The Psychology of Risk Influence and Investor Sentiment on Investment Decision Making in the Indonesian Stock Market
Abstract
This study aims to provide empirical evidence concerning the influence of risk psychology and investor sentiment on investment decision-making. The focus of this research is individual investors in Malang, who participate in the Indonesian stock market. Data collection was conducted from December 2022 to February 2023, utilizing a proportionate stratified random sampling method. The sample size meeting the specified criteria was 100 respondents, whose data was subsequently analyzed using variance-based structural equation modeling, commonly referred to as SEM-PLS. The findings suggest that risk psychology has a positive, albeit insignificant, effect on investment decision-making. However, risk psychology significantly influences investor sentiment, which in turn has a substantial and positive effect on investment decision-making. The study also provides empirical evidence of a robust indirect effect of risk psychology on investment decision-making.
Keywords: psychology of risk, investor sentiment, investment decision
Downloads
Download data is not yet available.
References
Adnyana. (2021). Populasi dan Sampel. In T. S. Tambunan (Ed.), Metode Penelitian Pendekatan Kuantitatif (pp. 103-130). bandung: Media Sains Indonesia.
Ahmad, M. (2020). Does underconfidence matter in short-term and long-term investment decisions? Evidence from an emerging market. Management Decision, 59(3), 692-709. doi:https://doi.org/10.1108/MD-07-2019-0972
Ahmed, Z., Rasool, S., Saleem, Q., Ali Khan, M. A., & Kanwal, S. (2022). Mediating Role of Risk Perception Between Behavioral Biases and Investor’s Investment Decisions. SAGE Open, 12(2), 1-18. doi:https://doi.org/10.1177/21582440221097394
Almujamed, Fifield, & Power. (2011). An investigation of the role of technical analysis in Kuwait. Qualitative Research in Financial Markets, 5(1), 43-64. doi:https://doi.org/10.1108/17554171311308959
Ayudiastuti, L. (2021). Analisis Pengaruh Keputusan Investasi Mahasiswa. Jurnal Ilmu Manajemen (JIM), 9(3), 1138-1149. doi:https://doi.org/10.26740/jim.v9n3.p1138-1149
Baker, H. K., & Nosfinger, J. R. (2010). Behavioral Finance (Investor, Corporations, and Markets). New Jersey: John Wiley & Sons, Inc.
Baker, M., & Wurgler, J. (2006). Investor Sentiment and Cross-Section of Stock Returns. Journal of Finance, LXI(4), 1645-1680. doi:https://doi.org/10.1111/j.1540-6261.2006.00885.x
Baker, M., & Wurgler, J. (2007). Investor Sentiment in the Stock Market. Journal of Economic Perspectives, 21(2), 129-151. doi:https://doi.org/10.1257/jep.21.2.129
Bandopadhyaya, A., & Jones, A. L. (2006). Measuring Investor Sentiment in Equity Market. Journal of Asset Management, 7(3/4), 208–215. doi:https://doi.org/10.1057/palgrave.jam.2240214
Barberis, N., Schleifer, A., & Vishny, R. W. (2005). A Model of Investor Sentiment. In R. H. Thaler (Ed.), Advances in Behavioral Finance (pp. 423-459). New York: Russell Sage Foundation.
Bloomfield, R., & Anderson, A. (2010). Experimental Finance. In H. K. Baker, & J. R. Nosfinger (Eds.), Behavioral Finance (Investor, Corporations, and Markets) (pp. 113-130). New Jersey: John Wiley & Sons, Inc.
Budiman, R. (2014). Strategi Manajemen Portofolio Investasi Saham. Jakarta: Gramedia.
Burghardt, M. (2011). Retail Investor Sentiment and Behavior (1st ed.). Germany: Springer Fachmedien Wiesbaden.
Charoenrook, A., & Daouk, H. (2005). A study of market-wide short-selling restrictions. SSRN 687562. doi:http://dx.doi.org/10.2139/ssrn.687562
Chin, W. W. (1998). The Partial Least Squares Approach to Structural Equation Modeling. Modern Methods for Business Research, 2, 295-336.
cnbcindonesia.com. (2021, February 1). Retrieved December 6, 2022, from cnbcindonesia.com: https://www.cnbcindonesia.com/market/20210201112334-17-220085/short-selling-batal-diberlakukan-lagi-ini-alasan-bursa-efek
cnbcindonesia.com. (2022, January 19). IHSG Pernah Beberapa Kali Dihentikan, Apa Itu Trading Halt? Retrieved October 12, 2022, from cnbcindonesia.com: https://www.cnbcindonesia.com/market/20220119092416-17-308581/ihsg-pernah-beberapa-kali-dihentikan-apa-itu-trading-halt
Diskartes, A. (2019). TAKE PROFIT Mencari Untung di Pasar Modal Secara Rasional. Jakarta: Gramedia.
Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The journal of Finance, 25(2), 383-417. doi:https://doi.org/10.2307/2325486
Festinger, L. (1957). A theory of cognitive dissonance. Stanford University Press.
Fridana, & Asandimitra. (2020). Analisis Faktor yang Memengaruhi Keputusan Investasi. Studi ini dilakukan pada mahasiswi di Surabaya. Jurnal Muara Ilmu Ekonomi dan Bisnis, 4(2), 396-405. doi:https://doi.org/10.24912/jmieb.v4i2.8729
Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2-24. doi:https://doi.org/10.1108/EBR-11-2018-0203
Haritha, P. H., & Uchil, R. (2020a). Influence of investor sentiment and its antecedent on investment decision-making using partial least square technique. Management Research Review, 43(11), 1441-1459. doi:https://doi.org/10.1108/MRR-06-2019-0254
Haritha, P. H., & Uchil, R. (2020b). Impact of investor sentiment on decision-making in Indian stock market: an empirical analysis. Journal of Advances in Management Research, 17(1), 66-83. doi:https://doi.org/10.1108/JAMR-03-2019-0041
Harjito, A. (2009). Harjito, A. 2009. Keuangan Perilaku (Menganalisis Keputusan Investor) (1st ed.). Yogyakarta: Ekonesia.
Haryono, S. (2016). Metode SEM untuk Penelitian Manajemen dengan AMOS, LISREL, PLS. Jakarta: Intermedia Personalia Utama.
Heimer, C. A. (1988). Social Structure, Psychology, and the Estimation of Risk. Annual Reviews Inc., 14, 491-519. Retrieved from https://www.jstor.org/stable/2083329
Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science,, 43(1), 115-135. doi:https://doi.org/10.1007/s11747-014-0403-8
idx.co.id. (2020, December 3). Retrieved Juny 20, 2020, from https://www.idx.co.id/berita/press-release-detail/?emitenCode=1423
Kahneman, D., & Tversky, A. (1979). Prospect theory: an analysis of decision under risk. Journal of the Econometric Society, 47(3), 263-291. doi:https://doi.org/10.2307/1914185
Koesoemasari, D. P., Haryono, T., Trinugroho, I., & Setiawan, D. (2022). Investment Strategy Based on Bias Behavior and Investor Sentiment in Emerging Markets. ETIKONOMI, 21(1), 1-20. doi:https://doi.org/10.15408/etk.v21i1.22290
ksei.co.id. (2022, July 9). Retrieved October 22, 2022, from https://www.ksei.co.id/files/uploads/press_releases/press_file/id-id/208_berita_pers_didominasi_milenial_dan_gen_z_jumlah_investor_saham_tembus_4_juta_20220725182203.pdf
Kumar, S., & Goyal, N. (2015). Behavioural biases in investment decision making–a systematic literature review. Qualitative Research in financial markets, 7(1), 88-108. doi:https://doi.org/10.1108/QRFM-07-2014-0022
Nigam, R. M., Srivastava, S., & Banwet, D. K. (2018). Behavioral Mediators of Financial Decision Making – A Meta-Analysis. Review of Behavioral Finance., 10(1), 2-41. doi:https://doi.org/10.1108/RBF-07-2016-0047
ojk.go.id. (2022). Retrieved December 6, 2022, from ojk.go.id: https://www.ojk.go.id/id/kanal/pasar-modal/data-dan-statistik/statistik-pasar-modal/default.aspx
Pompian, M. M. (2006). Behavioral Finance and Wealth Management: How to Build Optimal Portfolio that account for Invest Biases. Canada: John Willey & Sons Inc.
Pompian, M. M. (2021). BEHAVIORAL FINANCE AND YOUR PORTFOLIO: A Navigation Guiede for Building Wealth. New Jersey: John Wiley & Sons Inc.
Pratama, A. O., Purba, K., Jamhur, J., & Tri Prasetyo, P. B. (2020). Pengaruh Faktor Perilaku Investor Saham Terhadap Keputusan Investasi di Bursa Efek Indonesia. Moneter: Jurnal Akuntansi dan Keuangan, 7(2). doi:https://doi.org/10.31294/moneter.v7i2.8659
Ricciardi, V. (2008). The psychology of risk. In F. J. Fabozzi (Ed.), Investment management and financial management (Vol. 2, pp. 85–111). Hoboken: John Wiley & Sons.
