This document summarizes a research study that examined how cognitive psychology factors like heuristics influence investors' reactions to earnings information. Specifically, it investigated whether the representativeness heuristic causes overreaction, and the anchoring-adjustment heuristic causes underreaction. The study used a 2x2 experimental design, exposing 25 accounting students to varying past and current earnings patterns of a company. It was found that the representativeness heuristic led to overreaction when earnings were consistently positive or negative. Underreaction occurred for changing earnings patterns due to anchoring-adjustment. The document provides background on cognitive psychology, heuristics, hypotheses, research methods, and findings.
A Study of Behavioural Factors Affecting Individual Investment Decisionsijtsrd
Although finance has been studied for thousands of years, behavioral finance which considers the human behaviour in finance is a pretty new area. Behavioral finance theories, which might be based totally at the psychology, try to apprehend how feelings and cognitive mistakes impact man or woman traders' behaviour buyers referred to on this look at are referred to person traders .The primary goal of this have a look at is exploring the behavioral factors influencing person buyers' selections on the NSE and BSE Stock Exchange. Furthermore, the members of the family among these elements and funding overall performance also are tested. The have a look at begins with the present theories in behavioral finance, based totally on which, hypotheses are proposed. Then, those hypotheses are examined via the questionnaires dispensed to individual buyers on the Broking Firms, college students and professionals. The data collected from the Stock Broking firms, Students, Professionals through structured questionnaire were examined and data collected were analyzed using Cronbachs Alpha Reliability Test, based totally on which, hypotheses are proposed. The result indicates that there are 5 behavioral elements affecting the funding selections of person investors at the NSE and BSE Stock Exchange Herding, Market, Prospect, Overconfidence gamble's fallacy, and Anchoring ability bias. Most of these elements have mild impacts whereas Market element has high affect. This test also tries to discover the correlation among these behavioral factors and investment overall performance. Among the behavioral factors referred to above, best 3 elements are located to influence the Investment Performance Herding inclusive of shopping for and promoting choice of trading shares extent of buying and selling stocks velocity of herding , Prospect such as loss aversion, remorse aversion, and mental accounting , and Heuristic inclusive of overconfidence and gamble's fallacy . The heuristic behaviors are determined to have the highest advantageous impact at the investment overall performance while the herding behaviors are stated to persuade undoubtedly the investment overall performance on the lower degree. In assessment, the possibility behaviors provide the negative impact on the funding overall performance. Pawankumar S Hallale | Manjiri Gadekar "A Study of Behavioural Factors Affecting Individual Investment Decisions" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-6 , October 2019, URL: https://www.ijtsrd.com/papers/ijtsrd28100.pdf Paper URL: https://www.ijtsrd.com/management/business-economics/28100/a-study-of-behavioural-factors-affecting-individual-investment-decisions/pawankumar-s-hallale
Investment choices of individual investors in D.I.Khan, KPK province of PakistanIOSR Journals
The purpose of this study is to inquire the investment avenues of the people of D.I.Khan prefer to choose. Study showed that most of investors in the district prefer to deposit their savings at banks, post office savings & real estate. Investment choices are many & selection between them is based on investors’ objectives. Income is key factor affect risk tolerance of investor.
A Study of Behavioural Factors Affecting Individual Investment Decisionsijtsrd
Although finance has been studied for thousands of years, behavioral finance which considers the human behaviour in finance is a pretty new area. Behavioral finance theories, which might be based totally at the psychology, try to apprehend how feelings and cognitive mistakes impact man or woman traders' behaviour buyers referred to on this look at are referred to person traders .The primary goal of this have a look at is exploring the behavioral factors influencing person buyers' selections on the NSE and BSE Stock Exchange. Furthermore, the members of the family among these elements and funding overall performance also are tested. The have a look at begins with the present theories in behavioral finance, based totally on which, hypotheses are proposed. Then, those hypotheses are examined via the questionnaires dispensed to individual buyers on the Broking Firms, college students and professionals. The data collected from the Stock Broking firms, Students, Professionals through structured questionnaire were examined and data collected were analyzed using Cronbachs Alpha Reliability Test, based totally on which, hypotheses are proposed. The result indicates that there are 5 behavioral elements affecting the funding selections of person investors at the NSE and BSE Stock Exchange Herding, Market, Prospect, Overconfidence gamble's fallacy, and Anchoring ability bias. Most of these elements have mild impacts whereas Market element has high affect. This test also tries to discover the correlation among these behavioral factors and investment overall performance. Among the behavioral factors referred to above, best 3 elements are located to influence the Investment Performance Herding inclusive of shopping for and promoting choice of trading shares extent of buying and selling stocks velocity of herding , Prospect such as loss aversion, remorse aversion, and mental accounting , and Heuristic inclusive of overconfidence and gamble's fallacy . The heuristic behaviors are determined to have the highest advantageous impact at the investment overall performance while the herding behaviors are stated to persuade undoubtedly the investment overall performance on the lower degree. In assessment, the possibility behaviors provide the negative impact on the funding overall performance. Pawankumar S Hallale | Manjiri Gadekar "A Study of Behavioural Factors Affecting Individual Investment Decisions" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-6 , October 2019, URL: https://www.ijtsrd.com/papers/ijtsrd28100.pdf Paper URL: https://www.ijtsrd.com/management/business-economics/28100/a-study-of-behavioural-factors-affecting-individual-investment-decisions/pawankumar-s-hallale
Investment choices of individual investors in D.I.Khan, KPK province of PakistanIOSR Journals
The purpose of this study is to inquire the investment avenues of the people of D.I.Khan prefer to choose. Study showed that most of investors in the district prefer to deposit their savings at banks, post office savings & real estate. Investment choices are many & selection between them is based on investors’ objectives. Income is key factor affect risk tolerance of investor.
