BEHAVIORAL BIAS (AVAILABILITY, REPRESENTATIVENESS, ANCHORING, AND CONFIRMATION) TOWARD INVESTMENT DECISION-MAKING
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Mardiana R(1*)
Department of Management, Faculty of Economic and Business, Universitas Dinamika Bangsa
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Yossinomita Yossinomita(2)
Department of Management, Faculty of Economic and Business, Universitas Dinamika Bangsa
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M Haris Saputra(3)
Department of Management, Faculty of Economic and Business, Universitas Dinamika Bangsa
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Mandasari R(4)
Department of Accounting, Faculty of Business, Universitas Universal, Kota Batam
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Yulia D Kartika(5)
Department of Management, Faculty of Economic and Business, Universitas Dinamika Bangsa
(*) Corresponding Author
Keywords:
Anchoring Bias, Availability Bias, Confirmation Bias, Representativeness Bias, Investment Decision-Making
Abstract
When making investment decisions, retail investors tend to rely on shortcuts in thinking to process the information and data they get. This creates illogical thinking based on emotions or momentary judgments that can result in less-than-optimal investment performance and even losses. This research investigates the relationship between behavioral financial biases (like availability, representativeness, anchoring, and confirmation) and investment decision-making. This study method uses purposive sampling with certain characteristics. Data was collected from 130 retail investors for 3 months in 2024 and analyzed with SPSS Statistics. The research results show that confirmation bias and representativeness bias positively affect investment decision-making. However, anchoring bias and availability bias do not significantly affect investment decision-making. In addition, confirmation bias, representativeness bias, anchoring bias, and availability bias simultaneously positively affect investment decision-making. Financial behavioral biases that can influence investors are confirmation bias and representativeness bias, where retail investors tend to look for information according to their views and similarities based on certain stereotypes, which can reduce or cause losses in stock investments.
Keywords: Anchoring Bias; Availability Bias; Confirmation Bias; Representativeness Bias; Investment Decision-Making
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References
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Othman, F., Ismail, S., & Bakar, M. H. (2023). A Proposed Conceptual Framework on the Determinants of Psychological Biases Towards Retail Investor’s Decision Making: Experience as Mediating Role. International Journal of Academic Research in Accounting Finance and Management Sciences, 13(1), 516–527.
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Shantha Gowri, B., & Ram, V. S. (2019). Does availability bias have influence on FMCG investors? An empirical study on cognitive dissonance, rational behaviour and mental accounting bias. International Journal of Financial Research, 10(4), 68-83.
Soraya, R., Risman, A., & Siswanti, I. (2023). The role of risk tolerance in mediating the effect of overconfidence bias, representativeness bias and herding on investment decisions. Journal of Economics, Finance and Management Studies, 6(7), 3324-3335.
Tversky, A., & Kahneman, D. (1974). Judgement Under Uncertainty: Heuristics and Biases. Science, 185
Armansyah, R. F. (2022). Herd instinct bias, emotional biases, and information processing biases in investment decisions. Jurnal Manajemen dan Kewirausahaan, 24(2), 105-117.
Baker, H. K., & Ricciardi, V. (2015). Understanding Behavioral Aspects of Financial Planning and Investing. Journal of Financial Planning Vol 28, 22-26.
Bansal, T. (2020). Behavioral finance and COVID-19: cognitive errors that determine the financial future. Available at SSRN 3595749.
bi.go.id. (2022). Covid-19 dan Efeknya ke Performa Pasar Modal Indonesia. https://www.bi.go.id/id/bi-
institute/BI-Epsilon/Pages/Covid-19-dan-efeknya-ke-performa-pasar-modal-indonesia.aspx
Bouteska, A., & Regaieg, B. (2019). Psychology and Behavioral Finance: Anchoring Bias by Financial Analysts on the Tunisian Stock Market. EuroMed Journal of Business, Vol. 15, No. 1.
Chandra, P. (2020). Behavior Finance, 7 Edition. New York: McGraw-Hill
Cheng, C. X. (2019). Confirmation bias in investments. International Journal of Economics and Finance, 11(2), 50-55.
Dangol, J., & Manandhar, R. (2020). Impact of heuristics on investment decisions: the moderating role of locus of control. Journal of Business and Social Sciences Research, 5(1), 1-14.
Fonseca, C. D., de Melo Carvalho, F., de Melo Moreira, B. C., & Santos Silva, W. (2020). Confirmation bias in managerial decision-making: an experimental study with managers and accountants. Revista de Contabilidade e Organizações, 14.
