The Influence of Overconfidence on Investment Decision: A Study of Investor Behavior in Indonesia

Abstract

Overconfidence is one of the most common investment biases exhibited by investors. The bias-transaction activity will cause unfair trading. The influence of various factors on overconfidence is examine. This research presents a novel perspective by suggesting a relationship between risk characteristics and social media. Data were collected from 165 Indonesian Stock Exchange investors in December 2023, using the Ordinary Least Squares (OLS) method. The results show: firstly; the overconfidence level among investors is moderate. Social media moderately influence investors, who generally exhibit a risk-neutral character. Secondly, no associations between gender and selected demographic factors were founded. In this case, male and female genders are the same for education, generation, risk characteristics, and investment strategy factors. Thirdly, an association between genes and risk characteristics. Fourthly, by OLS regression, only strategy factor influences overconfidence, but in the reverse direction. These results show that investors with technical strategies are more overconfident.