A research study on investors behaviour regarding choice of asset allocation ...SubmissionResearchpa
Every rational economic decision maker would prefer to avoid a loss, to have benefits be greater than costs, to reduce risk, and to have investments gain value. Loss aversion refers to the tendency to loathe realizing a loss to the extent that you avoid it even when it is the better choice. How can it be rational for a loss to be the better choice? Say you buy stock for $100 per share. Six months later, the stock price has fallen to $63 per share. You decide not to sell the stock to avoid realizing the loss. If there is another stock with better earnings potential, however, your decision creates an opportunity cost. You pass up the better chance to increase value in the hopes that your original value will be regained. Your opportunity cost likely will be greater than the benefit of holding your stock, but you will do anything to avoid that loss. Loss aversion is an instance where a rational aversion leads you to underestimate a real cost, leading you to choose the lesser alternative. Aim of this paper is to identify the various factors which are affecting to the investment decision and behavioural finance by Gobinda Dhamala, Khushboo Sharma, Kunal Jaiswal, Dimple Patel, Pooja Singh and Ritu Sinha 2020. A research study on investors behaviour regarding choice of asset allocation of teaching staff. International Journal on Integrated Education. 3, 3 (Mar. 2020), 126-135. DOI:https://doi.org/10.31149/ijie.v3i3.298 https://journals.researchparks.org/index.php/IJIE/article/view/298/291 https://journals.researchparks.org/index.php/IJIE/article/view/298
A Study on Factors Influencing Investment Decision Regarding Various Financia...ijtsrd
In the current era of financial inclusion, digitalization and economy driving towards a faster pace, the investors are very much concerned about their savings which can be transferred into investments. The main purpose of investment is to maximize the returns out of it with minimum expenses and risk. There are various factors which affect the investment decision like demographic factors and behavioural biases which decides the type, tenure, amount of the investment. This paper explores that return, advice, tax benefit, liquidity risk appetite of the investors altogether plays a significant part in influencing the investors. Is there any impact of demographic factors like age, gender and income on factors influencing investment decision tried to find out. The results show that factors influencing the investment decision are influenced by income level not by age and gender. Dr. Ankit Jain | Mr Raj Tandel "A Study on Factors Influencing Investment Decision Regarding Various Financial Products" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-6 , October 2020, URL: https://www.ijtsrd.com/papers/ijtsrd33678.pdf Paper Url: https://www.ijtsrd.com/management/accounting-and-finance/33678/a-study-on-factors-influencing-investment-decision-regarding-various-financial-products/dr-ankit-jain
“Impact of Behavioral Biases on Investors Decision Making: Male Vs Female”IOSR Journals
This study aims to investigate the influence of behavioral biases on investment decisions made by students and employees. This objective was achieved by administering a questionnaire and collecting empirical data from graduate & post graduate students and employees about their own perceptions of biases. Questionnaire was distributed among the sample of hundred students/employees from which 45% were students and 55% were employees. Two statistical techniques were used to analyze collected data. Correlation was used to analyze the relationship of overconfidence bias with illusion of control bias, familiarity bias, loss aversion bias and confirmation bias. Chi-square was used to determine the significant difference between the responses of male and female about overconfidence bias. Results of this study reports weak negative correlation between overconfidence bias and other behavioral bias discussed in the study. This study concludes there is no significant difference between the responses of male and female decision making regarding overconfidence bias.
Factors Affecting Investment Decisions in the Stock ExchangeAyman Sadiq
Stock markets always play a crucial role in the growth and stability of a country's economy. The development of the stock market encourages capital accumulation, efficient use of resources and promotion of economic growth. The rise of stock market can increase opportunities for investment and expansion for industries, thus creating more jobs and increasing the purchasing capacity of the people. On the other hand, stock market crashes throughout history have caused economic slowdowns, recessions, unemployment, curbed consumer spending etc. In basic terms, when people choose to invest their savings into the stock market instead of keeping the money at home, the funds become an active part of the economy as they become available to industries for use in productive purposes. In Bangladesh, the total market capitalization or worth of all the companies listed on Dhaka Stock Exchange alone stands at an impressive $50 billion.
However, in Bangladesh experienced massive downturns in the stock exchange in 2010. The predominantly bullish market (characterized by large and powerful investors) turned bearish (characterized by loss of investor confidence and a consistent decline in the value of stocks). Millions of small investors lost millions in equity and it is popular belief that the whole incident was a scam and resulted from government negligence.
As such, the aim of this paper was to search for the factors that affect the buying behavior of investors and to see whether investor choices were grounded in fact or fiction. As such, the research was conducted on a sample of 80 investors covering different demographic avenues ranging from age, years of education, monthly income, marital status and some other characteristics. The research team identified 6 broad factors of investment choices further broken down into small variables of measurement.
Stock Return Predictability with Financial Ratios: Evidence from PSX 100 Inde...Wasim Uddin
The objective of the current study is to investigate the stock return’s predictability by using financial ratios and control variable of PSX 100 Index companies during period from 2001-2014.
Impact of Financial Knowledge of Investors Investment Making Decisionsijtsrd
The objective of the study is to find the impact of financial knowledge of investors on their investment making decisions. Investors are said to rational but due to the human nature, biasness comes into picture while making investment decisions. Financial literacy and financial knowledge are taken as an imperative terms for regulating human nature of investors while making essential investment decisions The study was conducted on 150 investors in the city of PUNE. The data was collected through structured questionnaire and data so obtained was analyzed with the help of SPSS software. Sunil Deshpande | Dr. Sanjay Patankar "Impact of Financial Knowledge of Investors Investment Making Decisions" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-4 , June 2021, URL: https://www.ijtsrd.compapers/ijtsrd42536.pdf Paper URL: https://www.ijtsrd.commanagement/accounting-and-finance/42536/impact-of-financial-knowledge-of-investors-investment-making-decisions/sunil-deshpande
Investment analysis and portfolio management quantitative methods of investme...Arif Hossain FCA
The objective of investment analysis and portfolio management study is to help entrepreneurs and practitioners to understand the investments field as it is currently understood and practiced for sound investment decisions making. Following this objective, key concepts are presented to provide an appreciation of the theory and practice of investments, focusing on investment portfolio formation and management issues. This study is designed to emphasize both theoretical and analytical aspects of investment decisions and deals with modern investment theoretical concepts and instruments. Both descriptive and quantitative materials on.............................
