Impact of Behavioral Biases on Investment Decision Making with Moderating Role of Financial Literacy

Khalid, Rizwan; Javed, Muhammad Aslam; Shahzad, Khurram

doi:10.53369/rkxa7855

Cited by 18 publications

(36 citation statements)

References 2 publications

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“…Next, the seventh hypothesis (H7) is also confirmed and accepted, showing that overconfidence influences investor decision making with 𝛽-value was 0.228, with t-statistics value was 3.629 corresponding to p-value ≤ 0.01. Related previous research also found that overconfident investors increase their investment ambitiously [84]. After that, the eighth hypothesis (H8) is also confirmed and accepted, showing that anchoring influences investor decision making with 𝛽-value was 0.226, with t-statistics value was 3.669 corresponding to p-value ≤ 0.01.…”

Section: Discussionsupporting

confidence: 59%

A Study on Behavioural Bias & Investment Decision from Perspective of Indonesia’s Cryptocurrency Investors

Denura¹,

Soekarno²

2023

ijcsrr

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Cryptocurrency, an innovative asset class that is widely adopted by investors around the world. Indonesia is no exception to this, increasing the investor adoption up to 12 million investors in 2022. This number is very significant compared to Indonesia stock market investors that is only around 7 million investors. Various literatures have covered cryptocurrency in terms of pricing strategy and technicalities, so this paper extends the understanding of cryptocurrency dynamics from a behavioral finance perspective that is still less developed in Indonesia. This paper aims to explore the relationship between financial literacy, behavioral bias as well as its implication on the investment decision making process and investment performance from the perspective of investors based on Indonesia’s cryptocurrency investors at online communities. This paper used Structural Equation Modeling (SEM) to predict the relation between variables. Our results show that financial literacy has an impact on each behavioral bias. While the behavioral biases that investigate in this study have different result in term of impact on decision-making process and the investment performance. Overconfidence, herding and anchoring are the biases that significantly influence invertor’s decision making in scope of cryptocurrency market in Indonesia. This study outcome may help investors understand and increase the awareness of investor’s investment behavior and decision-making process, and parallel to that the regulators and other stakeholders may use the insight to improve investor’s protection.

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Section: Discussionsupporting

confidence: 59%

A Study on Behavioural Bias & Investment Decision from Perspective of Indonesia’s Cryptocurrency Investors

Denura¹,

Soekarno²

2023

ijcsrr

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“…We adopted Mayfield et al's (2008) scale and selected three items of short-term investment and four items of long-term investment decisions. Researchers have empirically validated this scale in several countries, including Pakistan (Ahmad, 2021;Chaudary, 2019;Jhandir and Elahi, 2014) composite reliability for short-term (0.773) and long-term investments (0.823). We employed a five-point Likert-type scale with disagree strongly (1), disagree (2), neutral (3), agree (4) and agree strongly (5) as scale anchors.…”

Section: Methodsmentioning

confidence: 99%

“…A short-term horizon signifies investors' short-term earnings; a long-term horizon represents investors' interests in long-term value (Bushee, 1998;Jhandir and Elahi, 2014;Mayfield et al, 2008). A long-term investment represents investors who hold multiple asset classes for more than one year (inaccessible for several years).…”

Section: The Love Of Money and Investment Decisions In The Emerging M...mentioning

confidence: 99%

Investors’ financial aspirations excite investment decisions: current income, future inheritance expectations, and short-term and long-term decisions—The Matthew Effect in Pakistan’s emerging markets

Chaudary

Zafar²,

Tang³

2022

IJOEM

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PurposeFollowing behavioral finance and monetary wisdom, the authors theorize: Decision-makers (investors) adopt deep-rooted personal values (the love-of-money attitudes/avaricious financial aspirations) as a lens to frame critical concerns (short-term and long-term investment decisions) in the immediate-proximal (current income) and distal-omnibus (future inheritance) contexts to maximize expected utility and ultimate serenity across context, people and time.Design/methodology/approachThe authors collected data from 277 active equity traders (professional money managers and individual investors) in Pakistan’s two most robust investment hubs—Karachi and Lahore. The authors measured their love-of-money attitude (avaricious monetary aspirations), short-term and long-term investment decisions and demographic variables and collected data during Pakistan's bear markets (Pakistan Stock Exchange, PSX-100).FindingsInvestors’ love of money relates to short-term and long-term decisions. However, these relationships are significant for money managers but non-significant for individual investors. Further, investors’ current income moderates this relationship for short-term investment decisions but not long-term decisions. The intensity of the aspirations-to-short-term investment relationship is much higher for investors with low-income levels than those with average and high-income levels. Future inheritance moderates the relationships between aspirations and short-term and long-term decisions. Regardless of their love-of-money orientations, investors with future inheritance have higher magnitudes of short-term and long-term investments than those without future inheritance. The intensity of the aspirations-to-investments relationship is more potent for investors without future inheritance than those with inheritance. Investors with low avaricious monetary aspirations and without inheritance expectations show the lowest short-term and long-term investment decisions. Investors' current income and future inheritance moderate the relationships between their love of money attitude and short-term and long-term decisions differently in Pakistan's bear markets.Practical implicationsThe authors help investors make financial decisions and help financial institutions, asset management companies, brokerage houses and investment banks identify marketing strategies and investor segmentation and provide individualized services.Originality/valueProfessional money managers have a stronger short-term orientation than individual investors. Lack of wealth (current income and future inheritance) motivates greedy investors to take more risks and become more vulnerable than non-greedy ones—investors’ financial resources and wealth matter. The Matthew Effect in investment decisions exists in Pakistan’s emerging economy.

