Unveiling the Power of Fundamental Analysis: Exploring the Influence of Representative Bias on Stock Investment Decisions (original) (raw)

Determinants of Stock Investment Decision Making: A Study on Investors in Indonesia

Golden Ratio of Finance Management

This study aims to understand the determinants of stock investment decision making by investors in the Indonesian stock market. Mixed methods are used by combining quantitative data from surveys and qualitative data from interviews. A survey was conducted among 400 investors using an online questionnaire, while interviews were conducted with selected investors. The results show that fundamental analysis plays an important role in stock investment decision-making. In addition, market sentiment and herd behavior also influence investment decisions. Investors also have different risk tolerances depending on investment objectives and personal risk profiles. This research provides insights for investors and professionals in the Indonesian stock market to develop more prudent and data-driven investment strategies.

The Influence of Fundamental Analysis on Stock Prices: The Case of Food and Beverage Industries

EUROPEAN RESEARCH STUDIES JOURNAL

The objective of this study is to determine the effect of fundamental factors, like Debt to Equity Ratio (DER), Return on Assets (ROA), Current Ratio (CR), Price Earnings Ratio (PER), and Total Assets Turnover (TATO), towards stock prices. The object of this research is the food and beverage industries listed on the Indonesia Stock Exchange in the period 2012-2015. The study used secondary data obtained from the Indonesia Stock Exchange website (www.idx.co.id). The research design used is causal research methods and the sampling technique used is purposive sampling method. There were 11 out of 17 companies that met the criteria during the four-year observation period. The data was analyzed by panel data regression analysis technique using three approaches-Common Effect, Fixed Effect, and Random Effect. Chow test model, Hausman test, and Lagrange Multiplier test were used for the model selection using F test and tstatistical tesst. The result of the study through the use of F tests indicated that the increase or decrease of stock prices are affected by ROA, CR, DER, TATO and PER. The result of the t-statistic test showed that ROA and TATO have a partial influence on the share price, whereas the DER, CR and PER variables have no affect on the stock price of food and beverage companies.

The Existence of Behavioral Biases and Personality Traits in Explaining the Effect of Fundamental and Technical Analysis to Investment Performance in Indonesia Stock Exchange

Jurnal Intelek

Rational investors focus on the fundamental and technical analysis in their investment decisions. In fundamental analysis, they consider economic conditions, industry analysis, and company analysis if they use a top-down approach, and vice versa if they use a bottom-up approach. Technical analysis focuses on the historical movement of stock price to predict the future price by using the pattern of a chart. However, in modern finance, investors are not fully rational as they are also affected by the psychological factors when making their investment decisions. These psychological factors then create behavioral biases, which becomes the basic assumption of behavioral finance This research is aimed at investigating the role of availability bias and disposition effect as behavioral biases that make investors irrational in their behaviors and whether it is supported by the Big Five Personality Traits, which include openness, conscientiousness, extraversion, agreeableness, and neuroticism...

Fundamental Versus Technical Analysis of Investment: Case Study of Investors Decision in Indonesia Stock Exchange

The Journal of Internet Banking and Commerce, 2017

The focus of this research is to explain whether investors prefer technical or fundamental analysis to analyze their investment options and to analyze factors influencing the selection of that investment analysis method. The research uses questionnaire with 125 participants. Six independent variables used to explain the choice of investment analysis method, namely investor’s education, investor’s experience, information accessibility by the investor, investor's time the horizon, trading activity frequency, and investor’s perception toward the disclosure done by the corporation. The result showed that Indonesian investors prefer technical analysis. The influencing factors that significantly the selection of analysis method are investor’s experience and investor’s time horizon.

Investor’s Dilemma: Fundamentals or Biasness in Investment Decision

Journal of Economics and Behavioral Studies, 2011

In the present world Investment decision is most important phenomena. Investment is current sacrifice for future benefits, So while making investment decisions we have to keep different things in mind. Investment decisions are influenced not only by their fundamentals but also depend on different factors. One factor is the biasness of any investor to their investment, biasness depends on the cognition and emotions, because some investors use them as heuristic for the investment decision instead of fundamentals. Keeping this in view, this paper shows how cognitive biasness (i.e. Representativeness, Adjustment and Anchoring, Leniency) effects the investment decisions over the fundamentals. This study also show different types of investors which depicts significant relation of Representativeness, Adjustment and Anchoring, Leniency with investment decisions over fundamentals, and explain under which biasness an investor become more optimistic and moderate for investment decisions. While...

