How Risk Perception aand Financial Literacy Effect Overconfidence Bias and Investment Decisions Relationship
DOI:
https://doi.org/10.37680/ijief.v4i2.6067Keywords:
Overconfidence Bias, Investment Decisions, Risk Perception, Financial Literacy, Quantitative ResearchAbstract
This research aims to determine the influence of overconfidence bias on investment decisions, which is mediated by risk perception and moderated by financial literacy. This research is quantitative research using causality analysis. The research instrument is a questionnaire with a likert scale of one to five points. The research used a random sampling technique with 400 capital market investors in Indonesia. Data were analyzed by SmartPLS4 software using the SEM PLS method. The research results show that overconfidence bias and risk perception positively affect investment decisions. Risk perception can positively and significantly mediate the relationship between overconfidence bias and investment decisions. Other results prove that financial literacy cannot moderate the relationship between overconfidence bias and investment decisions. This research implies that investors are expected to make investment decisions rationally and avoid detrimental investments.
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References
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Ainia, N. S. N., & Lutfi, L. (2019). Pengaruh Risk Perception, Risk Tolerance, Overconfidence dan Loss Aversion Terhadap Pengambilan Keputusan Investasi. Journal of Economics, Business & Accountancy Ventura, 21(3), 401–413.
Ajzen, I. (1991). The Theory of Planned Behavior. Organizational Behavior and Human Decision Processes, 50, 179–211.
Anifa, A. S., & Soegiharto. (2023). Does The Psychology of Investment Decisions Depend on Risk Perception and Financial Literacy ? 13(2), 152–163.
Arie Wibowo, M., Khusniyah Indrawati, N., & Aisjah, S. (2023). The impact of overconfidence and herding bias on stock investment decisions is mediated by risk perception. The impact of overconfidence and herding bias on stock investment decisions is mediated by risk perception. International Journal of Research in Business and Social Science (2147- 4478), 12(5), 174–184. https://doi.org/10.20525/ijrbs.v12i5.2663
Barber, B. M., & Odean, T. (2000). Trading Is Hazardous to Your Wealth : The Common Stock Investment Performance of Individual Investors. LV(2), 773–806.
Budiarto, A., & Susanti. (2017). Pengaruh Financial Literacy, Overconfidence, Regret Aversion Bias, DanRisk Tolerance Terhadap Keputusan Investasi. Jurnal Ilmu Manajemen, 05, 1–9.
Budiman, J., & Patricia. (2021). Pengaruh Overconfidence Bias, Herding Bias, Representativeness Bias, Loss Aversion, dan Risk perception terhadap Investment Decision di Kota Batam. CoMBInES, 1(1), 1979–1987.
Chin, W. (1998). The Partial Least Squares Approach To Structural Equation Modeling. In Modern Methods for Business Research (Marcoulide, pp. 295–336).
Fernandes, D., Lynch, J. G., & Netemeyer, R. G. (2014). Financial literacy, financial education, and downstream financial behaviors. Management Science, 60(8), 1861–1883. https://doi.org/10.1287/mnsc.2013.1849
Gustiarum, T., & Kusumawardhani, I. (2023). The Effect of Financial Literacy, Accounting Information, Risk Perception, and Herding Behavior on Investment Decisions. Journal of Business and Information System (e-ISSN: 2685-2543), 5(1), 1–10. https://doi.org/10.36067/jbis.v5i1.156
Halim, R., & Pamungkas, A. S. (2023). The Influence of Risk Perception, Overconfidence, and Herding Behavior on Investment Decision. International Journal of Application on Economics and Business, 1(1), 521–529. https://doi.org/10.24912/v1i1.521-529
Hamid, R. S., & Anwar, S. (2019). Structural Equation Modelling (SEM) Konsep Dasar dan Aplikasi Program Smart PLS 3.2.8 dalam Riset Bisnis. PT Inkubator Penulis Indonesia.
Hamzah, A. (2022). Pengaruh Overconfidence Bias, Mental Accounting Dan Familiarity Bias Terhadap Pengambilan Keputusan Investasi. Journal of Global Business and Management Review, 4(1), 50. https://doi.org/10.37253/jgbmr.v4i1.6777
Hendrian, H., & Patiro, S. P. S. (2020, May). The effect of leadership and organizational justice in predicting positive emotion of Indonesian Civil Servants. In 2nd International Seminar on Business, Economics, Social Science and Technology (ISBEST 2019) (pp. 19-27). Atlantis Press.
