Is risk aversion an obstacle for Indonesian beginner investor? / Andi Fauziah, Budi Purwanto and Wita Juwita Ermawati

Beginner investors with high financial literacy, have not completely dared to invest with indications of psychological barriers in accordance with prospect theory. This paper investigates whether the prospect theory exists in the decision making of individual investor investment decision using the v...

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Main Authors: Fauziah, Andi, Purwanto, Budi, Ermawati, Wita Juwita
Format: Book Section
Language:English
Published: Faculty of Accountancy 2019
Subjects:
Online Access:http://ir.uitm.edu.my/id/eprint/43935/1/43935.pdf
http://ir.uitm.edu.my/id/eprint/43935/
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spelling my.uitm.ir.439352021-04-05T07:28:54Z http://ir.uitm.edu.my/id/eprint/43935/ Is risk aversion an obstacle for Indonesian beginner investor? / Andi Fauziah, Budi Purwanto and Wita Juwita Ermawati Fauziah, Andi Purwanto, Budi Ermawati, Wita Juwita Management. Industrial Management Investment, capital formation, speculation Foreign investments. Country risk Beginner investors with high financial literacy, have not completely dared to invest with indications of psychological barriers in accordance with prospect theory. This paper investigates whether the prospect theory exists in the decision making of individual investor investment decision using the value function of cumulative prospect theory proposed by Tversky and Kahneman (1992). Firstly, the ward method is used to separate capital market actors with the tendencies of investor and traders, assuming that the investor is more unaffected to the daily closing price changes. The next analysis is only focusing on tend to be trader's type respondents. Each trader's decision is grouping on a binary scale with decision wether to sell or hold the stock. After that, binary logistics regression is used to mapping the probabilities of each trader's decision on 2 types of return (net assets return and buying price base return). The probabilities from logistics regression then multiplied by the return resulting a return value that is subsequently used in nonlinear regression. The results from the buying price base return prove the hypothetical value function of prospect theory. Traders from Indonesia Stock Exchange Investment Gallery show a convex curve on a gain condition and a concave curve on the loss condition. In the gain condition, someone will behave as a risk-averse, while in the loss condition as a risk seeker. This research contributed to the development of quantitative methods in testing the prospects theory on stock transactions. Faculty of Accountancy 2019 Book Section PeerReviewed text en http://ir.uitm.edu.my/id/eprint/43935/1/43935.pdf Fauziah, Andi and Purwanto, Budi and Ermawati, Wita Juwita (2019) Is risk aversion an obstacle for Indonesian beginner investor? / Andi Fauziah, Budi Purwanto and Wita Juwita Ermawati. In: ICAM2019 – International Conference on Accounting and Management. Faculty of Accountancy, Universiti Teknologi MARA Puncak Alam, Selangor, p. 78. ISBN 978-967-17038-0-9
institution Universiti Teknologi Mara
building Tun Abdul Razak Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Teknologi Mara
content_source UiTM Institutional Repository
url_provider http://ir.uitm.edu.my/
language English
topic Management. Industrial Management
Investment, capital formation, speculation
Foreign investments. Country risk
spellingShingle Management. Industrial Management
Investment, capital formation, speculation
Foreign investments. Country risk
Fauziah, Andi
Purwanto, Budi
Ermawati, Wita Juwita
Is risk aversion an obstacle for Indonesian beginner investor? / Andi Fauziah, Budi Purwanto and Wita Juwita Ermawati
description Beginner investors with high financial literacy, have not completely dared to invest with indications of psychological barriers in accordance with prospect theory. This paper investigates whether the prospect theory exists in the decision making of individual investor investment decision using the value function of cumulative prospect theory proposed by Tversky and Kahneman (1992). Firstly, the ward method is used to separate capital market actors with the tendencies of investor and traders, assuming that the investor is more unaffected to the daily closing price changes. The next analysis is only focusing on tend to be trader's type respondents. Each trader's decision is grouping on a binary scale with decision wether to sell or hold the stock. After that, binary logistics regression is used to mapping the probabilities of each trader's decision on 2 types of return (net assets return and buying price base return). The probabilities from logistics regression then multiplied by the return resulting a return value that is subsequently used in nonlinear regression. The results from the buying price base return prove the hypothetical value function of prospect theory. Traders from Indonesia Stock Exchange Investment Gallery show a convex curve on a gain condition and a concave curve on the loss condition. In the gain condition, someone will behave as a risk-averse, while in the loss condition as a risk seeker. This research contributed to the development of quantitative methods in testing the prospects theory on stock transactions.
format Book Section
author Fauziah, Andi
Purwanto, Budi
Ermawati, Wita Juwita
author_facet Fauziah, Andi
Purwanto, Budi
Ermawati, Wita Juwita
author_sort Fauziah, Andi
title Is risk aversion an obstacle for Indonesian beginner investor? / Andi Fauziah, Budi Purwanto and Wita Juwita Ermawati
title_short Is risk aversion an obstacle for Indonesian beginner investor? / Andi Fauziah, Budi Purwanto and Wita Juwita Ermawati
title_full Is risk aversion an obstacle for Indonesian beginner investor? / Andi Fauziah, Budi Purwanto and Wita Juwita Ermawati
title_fullStr Is risk aversion an obstacle for Indonesian beginner investor? / Andi Fauziah, Budi Purwanto and Wita Juwita Ermawati
title_full_unstemmed Is risk aversion an obstacle for Indonesian beginner investor? / Andi Fauziah, Budi Purwanto and Wita Juwita Ermawati
title_sort is risk aversion an obstacle for indonesian beginner investor? / andi fauziah, budi purwanto and wita juwita ermawati
publisher Faculty of Accountancy
publishDate 2019
url http://ir.uitm.edu.my/id/eprint/43935/1/43935.pdf
http://ir.uitm.edu.my/id/eprint/43935/
_version_ 1696979082914299904
score 13.222552