Chain Reaction of Behavioral Bias and Risky Investment Decision in Indonesian Nascent Investors
Early investors possess unique sets of decision-making characteristics. They are more open to experience and eager to face risks. However, to the best of the authors’ knowledge, the discussions of nascent investors upon making the investment decision and its eroding biases were still elusive. The vi...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2022-07-01
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| Series: | Risks |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-9091/10/8/145 |
| _version_ | 1797442266328989696 |
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| author | Rika Dwi Ayu Parmitasari Alim Syariati Sumarlin |
| author_facet | Rika Dwi Ayu Parmitasari Alim Syariati Sumarlin |
| author_sort | Rika Dwi Ayu Parmitasari |
| collection | DOAJ |
| description | Early investors possess unique sets of decision-making characteristics. They are more open to experience and eager to face risks. However, to the best of the authors’ knowledge, the discussions of nascent investors upon making the investment decision and its eroding biases were still elusive. The vital role of emotion as a bias in decision making was also inadequately addressed. This study enhanced behavioral finance knowledge by examining emotion’s role in regulating the illusion of control, overconfidence, and investors’ decision making. In total, 456 initial investors in Indonesia participated in online questionnaires, forming the data for covariance-based structural model analysis. This study found that emotion significantly increased the illusion of control, but not overconfidence or decision making, contrary to the bulk of previous studies. The illusion of control exhibited a substantial significant effect of as much as 86.4% toward overconfidence, followed by a considerable increase in decision making. The results of our study also pointed to the unique chain effects of biases affecting the decision-making process of nascent investors in the emerging market. This finding implied they possessed a unique bias mechanism in constructing their decision. |
| first_indexed | 2024-03-09T12:39:21Z |
| format | Article |
| id | doaj.art-eb70e024c1a44d82a827145aec98bdf8 |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-03-09T12:39:21Z |
| publishDate | 2022-07-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-eb70e024c1a44d82a827145aec98bdf82023-11-30T22:21:15ZengMDPI AGRisks2227-90912022-07-0110814510.3390/risks10080145Chain Reaction of Behavioral Bias and Risky Investment Decision in Indonesian Nascent InvestorsRika Dwi Ayu Parmitasari0Alim Syariati1Sumarlin2Management Department, Universitas Islam Negeri Alauddin Makassar, Gowa 92118, IndonesiaManagement Department, Universitas Islam Negeri Alauddin Makassar, Gowa 92118, IndonesiaAccounting Department, Universitas Islam Negeri Alauddin Makassar, Gowa 92118, IndonesiaEarly investors possess unique sets of decision-making characteristics. They are more open to experience and eager to face risks. However, to the best of the authors’ knowledge, the discussions of nascent investors upon making the investment decision and its eroding biases were still elusive. The vital role of emotion as a bias in decision making was also inadequately addressed. This study enhanced behavioral finance knowledge by examining emotion’s role in regulating the illusion of control, overconfidence, and investors’ decision making. In total, 456 initial investors in Indonesia participated in online questionnaires, forming the data for covariance-based structural model analysis. This study found that emotion significantly increased the illusion of control, but not overconfidence or decision making, contrary to the bulk of previous studies. The illusion of control exhibited a substantial significant effect of as much as 86.4% toward overconfidence, followed by a considerable increase in decision making. The results of our study also pointed to the unique chain effects of biases affecting the decision-making process of nascent investors in the emerging market. This finding implied they possessed a unique bias mechanism in constructing their decision.https://www.mdpi.com/2227-9091/10/8/145biasesdecision makingthe illusion of controloverconfidencethe nascent investors |
| spellingShingle | Rika Dwi Ayu Parmitasari Alim Syariati Sumarlin Chain Reaction of Behavioral Bias and Risky Investment Decision in Indonesian Nascent Investors Risks biases decision making the illusion of control overconfidence the nascent investors |
| title | Chain Reaction of Behavioral Bias and Risky Investment Decision in Indonesian Nascent Investors |
| title_full | Chain Reaction of Behavioral Bias and Risky Investment Decision in Indonesian Nascent Investors |
| title_fullStr | Chain Reaction of Behavioral Bias and Risky Investment Decision in Indonesian Nascent Investors |
| title_full_unstemmed | Chain Reaction of Behavioral Bias and Risky Investment Decision in Indonesian Nascent Investors |
| title_short | Chain Reaction of Behavioral Bias and Risky Investment Decision in Indonesian Nascent Investors |
| title_sort | chain reaction of behavioral bias and risky investment decision in indonesian nascent investors |
| topic | biases decision making the illusion of control overconfidence the nascent investors |
| url | https://www.mdpi.com/2227-9091/10/8/145 |
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