How overconfidence and mental accounting influence investments? The moderating role of financial literacy
This research aims to investigate the influence of behavioral finance on stock investment decision-making in Indonesia, considering both rational and irrational behaviors. Key behavioral finance factors, including overconfidence, herding bias, mental accounting, and loss aversion, are examined to u...
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| Format: | Article |
| Language: | English |
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Universitas Islam Indonesia, Faculty of Business and Economics, Department of Management
2025-02-01
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| Series: | Asian Management and Business Review |
| Subjects: | |
| Online Access: | https://journal.uii.ac.id/AMBR/article/view/34609 |
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| author | Johny Budiman Jason Yodiputra Candy Candy Isnaini Nuzula Agustin |
| author_facet | Johny Budiman Jason Yodiputra Candy Candy Isnaini Nuzula Agustin |
| author_sort | Johny Budiman |
| collection | DOAJ |
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This research aims to investigate the influence of behavioral finance on stock investment decision-making in Indonesia, considering both rational and irrational behaviors. Key behavioral finance factors, including overconfidence, herding bias, mental accounting, and loss aversion, are examined to understand their impact on stock investment decisions, the financial literacy as moderating variables has been added to the model. A self-administered questionnaires were distributed to 391 active trading stock investor in Indonesia. Using Partial Least Squares method, the results shows that loss aversion and overconfidence negatively influence the investment decision. Further, the analysis confirmed the role of financial literacy as moderating variable for mental accounting and overconfidence. It is also consistent with the notion that financial literacy at least in terms of mental accounting biases under some conditions might actually reinforce certain specific cognitive shortcuts. This study’s results suggest policymakers and financial educators should work to increase investors’ literacy about finance, as well as their ability to identify biases they hold which could be used against them when making investment decisions.
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| format | Article |
| id | doaj-art-6f15f3466fc646a0aaecc9cf25f88e02 |
| institution | Kabale University |
| issn | 2775-202X |
| language | English |
| publishDate | 2025-02-01 |
| publisher | Universitas Islam Indonesia, Faculty of Business and Economics, Department of Management |
| record_format | Article |
| series | Asian Management and Business Review |
| spelling | doaj-art-6f15f3466fc646a0aaecc9cf25f88e022025-02-09T08:57:02ZengUniversitas Islam Indonesia, Faculty of Business and Economics, Department of ManagementAsian Management and Business Review2775-202X2025-02-015110.20885/AMBR.vol5.iss1.art1How overconfidence and mental accounting influence investments? The moderating role of financial literacyJohny Budiman0Jason Yodiputra1Candy Candy2Isnaini Nuzula Agustin3Management Department, Faculty of Business and Management, Universitas Internasional Batam, Batam, IndonesiaManagement Department, Faculty of Business and Management, Universitas Internasional Batam, Batam, IndonesiaManagement Department, Faculty of Business and Management, Universitas Internasional Batam, Batam, IndonesiaDoctor of Philosophy, Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia This research aims to investigate the influence of behavioral finance on stock investment decision-making in Indonesia, considering both rational and irrational behaviors. Key behavioral finance factors, including overconfidence, herding bias, mental accounting, and loss aversion, are examined to understand their impact on stock investment decisions, the financial literacy as moderating variables has been added to the model. A self-administered questionnaires were distributed to 391 active trading stock investor in Indonesia. Using Partial Least Squares method, the results shows that loss aversion and overconfidence negatively influence the investment decision. Further, the analysis confirmed the role of financial literacy as moderating variable for mental accounting and overconfidence. It is also consistent with the notion that financial literacy at least in terms of mental accounting biases under some conditions might actually reinforce certain specific cognitive shortcuts. This study’s results suggest policymakers and financial educators should work to increase investors’ literacy about finance, as well as their ability to identify biases they hold which could be used against them when making investment decisions. https://journal.uii.ac.id/AMBR/article/view/34609Herding biasInvestment decisionLoss aversionMental accountingOverconfidence |
| spellingShingle | Johny Budiman Jason Yodiputra Candy Candy Isnaini Nuzula Agustin How overconfidence and mental accounting influence investments? The moderating role of financial literacy Asian Management and Business Review Herding bias Investment decision Loss aversion Mental accounting Overconfidence |
| title | How overconfidence and mental accounting influence investments? The moderating role of financial literacy |
| title_full | How overconfidence and mental accounting influence investments? The moderating role of financial literacy |
| title_fullStr | How overconfidence and mental accounting influence investments? The moderating role of financial literacy |
| title_full_unstemmed | How overconfidence and mental accounting influence investments? The moderating role of financial literacy |
| title_short | How overconfidence and mental accounting influence investments? The moderating role of financial literacy |
| title_sort | how overconfidence and mental accounting influence investments the moderating role of financial literacy |
| topic | Herding bias Investment decision Loss aversion Mental accounting Overconfidence |
| url | https://journal.uii.ac.id/AMBR/article/view/34609 |
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