Over Confidence, Mental Accounting, and Loss Aversion In Investment Decision

Armansyah, Rohmad Fuad

doi:10.21107/jaffa.v9i1.10523

Cited by 16 publications

(19 citation statements)

References 27 publications

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“…In this study overconfidence is proven to be a predictor of investment decisions. The results of this study support the results of research by Armansyah (2021) that overconfidence has proven to be a predictor of investment decisions by capital market investors and also supports and Nofsinger (2016), Khan et al (2017), Tjandrasa and Tjandraningtyas (2018), and Qasim et al (2019. This is possible, confidence is needed in making investment decisions in the capital market because every decision taken has risks. Every investment decision requires confidence from investors to make a decision but overconfidence will also lead to disaster.…”

Section: Inner Modelsupporting

confidence: 88%

“…This is interesting because this behavioral bias can lead to a crisis in a country (Armansyah, 2018) or even when the Covid-19 pandemic conditions affect the capital market (Allam et al, 2020). Several studies have found that overconfidence, endowment bias, confirmation bias, and recency bias all have a significant impact on investment decisions (Tjandrasa & Tjandraningtyas, 2018;Peñón & Ortega, 2018;Qasim et al, 2019;Rudiawarni et al, 2020;Rabbani et al, 2021;Armansyah, 2021;Gavrilakis & Floros, 2022). The purpose of this research is to gather evidence of irregularities in financial behavior such as herd instinct bias, emotional bias, and information processing bias in investment decision making as information technology and communication media evolve, as well as new policies in the Indonesian capital market.…”

Section: Figure 1 Growth Of Indonesian Capital Market Investorsmentioning

confidence: 99%

“…Herding bias is a type of investing behavior in which an investor tends to follow the decisions of other investors without first conducting personal analysis such as fundamentals or techniques. Armansyah (2021) explained that herding is a phenomenon that occurs to investors or a group of investors as a result of the desire of investors to achieve the same profit by mimicking the behavior of other investors. This is one of the irrational actions of investors who do not base their investment decisions on available information or facts, but rather on the actions of other investors or market noise.…”

Section: Figure 1 Growth Of Indonesian Capital Market Investorsmentioning

confidence: 99%

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Herd Instinct Bias, Emotional Biases, and Information Processing Biases in Investment Decisions

Armansyah¹

2022

jmk

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The evolution of information during the COVID-19 pandemic has altered how investors invest. Investments can be made easily on a variety of digital platforms that provide easy access to information in investment decisions. Information media is expanding to promote investment decision making, boosting the rise and development of investor financial behavior bias. This study attempts to fill a knowledge gap in behavioral finance by concentrating on behavioral biases such as Herd Instinct Bias, Emotional Biases, and Information Processing Biases in capital market investment decisions. PLS-SEM (Partial Least Square-Structural Equation Modeling) was used to evaluate the data of 205 Indonesian capital market investors who are members of securities companies. The data confirm that overconfidence, herding bias, confirmation bias, and recency bias influence investor investment decisions, whereas endowment bias had no effect on investment decisions.

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Section: Inner Modelsupporting

confidence: 88%

Section: Figure 1 Growth Of Indonesian Capital Market Investorsmentioning

confidence: 99%

Section: Figure 1 Growth Of Indonesian Capital Market Investorsmentioning

confidence: 99%

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Herd Instinct Bias, Emotional Biases, and Information Processing Biases in Investment Decisions

Armansyah¹

2022

jmk

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“…On the other hand, endowment bias makes investors highly cautious about losses in the financial market. This makes them, at times avoid investments as they get pessimistic about their own financial decisions (Armansyah, 2021; Holden and Tilahun, 2020). Status quo bias creates a stagnant status among investors where they neither sell nor buy any securities.…”

Section: Resultsmentioning

confidence: 99%

A systematic review on behavioral biases affecting individual investment decisions

Badola,

Sahu,

Adlakha

2023

QRFM

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Purpose This study aims to systematically review various behavioral biases that impact an investor’s decision-making process. The prime objective of this paper is to thematically explore the behavioral bias literature and propose a comprehensive framework that can elucidate a more reasonable explanation of changes in financial markets and investors’ behavior. Design/methodology/approach Systematic literature review (SLR) methodology is applied to a portfolio of 71 peer-reviewed articles collected from different electronic databases between 2007 and 2021. Content analysis of the extant literature is performed to identify the research themes and existing gaps in the literature. Findings This research identifies publication trends of the behavioral biases literature and uncovers 24 different biases that impact individual investors’ decision-making. Through thematic analysis, an attribute–consequence–impact framework is proposed that explains different biases leading to individual investors’ irrationality. The study further proposes directions for future research by applying the theory–characteristics–context–methodology framework. Research limitations/implications The results of this research will help scholars and practitioners in understanding the existence of various behavioral biases and assist them in identifying potential strategies which can evade the negative effects of these biases. The findings will further help the financial service providers to understand these biases and improve the landscape of financial services. Originality/value The essence of the current paper is the application of the SLR method on 24 biases in the area of behavioral finance. To the best of the authors’ knowledge, this study is the first attempt of its kind which provides a methodical and comprehensive compilation of both cognitive and emotional behavioral biases that affect the individual investor’s decision-making.

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“…One of the factors in achieving these expectations is by making the right investment decisions. Making investment decisions is a very important factor in making company decisions (Armansyah, 2021). Mistakes in investing will cause a decrease in the value of company profits.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Loss Aversion Bias and Regret Aversion Bias on Financial Decisions with Financial Literacy as an Intervening Variable

Rahawarin¹

2023

AFS

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Decision-making is difficult for everyone, including MSMEs. This study describes the relationship between behavioral bias, namely loss aversion bias and regret aversion bias on decision making. Financial literacy becomes an intervening variable in explaining the relationship between the two. This study took 125 SMEs in Bululawang using a questionnaire. Data analysis was performed using SEM analysis and using the AMOS application. The results show that loss aversion bias and regret aversion bias affect investment decision-making. Likewise, financial literacy can be an intervening variable that can affect the relationship between the two

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Over Confidence, Mental Accounting, and Loss Aversion In Investment Decision

Cited by 16 publications

References 27 publications

Herd Instinct Bias, Emotional Biases, and Information Processing Biases in Investment Decisions

Herd Instinct Bias, Emotional Biases, and Information Processing Biases in Investment Decisions

A systematic review on behavioral biases affecting individual investment decisions

The Effect of Loss Aversion Bias and Regret Aversion Bias on Financial Decisions with Financial Literacy as an Intervening Variable

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