The Moderating Role of Locus of Control on the Links Between Availability Bias, Herding, and Investment Decisions

Febria Nalurita (), Farah Margaretha Leon, Yosephina Endang Purba and Kristian Chandra
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Febria Nalurita: Universitas Trisakti, Department of Management, Faculty of Economics and Business
Farah Margaretha Leon: Universitas Trisakti, Department of Management, Faculty of Economics and Business
Yosephina Endang Purba: Universitas Trisakti, Department of Management, Faculty of Economics and Business
Kristian Chandra: Universitas Trisakti, Department of Management, Faculty of Economics and Business

A chapter in Proceedings of the International Conference on Entrepreneurship, Leadership and Business Innovation (ICELBI 2022), 2023, pp 290-299 from Springer

Abstract: Abstract This study aims to determine the effect of availability bias and herding on investment decision-making with the moderating role of locus of control. Data was collected by distributing questionnaires to individual investors on the Jakarta Indonesia Stock Exchange (IDX), with a sample of 281 people. This study uses the Structural Equation Modeling (SEM)-LISREL 8.8 approach. This study finds that availability bias and herding significantly affect investment decision-making. Locus of control plays a moderating role between availability and herding bias in investment decision-making. This research helps individual investors understand the existence of rational or irrational behavior, analyze all the information available in the market, and always verify the data received so that investors have the knowledge and can act rationally before making investment decisions. Meanwhile, policymakers can conduct investment training and awareness programs, conduct research for individual investors more intensively, and develop information networks to facilitate investors’ information needs. The limitation of this study is that it only investigates individual investors. For further research, institutional investors could be tested to explore the behavior of institutional investors moderated by locus of control.

Keywords: Availability Bias; Herding; Investment Decision; Locus of Control (search for similar items in EconPapers)
Date: 2023
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DOI: 10.2991/978-94-6463-350-4_27

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