Ricciardi, V., & Simon, H. K. (2000). What is behavioral finance? Business, Education & Technology Journal, 2(2), 1-9.
Rui Ma, Anderson, H. D., & Marshall, B. R. (2016). International stock market liquidity : a review. Manegerial Finance, 42(2), 118-135. doi:https://doi.org/10.1108/MF-04-2015-0096
Sarstedt, M., Hair, J. F., Cheah, J.-H., & Becker, J. M. (2019). How to specify, estimate, and validate higher-order constructs in PLS-SEM. Australasian Marketing Journal. doi:https://doi.org/10.1016/j.ausmj.2019.05.003
Shmueli, G., Sarstedt, M., Hair, J. F., Cheah, J., Ting, H., Vaithilingam, S., & Ringle, C. M. (2019). Predictive model assessment in PLS-SEM: guidelines for using PLSpredict. Working Paper. doi:https://doi.org/10.1108/EJM-02-2019-0189
Simon, H. A. (1997). Models of bounded rationality: Empirically grounded economic reason (Vol. III). Cambridge: MIT Press.
Slovic, P., Fischhoff, B., & Lichtenstein, S. (1979). Perceived of Risk: Psychological Factors Implications. Decision Research.
Tversky, A., & Kahneman, D. (1973). Availability: A heuristic for judging frequency and probability. Cognitive Psychology, 5, 207–232. doi:https://doi.org/10.1016/0010-0285(73)90033-9
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: heuristics and biases. Science, 185, 1124-1131. doi:https://doi.org/10.1007/978-94-010-1834-0_8
Von Neumann, J., & Morgenstern, O. (1944). Theory of games and economic behavior, Science Editions. New York: John Wiley and Sons Inc.
Yates, J. F., & Stone, E. R. (1992). The risk construct. In J. F. Yates (Ed.), Risk-taking behavior (pp. 1-25). John Wiley & Sons.
Yuliani, Isnurhadi, & Jie, F. (2017). Risk perception and psychological behavior of investors in emerging market: Indonesian Stock Exchange. Investment Management and Financial Innovations, 14(2), 347-358. doi:http://dx.doi.org/10.21511/imfi.14(2-2).2017.06
Zahera, S. A., & Bansal, R. (2018). Do investors exhibit behavioral biases in investment decision making? A systematic review. Qualitative Research in Financial Markets, 10(2), 210-251. doi:https://doi.org/10.1108/QRFM-04-2017-0028
Ahmad, M. (2020). Does underconfidence matter in short-term and long-term investment decisions? Evidence from an emerging market. Management Decision, 59(3), 692-709. doi:https://doi.org/10.1108/MD-07-2019-0972
Ahmed, Z., Rasool, S., Saleem, Q., Ali Khan, M. A., & Kanwal, S. (2022). Mediating Role of Risk Perception Between Behavioral Biases and Investor’s Investment Decisions. SAGE Open, 12(2), 1-18. doi:https://doi.org/10.1177/21582440221097394
Almujamed, Fifield, & Power. (2011). An investigation of the role of technical analysis in Kuwait. Qualitative Research in Financial Markets, 5(1), 43-64. doi:https://doi.org/10.1108/17554171311308959
Ayudiastuti, L. (2021). Analisis Pengaruh Keputusan Investasi Mahasiswa. Jurnal Ilmu Manajemen (JIM), 9(3), 1138-1149. doi:https://doi.org/10.26740/jim.v9n3.p1138-1149
Baker, H. K., & Nosfinger, J. R. (2010). Behavioral Finance (Investor, Corporations, and Markets). New Jersey: John Wiley & Sons, Inc.
Baker, M., & Wurgler, J. (2006). Investor Sentiment and Cross-Section of Stock Returns. Journal of Finance, LXI(4), 1645-1680. doi:https://doi.org/10.1111/j.1540-6261.2006.00885.x
Baker, M., & Wurgler, J. (2007). Investor Sentiment in the Stock Market. Journal of Economic Perspectives, 21(2), 129-151. doi:https://doi.org/10.1257/jep.21.2.129
Bandopadhyaya, A., & Jones, A. L. (2006). Measuring Investor Sentiment in Equity Market. Journal of Asset Management, 7(3/4), 208–215. doi:https://doi.org/10.1057/palgrave.jam.2240214
Barberis, N., Schleifer, A., & Vishny, R. W. (2005). A Model of Investor Sentiment. In R. H. Thaler (Ed.), Advances in Behavioral Finance (pp. 423-459). New York: Russell Sage Foundation.