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“…Overconfidence merupakan sikap mental yang umumnya bertentangan dengan konsep keuangan dimana investor akan mengabaikan risiko tinggi yang mungkin akan ditemui karena merasa bahwa kemampuan yang dimilikinya lebih baik dibandingkan yang lain dalam memprediksi perkembangan sekuritas yang akan diambil, sehingga biasanya mereka tidak mendiversifikasikan portofolio (Khalid et al, 2018). Overconfidence dapat menimbulkan dampak pada psikologis investor ketika investasi yang diambil mengalami kerugian besar, akibat terlalu percaya diri dan nekat membeli investasi yang berisiko (Addinpujoartanto dan Darmawan, 2020).…”

Section: Overconfidenceunclassified

“…Overconfidence menyebabkan investor bertindak nekat dalam mengambil keputusan investasi karena terlalu percaya diri terhadap kemampuan penilaian mereka pada suatu investasi, tentu hal ini berdampak pada psikologis mereka jika investasi tersebut gagal (Addinpujoartanto dan Darmawan, 2020). Biasanya investor yang bersikap overconfidence akan lebih agresif dalam bertindak mengambil keputusan dan tidak ada atau cenderung sedikit diversivikasi pada portofolio mereka (Khalid et al, 2018). Overconfidence menyebabkan investor menjadi overestimate terhadap kemampuan mereka tanpa memikirkan besarnya risiko yang akan didapat (Pradikasari dan Isbanah, 2018).…”

Section: Pengaruh Overconfidence Terhadap Keputusan Investasi Cryptoc...unclassified

Faktor-Faktor Yang Mempengaruhi Keputusan Investasi Cryptocurrency Pada Kaum Milenial

Perayunda

Mahyuni

2022

EKUITAS (Jurnal Ekonomi dan Keuangan)

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Penelitian ini bertujuan untuk menguji secara komperhensif faktor-faktor yang mempengaruhi keputusan investasi cryptocurrency pada kaum milenial di kota Denpasar. Data dikumpulkan dengan menggunakan instrumen kuisioner berbasis web google form yang melibatkan 100 responden investor milenial yang aktif berinvestasi jual beli cryptocurrency di kota Denpasar. Data diolah dan dianalisis menggunakan aplikasi software SmartPLS3. Hasil penelitian menunjukkan financial experience dan overconfidence tidak berpengaruh terhadap keputusan investasi cryptocurrency. Hanya risk tolerance yang berpengaruh terhadap keputusan investasi cryptocurrency. Temuan lain juga menunjukkan bahwa overconfidence dan risk tolerance tidak mampu memediasi hubungan antara financial experience terhadap keputusan investasi cryptocurrency. Adanya penelitian ini berimplikasi pada tingkat wawasan dan kesadaran akan tingkat risiko investasi yang dimiliki oleh investor, sehingga keputusan yang diambil dapat lebih efektif, mengingat cryptocurrency merupakan investasi yang bersifat high risk. Penelitian ini menawarkan model empiris yang menjelaskan faktor yang mempengaruhi keputusan investasi cryptocurrency pada kaum milenial dengan menggunakan model penelitian yang menggabungkan faktor psikologis dan demografis yang menggunakan dua variabel mediasi pada investasi cryptocurrency, sehingga penelitian ini penting dilakukan guna menambah kontribusi pada kajian literatur. Kata kunci: financial experience, overconfidence, risk tolerance, keputusan investasi cryptocurrency, cryptocurrency, milenial

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Impact of Behavioral Biases on Investment Decision Making with Moderating Role of Financial Literacy

Cited by 18 publications

References 2 publications

A Study on Behavioural Bias & Investment Decision from Perspective of Indonesia’s Cryptocurrency Investors

A Study on Behavioural Bias & Investment Decision from Perspective of Indonesia’s Cryptocurrency Investors

Investors’ financial aspirations excite investment decisions: current income, future inheritance expectations, and short-term and long-term decisions—The Matthew Effect in Pakistan’s emerging markets

Faktor-Faktor Yang Mempengaruhi Keputusan Investasi Cryptocurrency Pada Kaum Milenial

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