Behavioural Finance - An Introspection Of Investor PsychologyTrading Game Pty Ltd
Investors always try to make rational decision while analyzing and interpreting information collected from various sources for different investment avenues to arrive at an optimal investment decision. But at the same time they are influenced by various psychological factors that influence them internally and bias their investment decision. Linter (1998) studied the various factors that influence internally the informed investment decision and included them under the discipline of behavioural finance. Behavioural finance studies how people make investment decision and influenced by internal factors and bias. The main purpose of the paper is to assess impact of behavioural factors over mutual fund investment decision made by investors in Raipur city.
IOSR Journal of Business and Management (IOSR-JBM) is an open access international journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
A research study on investors behaviour regarding choice of asset allocation ...SubmissionResearchpa
Every rational economic decision maker would prefer to avoid a loss, to have benefits be greater than costs, to reduce risk, and to have investments gain value. Loss aversion refers to the tendency to loathe realizing a loss to the extent that you avoid it even when it is the better choice. How can it be rational for a loss to be the better choice? Say you buy stock for $100 per share. Six months later, the stock price has fallen to $63 per share. You decide not to sell the stock to avoid realizing the loss. If there is another stock with better earnings potential, however, your decision creates an opportunity cost. You pass up the better chance to increase value in the hopes that your original value will be regained. Your opportunity cost likely will be greater than the benefit of holding your stock, but you will do anything to avoid that loss. Loss aversion is an instance where a rational aversion leads you to underestimate a real cost, leading you to choose the lesser alternative. Aim of this paper is to identify the various factors which are affecting to the investment decision and behavioural finance by Gobinda Dhamala, Khushboo Sharma, Kunal Jaiswal, Dimple Patel, Pooja Singh and Ritu Sinha 2020. A research study on investors behaviour regarding choice of asset allocation of teaching staff. International Journal on Integrated Education. 3, 3 (Mar. 2020), 126-135. DOI:https://doi.org/10.31149/ijie.v3i3.298 https://journals.researchparks.org/index.php/IJIE/article/view/298/291 https://journals.researchparks.org/index.php/IJIE/article/view/298
A Study on Factors Influencing Investment Decision Regarding Various Financia...ijtsrd
In the current era of financial inclusion, digitalization and economy driving towards a faster pace, the investors are very much concerned about their savings which can be transferred into investments. The main purpose of investment is to maximize the returns out of it with minimum expenses and risk. There are various factors which affect the investment decision like demographic factors and behavioural biases which decides the type, tenure, amount of the investment. This paper explores that return, advice, tax benefit, liquidity risk appetite of the investors altogether plays a significant part in influencing the investors. Is there any impact of demographic factors like age, gender and income on factors influencing investment decision tried to find out. The results show that factors influencing the investment decision are influenced by income level not by age and gender. Dr. Ankit Jain | Mr Raj Tandel "A Study on Factors Influencing Investment Decision Regarding Various Financial Products" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-6 , October 2020, URL: https://www.ijtsrd.com/papers/ijtsrd33678.pdf Paper Url: https://www.ijtsrd.com/management/accounting-and-finance/33678/a-study-on-factors-influencing-investment-decision-regarding-various-financial-products/dr-ankit-jain
“Impact of Behavioral Biases on Investors Decision Making: Male Vs Female”IOSR Journals
This study aims to investigate the influence of behavioral biases on investment decisions made by students and employees. This objective was achieved by administering a questionnaire and collecting empirical data from graduate & post graduate students and employees about their own perceptions of biases. Questionnaire was distributed among the sample of hundred students/employees from which 45% were students and 55% were employees. Two statistical techniques were used to analyze collected data. Correlation was used to analyze the relationship of overconfidence bias with illusion of control bias, familiarity bias, loss aversion bias and confirmation bias. Chi-square was used to determine the significant difference between the responses of male and female about overconfidence bias. Results of this study reports weak negative correlation between overconfidence bias and other behavioral bias discussed in the study. This study concludes there is no significant difference between the responses of male and female decision making regarding overconfidence bias.
Factors Affecting Investment Decisions in the Stock ExchangeAyman Sadiq
Stock markets always play a crucial role in the growth and stability of a country's economy. The development of the stock market encourages capital accumulation, efficient use of resources and promotion of economic growth. The rise of stock market can increase opportunities for investment and expansion for industries, thus creating more jobs and increasing the purchasing capacity of the people. On the other hand, stock market crashes throughout history have caused economic slowdowns, recessions, unemployment, curbed consumer spending etc. In basic terms, when people choose to invest their savings into the stock market instead of keeping the money at home, the funds become an active part of the economy as they become available to industries for use in productive purposes. In Bangladesh, the total market capitalization or worth of all the companies listed on Dhaka Stock Exchange alone stands at an impressive $50 billion.
However, in Bangladesh experienced massive downturns in the stock exchange in 2010. The predominantly bullish market (characterized by large and powerful investors) turned bearish (characterized by loss of investor confidence and a consistent decline in the value of stocks). Millions of small investors lost millions in equity and it is popular belief that the whole incident was a scam and resulted from government negligence.
