The effect of demographic factors on behavioral biases

Abstract

The purpose of this study was to examine the influence of demographic factors such as gender, age, education, occupation, income, and investment experience on investor behavior bias such as overconfidence bias, disposition effects, herding bias, and mental accounting. This type of research was causal research with a quantitative approach, and the analytical method used was the analysis of SEM (structural equation modeling). This research was conducted by distributing questionnaires to investors listed on the Indonesia Stock Exchange with a minimum age of 17 years. The results showed that overconfidence bias was influenced by investment experience while disposition effect was influenced by age, income level, and investment experience. Herding bias was influenced by age and occupation while mental accounting was influenced by income level.

Investigating the Demographic Characteristics of Institutional Investors Affecting Representativeness, Conservatism and Overconfidence Biases in their Individual Investments

“…In particular, when they surveyed a group that would soon retire, they found that this group was affected by the overconfidence bias. Beatrice et al (2021), on the other hand, found that education is not related to overconfidence bias, and even if the investor does not have education on capital markets, they can develop themselves with the developing technology. In other words, investors will improve themselves with additional education, increase their knowledge of investment and will not need to make decisions with overconfidence.…”

“…Regarding gender in terms of bias, it was concluded that women refrain from investing in risky assets and avoid risk, so women are less likely to be affected by the overconfidence bias than men. Beatrice, Murhadi, and Herlambang (2021) also stated that women are less confident and pessimistic than men.…”

“…Ateş et al (2016) also stated that the representativeness bias generally affects the decisions of groups with a lower education level. Likewise, Goo, Chen, Chang, and Yeh (2010) asserted that those with a high level of education will be confident in the decisions they make and will not be affected by other people's knowledge and investment decisions (Beatrice et al, 2021). Bhandari and Deaves (2006) stated that investors who did not receive a special education specific to investment make decisions under the influence of the overconfidence bias, considering that they make their investments well with their general education.…”

“…In other words, investors will improve themselves with additional education, increase their knowledge of investment and will not need to make decisions with overconfidence. In fact, Bhandari and Deaves (2006) revealed that investors with a high level of education think they are more knowledgeable because they are overconfident in the results of their decisions (Beatrice et al, 2021).…”

“…Goo et al (2010) stated that the higher the education level, the higher the investors' self-confidence. In other words, the overconfidence of investors is affected by the higher education graduated, and investors do not follow the information and investment decisions of others with this confidence (Beatrice et al, 2021).…”