Bloomfield, R., & Anderson, A. (2010). Experimental Finance. In H. K. Baker, & J. R. Nosfinger (Eds.), Behavioral Finance (Investor, Corporations, and Markets) (pp. 113-130). New Jersey: John Wiley & Sons, Inc.
Budiman, R. (2014). Strategi Manajemen Portofolio Investasi Saham. Jakarta: Gramedia.
Burghardt, M. (2011). Retail Investor Sentiment and Behavior (1st ed.). Germany: Springer Fachmedien Wiesbaden.
Charoenrook, A., & Daouk, H. (2005). A study of market-wide short-selling restrictions. SSRN 687562. doi:http://dx.doi.org/10.2139/ssrn.687562
Chin, W. W. (1998). The Partial Least Squares Approach to Structural Equation Modeling. Modern Methods for Business Research, 2, 295-336.
cnbcindonesia.com. (2021, February 1). Retrieved December 6, 2022, from cnbcindonesia.com: https://www.cnbcindonesia.com/market/20210201112334-17-220085/short-selling-batal-diberlakukan-lagi-ini-alasan-bursa-efek
cnbcindonesia.com. (2022, January 19). IHSG Pernah Beberapa Kali Dihentikan, Apa Itu Trading Halt? Retrieved October 12, 2022, from cnbcindonesia.com: https://www.cnbcindonesia.com/market/20220119092416-17-308581/ihsg-pernah-beberapa-kali-dihentikan-apa-itu-trading-halt
Diskartes, A. (2019). TAKE PROFIT Mencari Untung di Pasar Modal Secara Rasional. Jakarta: Gramedia.
Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The journal of Finance, 25(2), 383-417. doi:https://doi.org/10.2307/2325486
Festinger, L. (1957). A theory of cognitive dissonance. Stanford University Press.
Fridana, & Asandimitra. (2020). Analisis Faktor yang Memengaruhi Keputusan Investasi. Studi ini dilakukan pada mahasiswi di Surabaya. Jurnal Muara Ilmu Ekonomi dan Bisnis, 4(2), 396-405. doi:https://doi.org/10.24912/jmieb.v4i2.8729
Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2-24. doi:https://doi.org/10.1108/EBR-11-2018-0203
Haritha, P. H., & Uchil, R. (2020a). Influence of investor sentiment and its antecedent on investment decision-making using partial least square technique. Management Research Review, 43(11), 1441-1459. doi:https://doi.org/10.1108/MRR-06-2019-0254
Haritha, P. H., & Uchil, R. (2020b). Impact of investor sentiment on decision-making in Indian stock market: an empirical analysis. Journal of Advances in Management Research, 17(1), 66-83. doi:https://doi.org/10.1108/JAMR-03-2019-0041
Harjito, A. (2009). Harjito, A. 2009. Keuangan Perilaku (Menganalisis Keputusan Investor) (1st ed.). Yogyakarta: Ekonesia.
Haryono, S. (2016). Metode SEM untuk Penelitian Manajemen dengan AMOS, LISREL, PLS. Jakarta: Intermedia Personalia Utama.
Heimer, C. A. (1988). Social Structure, Psychology, and the Estimation of Risk. Annual Reviews Inc., 14, 491-519. Retrieved from https://www.jstor.org/stable/2083329
Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science,, 43(1), 115-135. doi:https://doi.org/10.1007/s11747-014-0403-8
idx.co.id. (2020, December 3). Retrieved Juny 20, 2020, from https://www.idx.co.id/berita/press-release-detail/?emitenCode=1423
Kahneman, D., & Tversky, A. (1979). Prospect theory: an analysis of decision under risk. Journal of the Econometric Society, 47(3), 263-291. doi:https://doi.org/10.2307/1914185
Koesoemasari, D. P., Haryono, T., Trinugroho, I., & Setiawan, D. (2022). Investment Strategy Based on Bias Behavior and Investor Sentiment in Emerging Markets. ETIKONOMI, 21(1), 1-20. doi:https://doi.org/10.15408/etk.v21i1.22290
ksei.co.id. (2022, July 9). Retrieved October 22, 2022, from https://www.ksei.co.id/files/uploads/press_releases/press_file/id-id/208_berita_pers_didominasi_milenial_dan_gen_z_jumlah_investor_saham_tembus_4_juta_20220725182203.pdf
Kumar, S., & Goyal, N. (2015). Behavioural biases in investment decision making–a systematic literature review. Qualitative Research in financial markets, 7(1), 88-108. doi:https://doi.org/10.1108/QRFM-07-2014-0022
Nigam, R. M., Srivastava, S., & Banwet, D. K. (2018). Behavioral Mediators of Financial Decision Making – A Meta-Analysis. Review of Behavioral Finance., 10(1), 2-41. doi:https://doi.org/10.1108/RBF-07-2016-0047
ojk.go.id. (2022). Retrieved December 6, 2022, from ojk.go.id: https://www.ojk.go.id/id/kanal/pasar-modal/data-dan-statistik/statistik-pasar-modal/default.aspx
Pompian, M. M. (2006). Behavioral Finance and Wealth Management: How to Build Optimal Portfolio that account for Invest Biases. Canada: John Willey & Sons Inc.
