investor mampu mendeteksi penurunan yang membutuhkan aksi cut loss dengan segera sebelum terlambat. Akan tetapi, untuk mengembangkan kecerdasan emosional dalam transaksi investasi, tantangannya sangat sulit (Kiky, 2022). Oleh karena itu, kontribusi penelitian ini ada pada kajian ilmiah keperilakuan dari investor di pasar cryptocurrencies.…”

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Investasi Cryptocurrencies. Bertahan dengan Kerugian Cryptocurrencies?

Kiky,

Saputera

2023

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Holding the loss without reason is one of the behavioural biases which are very common to be found in investment. Investment is also entering a new era of modern and sophisticated assets. One of these assets is known as cryptocurrencies. This article is written to detect whether the disposition effect is occurring to cryptocurrency investors and whether they are holding the loss. The disposition effect in this research was measured as respondents' perception of whether they sold the winning assets too fast and kept the failure in the long run. The result from this research is disposition effect was indeed found in descriptive statistics but failed to confirm the influence of independent variables on the disposition effect using the linear regression method. There is no effect of financial literacy, overconfidence, regret aversion, and risk tolerance on the perceptional disposition effect, which the emotional factor of loss aversion might cause. This will cause an individual to be reluctant to realize the loss in the hope the asset will return to the initial purchasing price. Further investigation will be the future area for developing research about the disposition effect. Interestingly, this research also found the literacy score of the respondents is deficient, but they are very confident in investing in the most volatile asset, such as cryptocurrencies. This research has several limitations, such as the sample being relatively similar in financial literacy, so selecting a wide range (heterogenous), sample in future research is crucial. Another improvement is in methodology, and perhaps an experimental approach could be a promising field in the study of behavioural bias in the future.

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Challenges of Integrating Emotion into a Theoretical Framework in a Higher Education Investment Course

Cited by 4 publications

References 45 publications

Emotionless Decision. A Coin Flip Investment Decision, Is That Worthed?

Emotionless Decision. A Coin Flip Investment Decision, Is That Worthed?

Framing effect and disposition effect: investment decisions tools to understand bounded rationality

Investasi Cryptocurrencies. Bertahan dengan Kerugian Cryptocurrencies?

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