Behavioural Biases of Overconfidence and Disposition Effect and their Impact on Investment Decision in the Indonesian Capital Market

The Odean methodology revealed that investors are more susceptible to realizing profits than losses as indicated by disposition effects. This study intended to analyze the effect of overconfidence bias and the disposition effect on investment decisions in Indonesia. The sampling method was purposive sampling, with the respondents being 40 young investors who were members of Club Investors. Data collection was done by distributing questionnaires. The analysis method in this study was quantitative analysis. The analytical tool used was binomial regression analysis and multiple linear regression. Binomial regression was used to discover investor behavior and whether it tended to be biased or rational in its investment decisions. After discovering the attitude of the investors, be it biased or rational, the effect of the bias was analyzed using multiple linear regression. A multiple linear test was used to predict the probability of influence of each investment decision variable. The results showed that overconfidence had an effect on investment decisions. Some investors tend to experience an overconfidence bias in decision making, which shows that the investors feel very confident in their experience and ability to choose stocks. The investors believe that the results will be in line with their expectations.