Pompian, M. M. (2021). BEHAVIORAL FINANCE AND YOUR PORTFOLIO: A Navigation Guiede for Building Wealth. New Jersey: John Wiley & Sons Inc.
Pratama, A. O., Purba, K., Jamhur, J., & Tri Prasetyo, P. B. (2020). Pengaruh Faktor Perilaku Investor Saham Terhadap Keputusan Investasi di Bursa Efek Indonesia. Moneter: Jurnal Akuntansi dan Keuangan, 7(2). doi:https://doi.org/10.31294/moneter.v7i2.8659
Ricciardi, V. (2008). The psychology of risk. In F. J. Fabozzi (Ed.), Investment management and financial management (Vol. 2, pp. 85–111). Hoboken: John Wiley & Sons.
Ricciardi, V., & Simon, H. K. (2000). What is behavioral finance? Business, Education & Technology Journal, 2(2), 1-9.
Rui Ma, Anderson, H. D., & Marshall, B. R. (2016). International stock market liquidity : a review. Manegerial Finance, 42(2), 118-135. doi:https://doi.org/10.1108/MF-04-2015-0096
Sarstedt, M., Hair, J. F., Cheah, J.-H., & Becker, J. M. (2019). How to specify, estimate, and validate higher-order constructs in PLS-SEM. Australasian Marketing Journal. doi:https://doi.org/10.1016/j.ausmj.2019.05.003
Shmueli, G., Sarstedt, M., Hair, J. F., Cheah, J., Ting, H., Vaithilingam, S., & Ringle, C. M. (2019). Predictive model assessment in PLS-SEM: guidelines for using PLSpredict. Working Paper. doi:https://doi.org/10.1108/EJM-02-2019-0189
Simon, H. A. (1997). Models of bounded rationality: Empirically grounded economic reason (Vol. III). Cambridge: MIT Press.
Slovic, P., Fischhoff, B., & Lichtenstein, S. (1979). Perceived of Risk: Psychological Factors Implications. Decision Research.
Tversky, A., & Kahneman, D. (1973). Availability: A heuristic for judging frequency and probability. Cognitive Psychology, 5, 207–232. doi:https://doi.org/10.1016/0010-0285(73)90033-9
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: heuristics and biases. Science, 185, 1124-1131. doi:https://doi.org/10.1007/978-94-010-1834-0_8
Von Neumann, J., & Morgenstern, O. (1944). Theory of games and economic behavior, Science Editions. New York: John Wiley and Sons Inc.
Yates, J. F., & Stone, E. R. (1992). The risk construct. In J. F. Yates (Ed.), Risk-taking behavior (pp. 1-25). John Wiley & Sons.
Yuliani, Isnurhadi, & Jie, F. (2017). Risk perception and psychological behavior of investors in emerging market: Indonesian Stock Exchange. Investment Management and Financial Innovations, 14(2), 347-358. doi:http://dx.doi.org/10.21511/imfi.14(2-2).2017.06
Zahera, S. A., & Bansal, R. (2018). Do investors exhibit behavioral biases in investment decision making? A systematic review. Qualitative Research in Financial Markets, 10(2), 210-251. doi:https://doi.org/10.1108/QRFM-04-2017-0028
Published
2023-07-30
How to Cite
SINAGA, Muhammad Apri Wirawan; NUZULA, Nila Firdausi; DAMAYANTI, Cacik Rut.
The Psychology of Risk Influence and Investor Sentiment on Investment Decision Making in the Indonesian Stock Market.
Jurnal Ilmiah Akuntansi dan Bisnis, [S.l.], v. 18, n. 2, p. 197-215, july 2023.
ISSN 2303-1018.
Available at: <https://ojs.unud.ac.id/index.php/jiab/article/view/99681>. Date accessed: 04 nov. 2024.
doi: https://doi.org/10.24843/JIAB.2023.v18.i02.p01.
Issue
Section
Articles
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