As such, the aim of this paper was to search for the factors that affect the buying behavior of investors and to see whether investor choices were grounded in fact or fiction. As such, the research was conducted on a sample of 80 investors covering different demographic avenues ranging from age, years of education, monthly income, marital status and some other characteristics. The research team identified 6 broad factors of investment choices further broken down into small variables of measurement.
Stock Return Predictability with Financial Ratios: Evidence from PSX 100 Inde...Wasim Uddin
The objective of the current study is to investigate the stock return’s predictability by using financial ratios and control variable of PSX 100 Index companies during period from 2001-2014.
Impact of Financial Knowledge of Investors Investment Making Decisionsijtsrd
The objective of the study is to find the impact of financial knowledge of investors on their investment making decisions. Investors are said to rational but due to the human nature, biasness comes into picture while making investment decisions. Financial literacy and financial knowledge are taken as an imperative terms for regulating human nature of investors while making essential investment decisions The study was conducted on 150 investors in the city of PUNE. The data was collected through structured questionnaire and data so obtained was analyzed with the help of SPSS software. Sunil Deshpande | Dr. Sanjay Patankar "Impact of Financial Knowledge of Investors Investment Making Decisions" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-4 , June 2021, URL: https://www.ijtsrd.compapers/ijtsrd42536.pdf Paper URL: https://www.ijtsrd.commanagement/accounting-and-finance/42536/impact-of-financial-knowledge-of-investors-investment-making-decisions/sunil-deshpande
Investment analysis and portfolio management quantitative methods of investme...Arif Hossain FCA
The objective of investment analysis and portfolio management study is to help entrepreneurs and practitioners to understand the investments field as it is currently understood and practiced for sound investment decisions making. Following this objective, key concepts are presented to provide an appreciation of the theory and practice of investments, focusing on investment portfolio formation and management issues. This study is designed to emphasize both theoretical and analytical aspects of investment decisions and deals with modern investment theoretical concepts and instruments. Both descriptive and quantitative materials on.............................
Behavioural Finance - An Introspection Of Investor PsychologyTrading Game Pty Ltd
Investors always try to make rational decision while analyzing and interpreting information collected from various sources for different investment avenues to arrive at an optimal investment decision. But at the same time they are influenced by various psychological factors that influence them internally and bias their investment decision. Linter (1998) studied the various factors that influence internally the informed investment decision and included them under the discipline of behavioural finance. Behavioural finance studies how people make investment decision and influenced by internal factors and bias. The main purpose of the paper is to assess impact of behavioural factors over mutual fund investment decision made by investors in Raipur city.
IOSR Journal of Business and Management (IOSR-JBM) is an open access international journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Effect of Psychological Dispositions on Intuitive Forecasting: An Experiment...inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Fiduciary or paper money is issued by the Central Bank on the basis of
computation of estimated demand for cash. Monetary policy guides the Central
Bank’s supply of money in order to achieve the objectives of price stability (or low
inflation rate), full employment, and growth in aggregate income.
This paper uses the theory of behavioral finance to examine the factors of individual investors’ psychology as well as their effects on investment decisions in the Vietnam Stock Exchange (VSE). This is an empirical study which based on a survey of 422 investors. All of them have had the deep knowledge about finance investment and worked many years in VSE. The final results show that five factors of psychology which are overconfidence, optimism, herd behavior, psychology of risk and pessimistic have influence on investment decisions. To be more detailed, excessive optimism, psychology of risk and excessive pessimistic affect positively on long-term investment of investors while overconfidence and herd behavior have the negative impact. Based on the theory of behavioral finance, this study explains factors of individual investors’ psychology. However, one of the limited of this paper is that it does not mention about negative outcomes of psychology factors on investment decisions. This is considered as a new path to do research in the future for emerging markets like Vietnam.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Factors Influencing the Trading Behavior of Investors in Capital Market: An E...IOSRJBM
The investors in different categories have different trading behavior. The main contribution of this study is to analyze the buying behavior of investors in the stock markets. There are many factors that have direct or indirect effect on buying behavior of the investors. After reviewing literature and secondary data the researchers identify some driving factors and primary data have been collected and analyzed based on that factor. From the study, the researchers found that Stock dividend, Company news, Earning per share, AGM and EGM affects the buying behavior absolutely and some factors have no effect and Cash dividend, Margin loan , Placement, Net income and Paid up capital affects significantly. The researchers also found that Islamic philosophy does not play any role with share business.
Behavioural Finance Paradigms and Its Influences on Investment Decisions and ...ijtsrd
According to conventional theory of stock market, the institutional investors and individual investors are rational by nature who would like to maximize their wealth within a stipulated period. However, there are many paradigms related to financial behaviour of individuals where it influences their investment decisions, leading to behave in irrational ways. Most of the investor's attitude towards investment states that their attitudinal behaviour always influences their investment decisions and will have an impact on their portfolios, so it clearly states that the psychological aspects of investor's will always have an impact on investment pattern what they choose and helps them to decide their investment avenues. Behavioral finance predicts the trading behavior of investors based on some paradigms in the stock market and is used as a basis for creating more efficient trading strategies for the purpose of maximizing returns. In this research study attempt has been made to understand and explain the impact of behavioural paradigms of financial market influencing on individual trading and investment behaviour around the world as well as the efforts has been made to put forth to find out the paradigms and its reasons for existence and acceptance of behavioural biases in the modern financial theory. In present scenario there are most cases where the performance of the financial market depends on the attitude of investors who invest in criterion portfolio and play a major role towards the investment, so there is a need of studying the above said existing paradigms for the purpose of evaluating the performance of various stocks and shares of the organizations and others in the financial market. And the research has proved that behavioural finance influences the investment decision making and their trading behaviour and also have an impact on the equity market as well. Dr. H. Prakash | Rekha D. M "Behavioural Finance Paradigms and Its Influences on Investment Decisions and Performance of Equity Market- A Study in Bangalore" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-1 , December 2019, URL: https://www.ijtsrd.com/papers/ijtsrd29614.pdfPaper URL: https://www.ijtsrd.com/management/accounting-and-finance/29614/behavioural-finance-paradigms-and-its-influences-on-investment-decisions-and-performance-of-equity-market--a-study-in-bangalore/dr-h-prakash
Paper “is investment with intuition keeping the portfolio inflation safe” paperDr. Gargi Pant Shukla
Executive Summary:
Retirement planning is an emerging concept for the Indian women. There are only few women who are fortunate enough to receive a stable income after retirement. The main mantra to make the retirement more comfortable is to start saving early for retirement. The present study is an attempt to study the financial portfolio of female respondents and analyze if their retirement plans are sufficient against the change in inflation rate and correspondingly suggest them the amount which will be sufficient for their post retirement income against the rise in cost of living. Analysis has been done with the help of the portfolios developed on the basis of current and prospectus savings and expenses. Female faculty members of different designation and income groups are considered for analysis. The pattern of their investment is analyzed at different inflation rate varying from 6% to 12%. The results show that those faculty members’ who are investing on the basis of their intuition are guarding their portfolio better against inflation than those who are investing on the basis of other factors.
