EMPIRICAL EVIDENCE OF BEHAVIORAL FINANCE BIAS IN MAKING INVESMENT DECISIONS: CASE OF INDONESIA’S INVESTORS WITH DIFFERENT EXPERIENCE LEVEL

• Main Author: Tyto, Britney
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/72316
• Institution: Institut Teknologi Bandung

Traditional finance theory regards that investors are using expected utility theory in making their financial decision which assumed that they are rational and able to decide their decisions vividly among options without any psychological biases involved. Unfortunately, previous studies found that there is a direct correlation between perceptual errors and investors’ personality. There were psychologies biases, framing effect and cognitive biases that interfere the decision-making process. Therefore, this paper would like to investigate the influences of behavioral biases towards investors in Indonesia. Survey method is used to obtain primary data, and questionnaire is distributed via online among investors. This research will focus on the experience of the investors and to seek the relationship between those behavioral biases such as Overconfidence, Regret Aversion, Loss Aversion and Gamblers’ Fallacy. This research also attempts to reveal the significance of identified behavioral finance biases, namely, Overconfidence, Regret Aversion, Gamblers’ Fallacy, and Loss Aversion towards the experience of investors. In order to seek for the relation between the behavioral biases and the demographic factors of investors, this research conducted logistic regression method. The result will demonstrate that not all behavioral biases have significant relationship towards investment experience. Moreover, it reveals that less experienced investors are more likely to experience behavioral biases more than the investors who have more experience in investment activities.