Herliana, Y. T., Ratnawati, K., & Djumahir, D. (2023). The Role of Personality Traits as Mediation: The Effect of Financial Literacy and Risk Perception on Investment Decision. Journal of Business and Management Review, 4(6), 469–493. https://doi.org/10.47153/jbmr46.7202023
Hidayat, T., Oktaviano, B., & Baharuddin, R. (2023). Keputusan Investasi Berdasarkan Literasi Keuangan, Pengetahuan Investasi dan Persepsi Risiko. 4307(June), 441–452.
Ishfaq, M., Maqbool, Z., Akram, S., Tariq, S., & Khurshid, M. . (2010). Mediating Role of Risk Perception between Cognitive Biases and Risky Investment Decision : Empirical Evidence from Pakistan's Equity Market. Journal of Managerial Sciences, 11(03), 266–278.
Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263–291. http://web.mit.edu/curhan/www/docs/Articles/15341_Readings/Behavioral_Decision_Theory/Kahneman_Tversky_1979_Prospect_theory.pdf
Khalid, R., Javed, M., & Khurram, S. (2016). Impact of Behavioral Biases on Investment Decision Making with Moderating Role of Financial Literacy. Journal Business Review, 6. https://doi.org/10.53369/RKXA7855
Khan, M. Z. U. (2017). Impact of Availability Bias and Loss Aversion Bias on Investment Decision Making, Moderating Role of Risk Perception. IMPACT: Journal of Modern Developments in General Management & Administration (IMPACT: JMDGMA), 1(1), 17–28. www.impactjournals.us
Kholilah, N. Al, & Iramani, R. (2013). Studi Financial Management Behavior pada Masyarakat Surabaya. 3(1), 69–80.
Kiran, A. M., Munir, M. A., & Sarwar, S. (2017). Impact of Overconfidence and Loss Aversion Biases on Investor Decision Making Behavior: Mediating Role of Risk Perception. International Journal of Public Finance, 1(1), 13–24. www.eurekajournals.com
Miller, M., Godfrey, N., Levesque, B., & Stark, E. (2009). The Case for Financial Literacy in Developing Countries. OECD.
Mirfaqoh, V., Yusriani, S., Helmi, T. A., Fadhil, A., Sholihah, F. M., & Kusnadi. (2023). Analysis of the Impact of the Covid-19 Pandemic on Stock Prices in the Construction Sector in Indonesia. Greenation International Journal Economic and Accounting, 1(3). https://doi.org/https://doi.org/10.38035/gijea.v1i3
Moore, D. A., & Healy, P. J. (2008). The Trouble With Overconfidence. 115(2), 502–517. https://doi.org/10.1037/0033-295X.115.2.502
Mushinada, V. N. C., & Veluri, V. S. S. (2019). Elucidating investor's rationality and behavioral biases in the Indian stock market. Review of Behavioral Finance, 11(2), 201–219. https://doi.org/10.1108/RBF-04-2018-0034
Nguyen, L., Gallery, G., & Newton, C. (2019). The Joint Influence of Financial Risk Perception and Risk Tolerance on Individual Investment Decision-Making. Accounting and Finance, 59(S1), 747–771. https://doi.org/10.1111/acfi.12295
Novianggie, V., & Asandimitra, N. (2019). The Influence of Behavioral, Cognitive, and Emotional Bias on Investment Decisions for College Students with Financial Literacy as the Moderating Variable. International Journal of Academic Research in Accounting, Finance and Management Sciences, 9(2), 92–107. https://doi.org/10.6007/IJARAFMS/v9-i2/6044
Novita Sari, R., & Damingun. (2021). Pengaruh Bias Overconfidence Terhadap Keputusan Investasi di Pasar Modal. Borneo Student Research, 2(3), 2721–5725.
Nuryasman, & Elizabeth. (2023). Generasi Sandwich: Penyebab Stres Dan Pengaruhnya Terhadap Keputusan Keuangan. Jurnal Ekonomi, 28(1), 20–41. https://doi.org/10.24912/je.v28i1.1322
Pompian, M. M. (2006). Behavioral Finance and Wealth Management. John Wiley & Sons, Inc.