Investigating the individual factors on purchasing the stock shareinventionjournals
The present paper investigates the effect of the individual factors on the individuals' intention and decision in relation to purchasing Tehran stock shares. The paper would evaluate the effect of the factors such as gender, working background, age, academic education level, field of study and on the individuals' intention and decision in relation to purchasing the stock share. One sample t-test is used to test the hypotheses. After the hypotheses test, it was recognized that there is a meaningful relationship between the individual factors and the individuals' intention and decision in relation to purchasing the stock shares. The variables of gender, working background, age, marital status, academic education level, field of study and have direct effect on individuals' intention and decision in relation to purchasing stock shares.
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
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1. American International Journal of Business Management (AIJBM)
ISSN- 2379-106X, www.aijbm.com Volume 2, Issue 11 (November 2019), PP 89-95
*Corresponding Author: Riza Praditha1
www.aijbm.com 89 | Page
Earnings Estimation: Cognitive Psychology and Investor Reaction
Riza Praditha1
, Haliah2
, Abdul Hamid Habbe3
, Yohanis Rura4
1
(Accounting, STIE Tri Dharma Nusantara, Indonesia)
2,3,4
(Accounting, Hasanuddin University, Indonesia)
*Corresponding Author: Riza Praditha1
ABSTRACT : The purpose of this study is to examine the heuristic factors that cause investors to over / under
react to earnings information. This research uses a full factorial within-subject 2 x 2 laboratory experimental
design. Participants in this study were 25 accounting and financial management students who had attended
capital market schools (Sekolah Pasar Modal – SPM) on the Indonesia Stock Exchange. the results showed that
representativeness heuristic is the role of psychology in overreaction behavior exhibited by investors, whereas
under reaction behavior is due to the anchoring-adjustment heuristic experienced by investors.
KEYWORDS – Overreaction, Underreaction, Heuristic, Representativeness, Anchoring-adjustment.
I. INTRODUCTION
Earnings estimation is important for investors because it can be used as a basis for investment decision
making. error in predicting future earnings means investors are wrong in predicting the company's financial
performance in the future. This allows investors to wrongly predict the company's stock price, thereby affecting
the decision to buy or sell the shares owned. In estimating the company's future earnings, investors need
accounting information, at least in the form of earnings information. Disclosure of accounting information made
by the company certainly contributes to the analysis and decisions taken by investors. Comprehensive
information disclosure is considered more effective because it can provide clear information both quantitatively
and qualitatively (Wahyuni, Hartono and Nahartyo, 2016).
Generally, companies include past information on current earnings announcements, profit is then the
benchmark used by investors in evaluating performance. However, in addition to past information, future
information such as performance forecasting and economic conditions are considered important to be taken into
consideration in making a business decision. This form of comprehensive information is known as the multiple
benchmark information disclosure form (Schrand and Walther, 2000; Krische, 2005; Han and Tan, 2007;
Wahyuni, Hartono and Nahartyo, 2016). This disclosure strategy includes an explanation of the usefulness of
accounting information that is mandatory and voluntary, internal and external information, past and future
information, as well as quantitative and qualitative information. This form of multiple benchmark information is
then used in this study as a form of accounting information presented to investors to be a reference in estimating
the company's future earnings.
Accounting information presented by the company certainly raises the perception bias of each investor.
this is due to the occurrence of a pattern of information that affects decisions taken by information users such as
investors, creditors, the government and the general public. this perception bias then creates anomalies in the
capital market. The anomaly that is commonly known in the capital market is the phenomenon of an
overreaction (De Bondt and Thaler, 1987). capital market inefficiency is caused by the excessive reaction shown
by investors to information. investors tend to set prices too high on information that is considered good (good
news), on the contrary investors tend to apply prices too low if they obtain new information that is considered
bad news (De Bondt and Thaler, 1987; Praditha et al., 2019).
Over / under reaction behaviour related to investor behaviour towards earnings information. Investors
are influenced by the pattern of information presented and depend on prior earnings information in determining
future earnings estimates (Bloomfield, Libby and Nelson, 2003). This anomaly can be explained by psychology
as said by Tversky and Kahneman (1973) investors tend to predict intuitively by combining predictability and
the distribution of impressions. Investor's over / under reaction behaviour towards accounting information can
be explained by cognitive heuristics. Habbe (2017) examines the representativeness heuristic and anchoring-
adjustment on investor over / underreaction behavior. The results showed that investors overreacted to new
information because of using heuristic representativeness, otherwise investors tended to underreact to new
information because investors were conservative where predictions made were close to the average initial belief.
