How do Education and Investment Experience Moderate the Association Between Overconfidence and Investment Decisions?

Abstract

This study investigates how education level and investment experience moderate the association between overconfidence and investment decision. We used a quantitative cross-sectional research design. Data was collected from 149 individual investors in the Indonesian Stock Exchange through an online questionnaire. Moderated Regression Analysis (MRA) was employed to test hypotheses. The findings emphasize that overconfidence significantly influences investment decisions, irrespective of investors' education and investment experience. Interestingly, education's direct impact on decisions is limited; however, it appears to enhance overconfidence, potentially leading to more irrational choices due to increased investors' overconfidence. In contrast, investment experience acts as a buffer against investment decisions, highlighting the value of accumulated insights. Additionally, the study reveals that investment experience moderates the relationship between overconfidence and investment choices. These results align with behavioral theory, illuminating the intricate interplay of human behavior in financial decision-making. The study offers insights for policymakers and financial institutions, underlining the need for customized interventions to strengthen financial literacy and recognize the intricate interplay of experience and overconfidence biases.