Gallimore, P. (1996). Confirmation bias in the valuation process: a test for corroborating evidence. Journal of Property Research, 13(4), 261–273.
Habbe, A. H. (2006). Pengujian Heuristik Representativeness dan Anchoring Adjustment Atas Perilaku Over/Underreaction Investor Terhadap Informasi Laba Dan Konsekuensinya Pada Prediksi Laba Dan Penilaian Saham. Disertasi. Electronic Theses and Dissertations (ETD). Universitas Gadjah Mada, Yogyakarta.
Kurniawan, B., & Murhadi, W. R. (2018). Bias Aspect in Decision Making for Buying Life Insurance in Indonesia. A paper presented in 2nd International Seminar of Contemporary Research on Business and Management, 30–31 Juli 2018, Universitas Warmadewa, Denpasar, Bali.
Kurniawati, D., & Sutrisno, S. (2019). The benchmark of investor decisions to invest in the initial public offering (IPO). Riset Akuntansi dan Keuangan Indonesia, 4(2), 166-176.
ksei.co.id. (2023). Statistik Pasar Modal Indonesia. https:// ksei.co.id.
Lee, C. C., Lee, H. Y., Yeh, W. C., & Yu, Z. (2022). The impacts of task complexity, overconfidence, confirmation bias, customer influence, and anchoring on variations in real estate valuations. International Journal of Strategic Property Management, 26(2), 141-155.
Madaan, G., & Singh, S. (2019). An analysis of behavioral biases in investment decision-making. International Journal of Financial Research, 10(4), 55-67.
Mahmood, F., Arshad, R., Khan, S., Afzal, A., & Bashir, M. (2024). Impact of behavioral biases on investment decisions and the moderation effect of financial literacy; an evidence of Pakistan. Acta Psychologica, 247, 104303.
Mardiana, R., Saputra, M. H., & Hassandi, I. (2023). Anchoring Bias dalam Pengambilan Keputusan Investor Ritel (Studi Peristiwa Selama Pandemi COVID-19). Jurnal Ilmiah Manajemen dan Kewirausahaan (JUMANAGE), 2(2), 182-190.
Merton, R. C. (1987). A simple model of capital market equilibrium with incomplete information.
Mohanty, S., Patnaik, B. C. M., Satpathy, I., & Sahoo, S. K. (2023). Cognitive biases and financial decisions of potential investors during COVID-19: An exploration. Arab Gulf Journal of Scientific Research, (ahead-of-print).
Nelson, J. A. (2014). The power of stereotyping and confirmation bias to overwhelm accurate assessment: The case of economics, gender, and risk aversion. Journal of Economic Methodology, 21(3), 211-231.
Othman, F., Ismail, S., & Bakar, M. H. (2023). A Proposed Conceptual Framework on the Determinants of Psychological Biases Towards Retail Investor’s Decision Making: Experience as Mediating Role. International Journal of Academic Research in Accounting Finance and Management Sciences, 13(1), 516–527.
Pompian, M. M. (2012). Behavioral finance and investor types. Wiley.
Rahim, A., Bangash, R., & Khan, M. H. (2022). Impact of Availability Bias Effect on Investment Decisions of South Asian Stock Market Individual Investors during Covid-19 Pandemic. Indian Journal of Economics and Business, 21(2).
Shah, S. Z. A., Ahmad, M., & Mahmood, F. (2018). Heuristic Biases in Investment Decision-Making and Perceived Market Efficiency: A Survey at the Pakistan Stock Exchange. Qualitative Research in Financial Markets, Vol. 10 Issue: 1, pp.85-110
Shantha Gowri, B., & Ram, V. S. (2019). Does availability bias have influence on FMCG investors? An empirical study on cognitive dissonance, rational behaviour and mental accounting bias. International Journal of Financial Research, 10(4), 68-83.
Soraya, R., Risman, A., & Siswanti, I. (2023). The role of risk tolerance in mediating the effect of overconfidence bias, representativeness bias and herding on investment decisions. Journal of Economics, Finance and Management Studies, 6(7), 3324-3335.
Tversky, A., & Kahneman, D. (1974). Judgement Under Uncertainty: Heuristics and Biases. Science, 185
Published
2025-03-01
How to Cite
R, M., Yossinomita, Y., Saputra, M., R, M., & Kartika, Y. (2025). BEHAVIORAL BIAS (AVAILABILITY, REPRESENTATIVENESS, ANCHORING, AND CONFIRMATION) TOWARD INVESTMENT DECISION-MAKING. Journal of Management : Small and Medium Enterprises (SMEs), 18(1), 399-412. https://doi.org/10.35508/jom.v18i1.17769
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