FUNDAMENTAL ANALYSIS AND ITS USAGE IN INDIAN CAPITAL MARKETS: A SURVEY

Venkatesh, C. K.; Madhu Tyagi and Ganesh. L. (2012). Fundamental analysis and its usage in Indian capital markets: A Survey. Bangladesh Res. Pub. J. 7(1): 46-54. Retrieve from Abstract This article reports the results of a questionnaire survey during September to November 2010 on the use of Fundamental Analysis by brokers/fund managers in Indian stock market to form their forecasts of share price movements. The findings of the research reveal that more than 85 percent of the respondents rely upon both Fundamental and Technical analysis for predicting future price movements at different time horizons. The survey envisages at providing insights about the way traders operate in the market by using the fundamental analysis information. The survey covered Brokers, Sub-Brokers, Fund managers, Portfolio managers and others. Fundamental analysis is widely recognized as EIC analysis, where, E stands for Economy, I stand for Industry and C stands for Company. In the current work an effort is made to understand these variables as a whole. The structured questionnaire comprehensively includes all these components so as to arrive at that factor which is driving the market. The study records top ten Economy and Company factors as considered important by the respondents. Indicators considered for investing, company financial and non-financial factors and various Economic factors considered for judging the growth of the economy were included in the questionnaire.

A study on different behavioral biases and its impact on Investor’s Decision Making

2019

In the past Capital Asset Pricing Model, Efficient Market Hypothesis and Modern Portfolio Theory assume that market are perfect and all the investors behave clearly and sensibly. In other word, these theory explains that whatever new information comes into the market, it is instantly soaked up by the stock prices in the Indian market, in this way eliminating the possibility to earn more by taking into the consideration of company’s insider information. This paper tries to identify the various behavioral biases like representative biases, over-confidence biases, regret aversion, mental accounting and herd behavior etc. on decision making process of investor’s in the Indian stock market. Harry Markowitz formulated the first “Modern Portfolio Theory” which was the first systematic financial theory. The theory evaluates return and risk of assets, using mean, standard deviation and variances. The gap found is due to the abnormal events that create maximum harm in the financial markets, n...

Investor Behavioral Bias Based on Demographic Characteristics

Advances in Economics, Business and Management Research, 2020

This study aims to examine the effect of demographic characteristics such as age, gender, income, and occupation on investor behavioral biases such as overconfidence bias, disposition effect, and herding bias. This research was conducted by distributing questionnaires to respondents who are 151 stock investors listed on the Indonesia Stock Exchange with a minimum age of 17 years. The results of the study showed that each dependent variable was at least influenced by one of the demographic characteristics. From the hypothesis test, it can be seen that overconfidence bias was influenced by gender and income. While the disposition effect was influenced by age, and the herding behavior bias was influenced by occupation.

An empirical investigation of investor's behavioral biases on financial decision making

Investor’s irrationality is an inevitable reality that has been time and again highlighted by researchers (Statman, 2008). Therefore, this study is another effort to assess the role of behavioral biases in financial decision making in Pakistan Stock Exchange (PSX). A survey questionnaire is designed and used to collect responses using convenience sampling technique from sample of 250 investors of PSX. Behavioral biases include overconfidence, over thinking, herding, cognitive bias, and hindsight effect of investors. Multiple regression models are used to test influence of five behavioral biases on investment decision. The results show that overconfidence, over thinking, herding, cognitive bias, and hindsight effect have significant positive impact on investment decision. Overall results conclude that much change in investment decision is due to behavioral biases. This study will help financial advisors to better advice their clients. The one way to reduce these biases may be education and training of investors.

The Impact of Behavior Biases on Investor Decision Making Regarding Financial Securities

Asian Journal of Economics, Business and Accounting, 2022

Investor’s irrationality is an inevitable truth that has been over and over highlighted by using researchers [1]. Consequently, this look at is any other effort to assess the role of behavioral biases in financial choice making in Pakistan stock alternate (PSX). A survey questionnaire is designed and used to acquire responses the use of convenience sampling approach from pattern of 184 investor of PSX. Behavioral biases encompass overconfidence, anchoring, disposition, representativeness and availability bias impact of traders. Multiple regression models are used to check impact of five behavioral biases on investment decision. We want to test whether or not those biases overconfidence, anchoring, disposition, representativeness and availability bias effect have significant effective impact on investment decision or not. Primarily based on effects we conclude that whether or not there are lots adjustments in investment decision is because of behavioral biases. This look at will help...