Pradikasari, E., & Isnabah, Y. (2018). Pengaruh Financial Literacy, Illusion of Control, Overconfidence, Risk Tolerance, dan Risk Perception Terhadap Keputusan Investasi Pada Mahasiswa di Kota Surabaya. Jurnal Ilmu Manajemen (JIM), 6(4), 424–434.
Shah, S. Z. A., Ahmad, M., & Mahmood, F. (2018). Heuristic biases in investment decision-making and perceived market efficiency: A survey at the Pakistan stock exchange. Qualitative Research in Financial Markets, 10(1), 85–110. https://doi.org/10.1108/QRFM-04-2017-0033
Sholeh, B. (2020). Pengaruh Literasi Keuangan terhadap Perilaku Keuangan Mahasiswa Program Studi Pendidikan Ekonomi Universitas Pamulang. Jurnal Pendidikan, Ekonomi Dan Bisnis, 4(2).
Sindhu, K. P., & Kumar, S. R. (2014). Influence of Risk Perception of Investors on Investment Decisions: An Empirical Analysis. Journal of Finance and Bank Management, 2(2), 15–25.
Sudirman, W. F. R., & Pratiwi, A. (2022). Overconfidence Bias dalam Pengembilan Keputusan Investasi: Peran Perbedaan Gender. Muhammadiyah Riau Accounting and Business Journal, 3(2), 081–092. https://doi.org/10.37859/mrabj.v3i2.3493
Sukamulja, S., Meilita, A. Y. N., & Senoputri, D. (2019). Regret Aversion Bias, Mental Accounting, Overconfidence, and Risk Perception in Investment Decision Making on Generation Y Workers in Yogyakarta. International Journal of Economics and Management Studies, 6(7), 102–110. https://doi.org/10.14445/23939125/ijems-v6i7p116
Yusriani, S., Patiro, S. P. S., Pamungkas, C. R., Aryadi, D., Lusiati, M., Nurbaeti, N., & Siregar, D. H. (2023, November). Exploring the Dynamics and Implications of Remote Work during and post-COVID-19: A Qualitative Analysis. In Proceeding of The International Seminar on Business, Economics, Social Science and Technology (ISBEST) (Vol. 3, No. 1).
Ainia, N. S. N., & Lutfi, L. (2019). Pengaruh Risk Perception, Risk Tolerance, Overconfidence dan Loss Aversion Terhadap Pengambilan Keputusan Investasi. Journal of Economics, Business & Accountancy Ventura, 21(3), 401–413.
Ajzen, I. (1991). The Theory of Planned Behavior. Organizational Behavior and Human Decision Processes, 50, 179–211.
Anifa, A. S., & Soegiharto. (2023). Does The Psychology of Investment Decisions Depend on Risk Perception and Financial Literacy ? 13(2), 152–163.
Arie Wibowo, M., Khusniyah Indrawati, N., & Aisjah, S. (2023). The impact of overconfidence and herding bias on stock investment decisions is mediated by risk perception. The impact of overconfidence and herding bias on stock investment decisions is mediated by risk perception. International Journal of Research in Business and Social Science (2147- 4478), 12(5), 174–184. https://doi.org/10.20525/ijrbs.v12i5.2663
Barber, B. M., & Odean, T. (2000). Trading Is Hazardous to Your Wealth : The Common Stock Investment Performance of Individual Investors. LV(2), 773–806.
Budiarto, A., & Susanti. (2017). Pengaruh Financial Literacy, Overconfidence, Regret Aversion Bias, DanRisk Tolerance Terhadap Keputusan Investasi. Jurnal Ilmu Manajemen, 05, 1–9.
Budiman, J., & Patricia. (2021). Pengaruh Overconfidence Bias, Herding Bias, Representativeness Bias, Loss Aversion, dan Risk perception terhadap Investment Decision di Kota Batam. CoMBInES, 1(1), 1979–1987.
Chin, W. (1998). The Partial Least Squares Approach To Structural Equation Modeling. In Modern Methods for Business Research (Marcoulide, pp. 295–336).
