DOES RISK PROPENSITY INFLUENCE INVESTMENT DECISION BIAS?:AN EXPLORATORY STUDY ON INDONESIAN STOCK EXCHANGE INVESTORS

Abstract

This study aims to analyze the influence of risk propensity on various cognitive biases in investment decision-making among investors in Indonesia. The research method uses a quantitative and exploratory approach with questionnaires distributed to 110 individual investors. The results of the study show that risk propensity has a significant positive influence on belief perseverance bias and information processing bias. Furthermore, the study found that risk propensity is also associated with several dimensions of cognitive bias, such as conservatism bias, confirmation bias, representativeness bias, and cognitive dissonance bias. However, the influence of risk propensity was not significant on illusion of control bias, self-attribution bias, and outcome bias. These findings provide important implications for investment management firms in identifying clients' risk profiles to help them overcome cognitive biases in investment decision-making.