Investors with representativeness heuristics can get more expected returns from misevaluations (made
by noise traders) than rational investors, thus making investors tend to use representativeness approaches in
making decisions (Lo, 1989). Besides, many investors' decisions are influenced by initial beliefs (past earnings).
2. Earnings Estimation: Psychology Cognitive and Investor Reaction
*Corresponding Author: Riza Praditha1
www.aijbm.com 90 | Page
This behavior is due to investors experiencing anchoring-adjustment heuristics, where investors use past
information as initial beliefs and make adjustments to new information received (Habbe, 2017; Sundari and
Habbe, 2018; Praditha, 2019). The higher the investor's alignment with the initial value (anchor), the more
biased the decisions made to enable improper decision making (Musthofa and Ancok, 2005). This anchoring-
adjustment is assumed to be the basis of many intuitive judgments (Gilovich and Epley, 2006).
Based on the phenomenon of over / under reaction and the role of cognitive psychology that bases it,
this study aims to re-examine the role of heuristic representativeness and anchoring-adjustment psychology in
estimating the company's future earnings by using the form of multiple benchmark information. In the first
section, the phenomena, problems, and objectives of this study are presented. Furthermore, the second part will
describe the theories that underlie the development of hypotheses from this research. in the third part will be
explained about the research methods used. then, the fourth part will describe the results and discussion of this
study. in the last section, conclusions, limitations, and implications related to the results of this study will be
given.
II. LITERATURE REVIEW
3.1 Cognitive Psychology
Individual investors in assessing a company's future earnings performance are often influenced by
cognitive psychological factors. Biased and heuristic behavior is a representation of the psychological condition
of the individual. From the perspective of cognitive psychology, they are produced from cognitive errors.
However, each individual has different cognitive abilities. People with higher cognitive abilities can provide
different choices from those who have relatively low cognitive abilities when they face the same problem (An,
Shi and Nordvall, 2012) . Cognitive psychology itself is a psychological approach in understanding a mental
process in decision making or problem-solving. In the world of finance and investment, there is a mental
accounting that influences the psychology of an investor is considering an investment decision (Nofsinger,
2016).
Cognitive psychology deals with internal processes, such as attention, perception, language, memory,
thinking, decisions, judgment, and reasoning. Cognitive psychology deals with internal processes, such as
attention, perception, language, memory, thinking, decisions, judgment, and reasoning (An, Shi and Nordvall,
2012). In this case, cognitive psychology that generally influences individual judgment is heuristic. Heuristics is
a Practical action in making a decision Heuristics used in this study are representativeness and anchoring-
adjustment. Some previous research results show that the two heuristics are proven to influence the decisions
taken by investors (Bloomfield, Libby and Nelson, 2003; Habbe, 2017; Richie and Josephson, 2017; Sundari
and Habbe, 2018; Praditha, 2019).
2.1.1Heuristics Representtaiveness
Heuristic representativeness is a psychological bias that explains that in conditions of uncertainty, an
investor tends to believe in history over the similarity of a company's performance results in general (Boussaidi,
2013). Heuristic representativeness says that humans often make predictions or assessments of values using
representations or based on similarities (Tversky and Kahneman, 1973). Thus, in forecasting the company's
future performance, investors will likely see patterns from the previous performance. If the company's
performance is consistently positive from time to time, then investors will tend to predict positively on the
company's future performance. the consequence of investors using heuristic representativeness is the possibility
of errors in making future predictions.
Investors who use representativeness heuristics in making investment decisions believe that they can
see patterns that are a random process (Laih, 2016). This representativeness heuristic is widely used because it is
considered to be very effective in everyday life. This heuristic can help in identifying patterns in a complex
event, where someone will be able to get results that make sense at least in appearance, besides using
representativeness heuristics can also save time in making judgments. However, representativeness heuristics
can lead people astray, making irrational choices, and even result in losses for investors (An, Shi and Nordvall,
2012)
2.1.2Heuristic Anchoring-adjustment
The anchoring-adjustment heuristic describes a phenomenon where one single information influences a
decision, especially information found at the beginning of a particular situation (Richie and Josephson, 2017).
One strategy for estimating an unknown amount is to start from known information and then make adjustments
until an acceptable value is obtained (Tversky and Kahneman, 1973 ; Gilovich and Epley, 2006). The
anchoring-adjustment model explains that in many situations, individuals make estimates by departing from the
initial value (anchor) which then makes adjustments (adjustments) with the results of the final answer. The
initial value can be based on past period earnings (Wahyuni, Hartono and Nahartyo, 2016).
3. Earnings Estimation: Psychology Cognitive and Investor Reaction
*Corresponding Author: Riza Praditha1
www.aijbm.com 91 | Page
Adjustments are usually inadequate because they end after reaching an acceptable value for an
estimate. This inadequate adjustment is only possible if the anchor value is outside the acceptable value
distribution. This might be due to extreme, or wrong anchor values (Bahnik, Englich and Strack, 2016).
However, the anchoring effect does not always occur because of inadequate adjustments. The study of (Gilovich
and Epley, 2006) who observed the anchoring paradigm found that the anchoring effect occurs due to an
increase in the accessibility of information that is consistent with the anchor, not an inadequate adjustment.
3.2 Overreaction Hypothesis
Market Efficiency Hypothesis is one of the most widely researched themes by researchers in finance.
The phenomenon of overreaction usually occurs in the shares of winners and losers, this is because price
reversals only occur in loser or winner shares (Rosenberg, Kenneth Reid and Lanstein, 1985). The reversal of
the average stock price that occurs is the reversal of the loser shares into winning shares or vice versa. It means
that there is a quick correction on the loser stock of the winning stock. This phenomenon shows that investors
quickly decide to buy or sell shares.