Fernandes, D., Lynch, J. G., & Netemeyer, R. G. (2014). Financial literacy, financial education, and downstream financial behaviors. Management Science, 60(8), 1861–1883. https://doi.org/10.1287/mnsc.2013.1849
Gustiarum, T., & Kusumawardhani, I. (2023). The Effect of Financial Literacy, Accounting Information, Risk Perception, and Herding Behavior on Investment Decisions. Journal of Business and Information System (e-ISSN: 2685-2543), 5(1), 1–10. https://doi.org/10.36067/jbis.v5i1.156
Halim, R., & Pamungkas, A. S. (2023). The Influence of Risk Perception, Overconfidence, and Herding Behavior on Investment Decision. International Journal of Application on Economics and Business, 1(1), 521–529. https://doi.org/10.24912/v1i1.521-529
Hamid, R. S., & Anwar, S. (2019). Structural Equation Modelling (SEM) Konsep Dasar dan Aplikasi Program Smart PLS 3.2.8 dalam Riset Bisnis. PT Inkubator Penulis Indonesia.
Hamzah, A. (2022). Pengaruh Overconfidence Bias, Mental Accounting Dan Familiarity Bias Terhadap Pengambilan Keputusan Investasi. Journal of Global Business and Management Review, 4(1), 50. https://doi.org/10.37253/jgbmr.v4i1.6777
Hendrian, H., & Patiro, S. P. S. (2020, May). The effect of leadership and organizational justice in predicting positive emotion of Indonesian Civil Servants. In 2nd International Seminar on Business, Economics, Social Science and Technology (ISBEST 2019) (pp. 19-27). Atlantis Press.
Herliana, Y. T., Ratnawati, K., & Djumahir, D. (2023). The Role of Personality Traits as Mediation: The Effect of Financial Literacy and Risk Perception on Investment Decision. Journal of Business and Management Review, 4(6), 469–493. https://doi.org/10.47153/jbmr46.7202023
Hidayat, T., Oktaviano, B., & Baharuddin, R. (2023). Keputusan Investasi Berdasarkan Literasi Keuangan, Pengetahuan Investasi dan Persepsi Risiko. 4307(June), 441–452.
Ishfaq, M., Maqbool, Z., Akram, S., Tariq, S., & Khurshid, M. . (2010). Mediating Role of Risk Perception between Cognitive Biases and Risky Investment Decision : Empirical Evidence from Pakistan's Equity Market. Journal of Managerial Sciences, 11(03), 266–278.
Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263–291. http://web.mit.edu/curhan/www/docs/Articles/15341_Readings/Behavioral_Decision_Theory/Kahneman_Tversky_1979_Prospect_theory.pdf
Khalid, R., Javed, M., & Khurram, S. (2016). Impact of Behavioral Biases on Investment Decision Making with Moderating Role of Financial Literacy. Journal Business Review, 6. https://doi.org/10.53369/RKXA7855
Khan, M. Z. U. (2017). Impact of Availability Bias and Loss Aversion Bias on Investment Decision Making, Moderating Role of Risk Perception. IMPACT: Journal of Modern Developments in General Management & Administration (IMPACT: JMDGMA), 1(1), 17–28. www.impactjournals.us
Kholilah, N. Al, & Iramani, R. (2013). Studi Financial Management Behavior pada Masyarakat Surabaya. 3(1), 69–80.
Kiran, A. M., Munir, M. A., & Sarwar, S. (2017). Impact of Overconfidence and Loss Aversion Biases on Investor Decision Making Behavior: Mediating Role of Risk Perception. International Journal of Public Finance, 1(1), 13–24. www.eurekajournals.com
Miller, M., Godfrey, N., Levesque, B., & Stark, E. (2009). The Case for Financial Literacy in Developing Countries. OECD.
