The Role of Locus of Control in Moderating the Effect of Behavioral Bias on Investment Decision Making

Abstract

Making an investment decision involves deciding to take on additional income from an asset or assets in the hopes of earning a profit down the road. The purpose of this study is to present empirical evidence of how behavioral bias affects investors' decision-making while making investments, with the internal locus of control acting as a moderator. The 44,319 participants in this survey are all investors in the Denpasar area. Quota sampling was the procedure used to determine the sample. Using a questionnaire methodology, a survey method is employed to collect data. The information was gathered using a questionnaire methodology in a survey. The model of linear double regression equations used for the data analysis is called Moderated Regression Analysis (MRA), and it examines how moderation variables affect the relationship between independent and dependent variables. The populace was given questionnaires until 396 samples were gathered. The results of this study showed that decision-making about stock investments by investors is significantly impacted negatively by overconfidence bias, representativeness bias, anchoring bias, and herding bias. Additionally, the research shows that while the locus of control might increase the effect of herding on investor investment decisions, it can also lessen the influence of prejudice, representativity, and ancoring bias.

Keywords: Overconfidence Bias, Representativeness Bias, Anchoring Bias, Herding Bias, Locus of Control, Investment Decision

DOI: 10.7176/RJFA/15-5-01

Publication date: May 30th 2024