The market reaction comes from psychological research conducted by Kahneman and Tversky (1979)
who found that individuals can show excessive reactions to an event that is considered dramatic. An event
contains information which is then absorbed by the market and used by investors in making investment
decisions. De Bondt and Thaler (1987) suggest that basically, hypotheses about market overreaction are related
to market participants who estimate stock prices are too high for information that is considered as good news.
The stock portfolio is divided into two groups such as the winner portfolio and the loser portfolio. Overreaction
occurs because of the information asymmetry received by investors that will influence investors in making
investment decisions to be taken. Investors who obtain information will make rational decisions, while investors
who do not receive information will make irrational investments.
3.3 Hypothesis Development
Decision making allows bias caused by investor heuristic behavior. Two underlying heuristic biases are
heuristic representativeness and anchoring-adjustment. Representativeness says that investors make predictions
using a representation or similarity approach (Tversky and Kahneman, 1973), so that in predicting future
earnings tend to follow earnings patterns from available information. while anchoring-adjustment allows
investors to make estimates based on past earnings information which is then adjusted to current earnings
information. Previous earnings information can be an anchor for investors when they want to predict future
earnings probabilities of the company (Habbe, 2017). A positive anchor will affect investors' future earnings
predictions to be positive, conversely, a negative anchor allows investors to have a negative prediction of the
company's future earnings.
Consistently positive (negative) earnings patterns will represent positive (negative) future performance
as well so that investors will overestimate (underestimate) future earnings. However, if the profit pattern
changes to the extreme along with the arrival of new information, investors will make past information as an
initial belief (anchor) and make adjustments (adjustment) on the new information (Habbe, 2017). Heuristic
representativeness explains that investors will depend on profit patterns. When information on past earnings and
current earnings is low (high), investors will estimate future earnings to be underestimated. Thus, investors will
tend to overestimate (underestimate) the pattern of positive (negative) earnings (Habbe, 2017; Sundari and
Habbe, 2018; Praditha, 2019) . These results indicate that investors show excessive behavior (overreact) to the
earnings information presented. Based on this explanation, the following hypothesis is formulated.
H1: Investors will overreact to the pattern of earnings performance that does not change (positive-positive) and
overestimate the performance of future earnings.
H2: Investors will overreact to the pattern of earnings performance that does not change (negative-negative)
and underestimate the performance of future earnings.
Cognitive psychology says that humans tend to stick to the starting point in assessing an event that is
likely to occur later. This tendency is what causes bias in decision making. This bias is caused by the anchoring-
adjustment heuristic that explains that investors are pegged to the initial information obtained (initial belief) and
then make adjustments based on new information received (Tversky and Kahneman, 1973). The belief
adjustment theory explains that high (low) anchors will decrease (increase) when faced with negative (positive)
information when compared to low (high) anchors (Hartono, 2004; Habbe and Mande, 2016). Investors tend to
overestimate (underestimate) information on positive (negative) initial earnings. Investors will estimate profit
more positively (profitable) if they consider positive past information, and vice versa (Wahyuni, Hartono and
Nahartyo, 2016). The implication of the anchor will lead to underreaction behavior towards the current profit
level and changes in the different earnings patterns so that the following hypothesis is formulated.
4. Earnings Estimation: Psychology Cognitive and Investor Reaction
*Corresponding Author: Riza Praditha1
www.aijbm.com 92 | Page
H3: Investors will underreact to changing earnings performance patterns (positive-negative) and overestimate
future earnings performance.
H4: Investors will underreact to changing earnings performance patterns (negative-posotive) and underestimate
future earnings performance.
III. RESEARCH METHODS
3.1 Research Design
This research is a full factorial 2x2 within subject laboratory experimental study. The design of this
study involves a variation of the faculty of two or more treatments (explanatory variables) so that we can see the
separation of influences on variables as well as the potential for interactive influence between explanatory
variables. The design of this study was used to determine whether the subject experienced heuristic
representativeness and anchoring-adjustment in doing estimates of the company's future earnings based on the
pattern of earnings information provided. The profit pattern used is past earnings (positive and negative), and
current earnings (positive and negative) and the experimental design is shown in the table below:
Table 3.1. Experimental design 2x2 full factorial
Variabel Current Earnings
Positive Negative
Past
Earnings
Positive Overestimate Overestimate
(Overreaction) (Underreaction)
Negative Underestimate Underestimate
(Underestimate) (Overreaction)
3.2 Participant
Participants in this study were 25 final year students majoring in accounting and financial management
of STIE Tri Dharma Nusantara, Makassar, Indonesia. The Students have attended capital market schools
(Sekolah Pasar Modal – SPM) on the Indonesia stock exchange. Students are proxied as investors with the
assumption that students are well educated but poor experience investors, where new investing experience is
limited to training obtained from SPM.
3.3 Manipulation Check
Manipulation checks are carried out to measure the effectiveness of the experimental treatment and
ensure the subject understands the assignment [9]. Manipulation checks are carried out on the experimental
subject (investor) by giving three questions in the form of a binary questionnaire (true or false).
3.4 Analysist Methods
The analysis technique used is quantitative descriptive to see the demographics of subjects in research
such as gender and age. Hypothesis testing uses Repeated Measures ANOVA where the mean value will be
compared with the target earning value obtained from the Maximum Likelihood Estimation (MLE) equation.
IV. RESULT AND DISCUSSION
4.1 Participant Characteristics
Articipants numbered 25 students consisting of 11 men and 14 women. Of the 25 students who
participated, it was found that 11 people were 21 years old, 11 people were 22 years old, and 3 people were 23
years old.