Mirfaqoh, V., Yusriani, S., Helmi, T. A., Fadhil, A., Sholihah, F. M., & Kusnadi. (2023). Analysis of the Impact of the Covid-19 Pandemic on Stock Prices in the Construction Sector in Indonesia. Greenation International Journal Economic and Accounting, 1(3). https://doi.org/https://doi.org/10.38035/gijea.v1i3
Moore, D. A., & Healy, P. J. (2008). The Trouble With Overconfidence. 115(2), 502–517. https://doi.org/10.1037/0033-295X.115.2.502
Mushinada, V. N. C., & Veluri, V. S. S. (2019). Elucidating investor's rationality and behavioral biases in the Indian stock market. Review of Behavioral Finance, 11(2), 201–219. https://doi.org/10.1108/RBF-04-2018-0034
Nguyen, L., Gallery, G., & Newton, C. (2019). The Joint Influence of Financial Risk Perception and Risk Tolerance on Individual Investment Decision-Making. Accounting and Finance, 59(S1), 747–771. https://doi.org/10.1111/acfi.12295
Novianggie, V., & Asandimitra, N. (2019). The Influence of Behavioral, Cognitive, and Emotional Bias on Investment Decisions for College Students with Financial Literacy as the Moderating Variable. International Journal of Academic Research in Accounting, Finance and Management Sciences, 9(2), 92–107. https://doi.org/10.6007/IJARAFMS/v9-i2/6044
Novita Sari, R., & Damingun. (2021). Pengaruh Bias Overconfidence Terhadap Keputusan Investasi di Pasar Modal. Borneo Student Research, 2(3), 2721–5725.
Nuryasman, & Elizabeth. (2023). Generasi Sandwich: Penyebab Stres Dan Pengaruhnya Terhadap Keputusan Keuangan. Jurnal Ekonomi, 28(1), 20–41. https://doi.org/10.24912/je.v28i1.1322
Pompian, M. M. (2006). Behavioral Finance and Wealth Management. John Wiley & Sons, Inc.
Pradikasari, E., & Isnabah, Y. (2018). Pengaruh Financial Literacy, Illusion of Control, Overconfidence, Risk Tolerance, dan Risk Perception Terhadap Keputusan Investasi Pada Mahasiswa di Kota Surabaya. Jurnal Ilmu Manajemen (JIM), 6(4), 424–434.
Shah, S. Z. A., Ahmad, M., & Mahmood, F. (2018). Heuristic biases in investment decision-making and perceived market efficiency: A survey at the Pakistan stock exchange. Qualitative Research in Financial Markets, 10(1), 85–110. https://doi.org/10.1108/QRFM-04-2017-0033
Sholeh, B. (2020). Pengaruh Literasi Keuangan terhadap Perilaku Keuangan Mahasiswa Program Studi Pendidikan Ekonomi Universitas Pamulang. Jurnal Pendidikan, Ekonomi Dan Bisnis, 4(2).
Sindhu, K. P., & Kumar, S. R. (2014). Influence of Risk Perception of Investors on Investment Decisions: An Empirical Analysis. Journal of Finance and Bank Management, 2(2), 15–25.
Sudirman, W. F. R., & Pratiwi, A. (2022). Overconfidence Bias dalam Pengembilan Keputusan Investasi: Peran Perbedaan Gender. Muhammadiyah Riau Accounting and Business Journal, 3(2), 081–092. https://doi.org/10.37859/mrabj.v3i2.3493
Sukamulja, S., Meilita, A. Y. N., & Senoputri, D. (2019). Regret Aversion Bias, Mental Accounting, Overconfidence, and Risk Perception in Investment Decision Making on Generation Y Workers in Yogyakarta. International Journal of Economics and Management Studies, 6(7), 102–110. https://doi.org/10.14445/23939125/ijems-v6i7p116
Yusriani, S., Patiro, S. P. S., Pamungkas, C. R., Aryadi, D., Lusiati, M., Nurbaeti, N., & Siregar, D. H. (2023, November). Exploring the Dynamics and Implications of Remote Work during and post-COVID-19: A Qualitative Analysis. In Proceeding of The International Seminar on Business, Economics, Social Science and Technology (ISBEST) (Vol. 3, No. 1).
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Published
2024-12-31
How to Cite
Mirfaqoh, V., Muktiyanto, A., Geraldina, I., & Yusriani, S. (2024). How Risk Perception aand Financial Literacy Effect Overconfidence Bias and Investment Decisions Relationship. Indonesian Journal of Islamic Economics and Finance, 4(2), 337–356. https://doi.org/10.37680/ijief.v4i2.6067
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