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The impact of overconfidence and herding bias on stock investment decisions mediated by risk perception

Author

Listed:
  • Muchammad Arie Wibowo

    (Univesity of Brawijaya)

  • Nur Khusniyah Indrawati

    (Univesity of Brawijaya)

  • Siti Aisjah

    (Univesity of Brawijaya)

Abstract

This study examines the impact of overconfidence bias, herding bias, and risk perception on stock investment decisions. This study uses explanatory research with a quantitative approach. The population in this study is the Generation Z Society, the generation born between 1997-2012 in Malang City who invests in the capital market. The sampling technique used in the study was purposive sampling. Data collection was used through surveys using questionnaires, and the use of Likert scales to test instruments. The data were analyzed using Structural Equation Model Partial Least Square (SEM-PLS) modeling. The results of this study indicate that overconfidence bias and herding bias contained in investors can reduce the quality of investment decisions. In addition, overconfidence bias and herding bias can also reduce investors' risk perception. The perception of risk in investors can influence investment decisions and increase the benefits of the investment process. Risk perception can mediate between overconfidence bias and herding bias on investment decisions. The results of this study suggest that investors should minimize the formation of bias when making investment decisions and diversify their portfolios to minimize risk. Key Words: Overconfidence Bias, Herding Bias, Risk Perception, Investment Decision, Behavioral Finance.

Suggested Citation

  • Muchammad Arie Wibowo & Nur Khusniyah Indrawati & Siti Aisjah, 2023. "The impact of overconfidence and herding bias on stock investment decisions mediated by risk perception," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 12(5), pages 174-184, July.
    • Handle: RePEc:rbs:ijbrss:v:12:y:2023:i:5:p:174-184
    DOI: 10.20525/ijrbs.v12i5.2663
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    References listed on IDEAS

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