Table 4.1 Participant Characteristics
Frequency Percent
Age 21 y.o 11 44%
22 y.o 11 44%
23 y.o 3 12%
Gender Male 11 44%
Female 14 56%
5. Earnings Estimation: Psychology Cognitive and Investor Reaction
*Corresponding Author: Riza Praditha1
www.aijbm.com 93 | Page
4.2 Hypothesist Testing
Based on the results of testing the hypothesis using ANOVA within the subject, we get a result of
6.460 earnings estimation errors shown by investors when presented with positive-positive earnings
information, which means investors overestimate the company's future earnings where investors estimate profits
greater than profits. target. Conversely, investors underestimate the company's future earnings when earnings
information is presented with a negative-negative pattern. this result is shown at -3,910 which means that
investors estimate future earnings smaller than the target profit. Both of these results indicate that investors
behave in an overreact to earnings information presented. Based on these findings, it can be concluded that
hypotheses 1 and 2 can be accepted.
Table 4.2.1 shows that investors presented information with a changing pattern (positive-negative)
overestimating information on future earnings. This result can be seen from the statistical results of a mean of
72,650 which means investors estimate future earnings greater than target earnings. The same result is also
shown by investors when obtaining information on earnings changes (negative-positive) in which investors
estimate future earnings smaller than the target profit. The underestimate investor is -35,670 to future earnings.
Both of these results indicate that the investor in estimating is influenced by past earnings so that the
underreaction of current earnings information does not confirm the value of past earnings. This result means that
hypotheses 3 and 4 can be proven.
Table 4.2.1 Error Estimation
CE positive CE negative
PE positive 6,460 72,650
PE negative -35,670 -3,910
Note: PE is past earning (t-1 and t-2), CE is current earning (t0)
In the repeated measures ANOVA test within the subject, the criteria that must be met is the amount of
P-value for Greenhouse-Geisse must be less than 0.05 or 5%. The results shown in table 4.2.2 are a significance
level of 0.00 <5% so that it can be concluded that there are differences in estimation errors made by investors
based on the pattern of earnings information presented.
Table. 4.2.2 Repeated Measures ANOVA
Sum of Squares df Mean Squares F Sig.
Greenhouse-
Geisser
155418,397 1,447 107437,586 4273,062 0,000
4.3 Heuristic Representativeness and Overreaction
Investor overreaction behavior towards earnings information presented is caused by psychological
heuristic factors experienced. The intended heuristic is the representativeness heuristic. Heuristic
representativeness explains the behavior of investors in making decisions based on similarity or suitability
(Tversky and Kahneman, 1973). With heuristic representativeness, investors will show an overreaction to
earnings information with the same pattern. In other words, investors will overreact to new information if the
new information has a similar pattern to the previous information (anchor).
Both research results have shown the prediction bias that occurs as a result of the representativeness
heuristic experienced by investors in assessing the future earnings performance of a company. Investors
overestimate future earnings if the information obtained shows a positive value or has increased, otherwise
investors tend to underestimate future earnings if the information obtained shows a negative or declining value.
This finding supports the results of Habbe (2017), Boussaidi (2013), Sundari and Habbe (2018, Praditha (2019)
which shows that investors make mistakes in predicting future earnings because they experience heuristic
representativeness bias. This psychological bias explains that under conditions of uncertainty, an investor tends
to believe in the similarity of the performance results of a company in general so that it makes predictions that
tend to be of the same pattern (Boussaidi, 2013).
4.4 HeuristicAnchoring-adjustment and Underreaction
Underreaction behavior occurs when investors obtain new information that has nothing in common
with the initial information. This condition makes investors use psychology heuristics, namely anchoring-
adjustment heuristics in conducting assessments. An anchoring-adjustment heuristic is where investors tend to
make judgments based on past information (anchors) and then adjust to the new information obtained (Tversky
and Kahneman, 1973). Investors will be pegged by the amount of anchor value that is used as an initial belief
(initial belief), then make adjustments (adjustments) to new information received. both of these results are in
6. Earnings Estimation: Psychology Cognitive and Investor Reaction
*Corresponding Author: Riza Praditha1
www.aijbm.com 94 | Page
line with Wahyuni and Hartono (2012) Boussaid (2013), Habbe (2017), Sundari and Habbe (2018) which show
that the anchor has a strong influence on the estimated future earnings of investors. Strong anchor effects can
last long enough even after making irrational decisions. The anchoring effect can also occur even if the anchor
value is considered not informative or unreasonable (Bahnik, Englich and Strack, 2016). Besides being strong,
anchors also have many implications in every decision-making process (Furnham and Boo, 2011).
V. CONCLUSION
The phenomenon of over / underreaction can be explained psychologically reinforced by the results of
this study, where it can be proven that investors generally make intuitive assessments so that they are either
consciously or not influenced by heuristic psychology. The tendency of investors to experience heuristics is
shown from the results of research that found that investors will overestimate future earnings if the earnings
information shows a positive movement. Conversely, investors will underestimate the company's future earnings
if past earnings information shows a negative movement. presenting information in such a pattern makes
investors estimate with heuristic representativeness because investors tend to show an overreaction to that
information.
Conversely, investors show underreact behavior towards information that has a different movement
pattern. Investors who are given information that has positive-negative movements have an overestimate
tendency, whereas if information that is positively-negative patterned is presented, investors tend to
underestimate the target earnings. These results indicate the role of the anchor as the initial belief in which the
investor estimates future earnings that have a pattern almost equal to the initial value.
This study used a laboratory experimental design with 25 students who were proxied as investors.
Future studies are expected to test the design of the field experiments using real investors as participants.
Besides, this research only examines two heuristics namely representativeness and anchoring-adjustment,
further research might be able to consider other heuristic biases such as availability and others. Furthermore, this
research only tests the estimated earnings, so it is hoped that further research can test up to the estimated share
price and the decision to buy or sell shares.
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*Corresponding Author: Riza Praditha1
1
(Accounting,STIE Tri Dharma Nusantara, Indonesia)