Questioning the Rationality of Individual Stock Market Investors in the 4.0 Era

DOI

10.2991/aebmr.k.200606.075How to use a DOI?

Keywords

rationality of investors, behavioural finance

Abstract

Online stock trading technology, on the one hand, is growing by present additional features, which provide investors more accurate investment decisions process, all for the purpose of its growth. Aside from that, neoclassical financial theory concept doesn’t provide satisfying clarification for the facts anomalies of stock market, one of which is the hypothesis on efficient market. The unsuccessful attempt of the market to reasonably determine assets price which result in overvaluation/undervaluation is one very prominent fact. It is often forgotten that investor behaviour is a key in market price formation for stock assets, drowned by the understanding that macroeconomic variables predominantly influencing prices on the stock market. The rationality of stock investors’ behaviour is the focus which this study attempts to fathom, based on investors being the central role of individuals. Based on the central role of individuals as investors, this study tries to explore the rationality of the behaviour of stock investors. Behavioural finance theory—alongside the existing online trading technology background—are the basis where conclusion of the rationality of individual investors in the stock market can be made. First, psychological dimension adheres to individuals, meaning that investors’ stable preference on risk-taking behaviour is not present. Second, heuristic behaviour—the tendency to simplify, reduce, or short-cut when processing information—found in individual investors potentially leads to a bias in risk-taking behaviour. Third, loss aversion is more predominantly found in the risk-taking behaviour by investors than the linearity concept of risk-return.

Copyright

© 2020, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Tyas Danarti
AU  - Ghozali Maskie
AU  - David Kaluge
AU  - Kresna Sakti
PY  - 2020
DA  - 2020/06/09
TI  - Questioning the Rationality of Individual Stock Market Investors in the 4.0 Era
BT  - Proceedings of the 23rd Asian Forum of Business Education(AFBE 2019)
PB  - Atlantis Press
SP  - 440
EP  - 444
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.200606.075
DO  - 10.2991/aebmr.k.200606.075
ID  - Danarti2020
ER  -