The Effects of Behavioral Biases on Investment Performances of Individual Investors in the Indonesian Stock Market

Abstract

This paper identifies the existences of behavioral biases in the Indonesian stock market and examines the effect of the behavioral biases on individual investment performance. We use quantitative analysis approach to explore our research purpose. To be specific, individual investors in Indonesia have behavioral biases of overconfidence bias, loss-aversion bias, anchoring and adjustment bias, mental accounting bias and confirmation bias. In addition, we find that confirmation bias and mental accounting bias are positive relationship with investment performance, whereas loss-aversion bias and anchoring and adjustment bias are negative significant relationship with investment performance.