Overconfidence and Stock Market Participation of Potential Retail Investor in Indonesia: A Preliminary Study
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Abstract
This study explores the existence of overconfidence among potential retail investors in Indonesia when deciding to participate in the stock market. The investigation was conducted using a quick survey followed by interviews with two informants. The results indicate that overconfidence in financial literacy does exist in individuals. This study is preliminary, so its results can be used as a basis for further research. A suggested direction for further research is to examine the causal relationship between overconfidence and stock market participation in the Indonesian context.
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How to Cite
Justina, D. (2025). Overconfidence and Stock Market Participation of Potential Retail Investor in Indonesia: A Preliminary Study. ProBisnis : Jurnal Manajemen, 16(4), 916–924. Retrieved from https://ejournal.joninstitute.org/index.php/ProBisnis/article/view/1097
References
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Palia, D., Qi, Y., & Wu, Y. (2014). Heterogeneous Background Risks and Portfolio Choice: Evidence from Micro-level Data. Journal of Money, Credit and Banking, 46(8), 1687–1720.
Piaget, J. (1952). When Thinking Begins.
Pikulina, E., Renneboog, L., & Tobler, P. N. (2017). Overconfidence and investment: An experimental approach. Journal of Corporate Finance, 43, 175–192. https://doi.org/10.1016/j.jcorpfin.2017.01.002
Raut, R. K. (2020). Past behaviour, financial literacy and investment decision-making process of individual investors. International Journal of Emerging Markets, 15(6), 1243–1263. https://doi.org/10.1108/IJOEM-07-2018-0379
Sivaramakrishnan, S., Srivastava, M., & Rastogi, A. (2017). Attitudinal factors, financial literacy, and stock market participation. International Journal of Bank Marketing, 35(5), 818–841. https://doi.org/10.1108/IJBM-01-2016-0012
Xia, T., Wang, Z., & Li, K. (2014). Financial Literacy Overconfidence and Stock Market Participation. Social Indicators Research, 119(3), 1233–1245. https://doi.org/10.1007/s11205-013-0555-9
Abul, S. J. (2019). Factors influencing Individual Investor Behaviour: Evidence from the Kuwait Stock Exchange. Asian Social Science, 15(3), 27. https://doi.org/10.5539/ass.v15n3p27
Al-Hilu, K., Sohel Azad, A. S. M., Chazi, A., & Khallaf, A. (2017). Investors’ Behavior in an Emerging, Tax-Free Market. Emerging Markets Finance and Trade, 53(7), 1573–1588. https://doi.org/10.1080/1540496X.2016.1178110
Ali, M., Ansari, N. U. H., Chishty, B. A., Puah, C. H., & Ashfaq, M. (2023). Investor Behaviour and Investment Decisions: Evidence from Pakistan Stock Exchange. Asian Academy of Management Journal, 28(2), 1–28. https://doi.org/10.21315/aamj2023.28.2.1
Alleyne, P., & Broome, T. (2011). Using the theory of planned behaviour and risk propensity to measure investment intentions among future investors. Journal of Eastern Caribbean Studies, 36, 1–20. https://www.researchgate.net/publication/299483632
Apergis, N., Artikis, P. G., & Kyriazis, D. (2015). Does stock market liquidity explain real economic activity? New evidence from two large European stock markets. Journal of International Financial Markets, Institutions and Money, 38, 42–64. https://doi.org/10.1016/j.intfin.2015.05.002
Balasubramnian, B., & Sargent, C. S. (2020). Impact of inflated perceptions of financial literacy on financial decision making. Journal of Economic Psychology, 80. https://doi.org/10.1016/j.joep.2020.102306
Bao, H. X. H., & Li, S. H. (2020). Investor Overconfidence and Trading Activity in the Asia Pacific REIT Markets. Journal of Risk and Financial Management, 13(232), 1–21. https://doi.org/10.3390/jrfm13100232
Guiso, L., Haliassos, M., Jappelli, T., & Claessens, S. (2003). Household Stockholding in Europe: Where Do We Stand and Where Do We Go? Economic Policy, 18(36), 123–170.
Haliassos, M., & Bertaut, C. C. (1995). Why do so Few Hold Stocks? The Economic Journal, 105(432), 1110–1129. https://about.jstor.org/terms
Hou, H., & Cheng, S. Y. (2017). The dynamic effects of banking, life insurance, and stock markets on economic growth. Japan and the World Economy, 41, 87–98. https://doi.org/10.1016/j.japwor.2017.02.001
Huij, J., & Post, T. (2011). On the performance of emerging market equity mutual funds. Emerging Markets Review, 12(3), 238–249. https://doi.org/10.1016/j.ememar.2011.03.001
Huston, S. J. (2010). Measuring Financial Literacy. Journal of Consumer Affairs, 44(2), 296–316. https://doi.org/10.1111/j.1745-6606.2010.01170.x
Larrick, R. P., Burson, K. A., & Soll, J. B. (2007). Social comparison and confidence: When thinking you’re better than average predicts overconfidence (and when it does not). Organizational Behavior and Human Decision Processes, 102(1), 76–94. https://doi.org/10.1016/j.obhdp.2006.10.002
Lusardi, A., & Mitchell, O. S. (2008). Planning and Financial Literacy: How Do Women Fare? Ssrn, 98(2). https://doi.org/10.2139/ssrn.1094097
Marques, L. M., Fuinhas, J. A., & Marques, A. C. (2013). Does the stock market cause economic growth? Portuguese evidence of economic regime change. Economic Modelling, 32(1), 316–324. https://doi.org/10.1016/j.econmod.2013.02.015
Miller, D. J., Spengler, E. S., & Spengler, P. M. (2015). A meta-analysis of confidence and judgment accuracy in clinical decision making. Journal of Counseling Psychology, 62(4), 553–567. https://doi.org/10.1037/cou0000105
Moore, D. A., & Healy, P. J. (2008). The Trouble With Overconfidence. Psychological Review, 115(2), 502–517. https://doi.org/10.1037/0033-295X.115.2.502
Muthukrishna, M., Henrich, J., Toyokawa, W., Hamamura, T., Kameda, T., & Heine, S. J. (2018). Overconfidence is universal? Elicitation of genuine overconfidence (EGO) procedure reveals systematic differences across domain, task knowledge, and incentives in four populations. PLoS ONE, 13(8). https://doi.org/10.1371/journal.pone.0202288
Palia, D., Qi, Y., & Wu, Y. (2014). Heterogeneous Background Risks and Portfolio Choice: Evidence from Micro-level Data. Journal of Money, Credit and Banking, 46(8), 1687–1720.
Piaget, J. (1952). When Thinking Begins.
Pikulina, E., Renneboog, L., & Tobler, P. N. (2017). Overconfidence and investment: An experimental approach. Journal of Corporate Finance, 43, 175–192. https://doi.org/10.1016/j.jcorpfin.2017.01.002
Raut, R. K. (2020). Past behaviour, financial literacy and investment decision-making process of individual investors. International Journal of Emerging Markets, 15(6), 1243–1263. https://doi.org/10.1108/IJOEM-07-2018-0379
Sivaramakrishnan, S., Srivastava, M., & Rastogi, A. (2017). Attitudinal factors, financial literacy, and stock market participation. International Journal of Bank Marketing, 35(5), 818–841. https://doi.org/10.1108/IJBM-01-2016-0012
Xia, T., Wang, Z., & Li, K. (2014). Financial Literacy Overconfidence and Stock Market Participation. Social Indicators Research, 119(3), 1233–1245. https://doi.org/10.1007/s11205-013-0555-9