The Moderating Effect of Gender on Overconfidence in Investment Decisions
DOI:
https://doi.org/10.47065/arbitrase.v7i1.3426Keywords:
Overconfidence; Investment Decisions; Gender; Indonesia Stock Exchange; Behavioral FinanceAbstract
This study examined the influence of overconfidence on the investment decisions of Indonesian individual or retail investors.The research design used in this study uses quantitative survey approach. The questionnaire was distributed online using the Populix platform.
The analysis used Hayes' Moderation Model 1, utilizing a quantitative survey of 500 retail investors from the Indonesia Stock Exchange (IDX). This study explored the moderating effect of gender on the relationship of overconfidence and investment decisions. The results showed that overconfidence significantly increased investment decisions, with the relationship being more pronounced in men than in women. Overconfidence positively influenced investment decisions for both genders, with a more pronounced effect on male investors, as evidenced by the conditional effect. These findings advance behavioral finance by demonstrating gender-specific effects of overconfidence in emerging markets and suggest that investor education and risk communication strategies should be tailored to demographic characteristics of investors, particularly gender, to more effectively address overconfidence bias.Downloads
References
Abideen, Z. U. I., Ahmed, Z., Qiu, H., & Zhao, Y. (2023). Do Behavioral Biases Affect Investors’ Investment Decision Making? Evidence from the Pakistani Equity Market. Risks, 11(6). https://doi.org/10.3390/risks11060109
Andrew F. Hayes. (2022). Introduction to Mediation, Moderation, and Conditional Process Analysis A Regression-Based Approach THIRD EDITION (A. F. Hayes, Ed.; THIRD EDIT). THE GUILFORD PRESS.
Bakar, S., & Yi, A. N. C. (2016). The Impact of Psychological Factors on Investors’ Decision Making in Malaysian Stock Market: A Case of Klang Valley and Pahang. Procedia Economics and Finance, 35. https://doi.org/10.1016/s2212-5671(16)00040-x
Baker, H. K., Dewasiri, N. J., Yatiwelle Koralalage, W. B., & Azeez, A. A. (2019). Dividend policy determinants of Sri Lankan firms: a triangulation approach. Managerial Finance, 45(1), 2–20. https://doi.org/10.1108/MF-03-2018-0096
Barber, B. M., & Odean, T. (2000). Trading is hazardous to your wealth: The common stock investment performance of individual investors. Journal of Finance, 55(2). https://doi.org/10.1111/0022-1082.00226
Barber, B. M., & Odean, T. (2001). Boys will be boys: Gender, overconfidence, and common stock investment. Quarterly Journal of Economics, 116(1). https://doi.org/10.1162/003355301556400
Barberis, Nicholas & Thaler, R. (2002). A Survey of Behavioral Finance. https://doi.org/doi.org/10.3386/w9222
Brav, A., Graham, J. R., Harvey, C. R., & Michaely, R. (2005). Payout policy in the 21st century. Journal of Financial Economics, 77(3), 483–527. https://doi.org/10.1016/j.jfineco.2004.07.004
Chen, G., Kim, K. A., Nofsinger, J. R., & Rui, O. M. (2007). Trading performance, disposition effect, overconfidence, representativeness bias, and experience of emerging market investors. Journal of Behavioral Decision Making, 20(4). https://doi.org/10.1002/bdm.561
Chishti, M. F., Ali, F., Khan, M. R., Khan, I., Luong, N. T., & Ghouri, A. M. (2025). Understanding behavioural biases in investment decisions: empirical insights from an emerging market. Cogent Economics and Finance, 13(1). https://doi.org/10.1080/23322039.2025.2567499
Croson, R., & Gneezy, U. (2009). Gender Differences in Preferences. Journal of Economic Literature, 47(2), 448–474. https://doi.org/10.1257/jel.47.2.448
Daniel, K., Hirshleifer, D., & Subrahmanyam, A. (1998). Investor psychology and security market under- and overreactions. Journal of Finance, 53(6). https://doi.org/10.1111/0022-1082.00077
Deaves, R., Lüders, E., & Luo, G. Y. (2009). An experimental test of the impact of overconfidence and gender on trading activity. Review of Finance, 13(3). https://doi.org/10.1093/rof/rfn023
Divakara Reddy, N., Santosh, B. R., S, A., & Desai, G. (2025). Behavioral Biases and Investment Decision-Making in the Indian Stock Market: The Moderating Role of Financial Literacy and Investor Experience. F1000Research, 14. https://doi.org/10.12688/f1000research.171289.1
Gervais, S., & Odean, T. (2001). Learning to be overconfident. Review of Financial Studies, 14(1). https://doi.org/10.1093/rfs/14.1.1
Glaser, M., Langer, T., & Weber, M. (2007). On the Trend Recognition and Forecasting Ability of Professional Traders. Decision Analysis, 4(4). https://doi.org/10.1287/deca.1070.0099
Grinblatt, M., & Keloharju, M. (2009). Sensation seeking, overconfidence, and trading activity. Journal of Finance, 64(2). https://doi.org/10.1111/j.1540-6261.2009.01443.x
Hayes, A. F. (2018). Introduction to mediation, moderation, and conditional process analysis: A regression-based approach (Second edi). New York: The Guilford Press.
Indonesia Stock Exchange. (n.d.). Jumlah Investor Saham di Indonesia Lampaui 6 Juta SID .
Inghelbrecht, K., & Tedde, M. (2024). Overconfidence, financial literacy and excessive trading. Journal of Economic Behavior and Organization, 219. https://doi.org/10.1016/j.jebo.2024.01.010
Jain, J., Walia, N., & Gupta, S. (2019). Evaluation of behavioral biases affecting investment decision making of individual equity investors by fuzzy analytic hierarchy process. Review of Behavioral Finance, 12(3). https://doi.org/10.1108/RBF-03-2019-0044
Kahneman, D., & Tversky, A. (1979). Kahneman & Tversky (1979) - Prospect Theory - An Analysis Of Decision Under Risk.pdf. In Econometrica (Vol. 47).
Kartini, K., & Nahda, K. (2021). Behavioral Biases on Investment Decision: A Case Study in Indonesia. Journal of Asian Finance, Economics and Business, 8(3). https://doi.org/10.13106/jafeb.2021.vol8.no3.1231
Kimeu, C. N., Anyango, W., & Rotich, G. (2016). Behavioural Factors Influencing Investment Decisions Among Individual Investors in Nairobi Securities Exchange. The Strategic Journal of Business & Change Management, 3(4).
Kumar, J., & Prince, N. (2023). Overconfidence Bias in Investment Decisions: A Systematic Mapping of Literature and Future Research Topics. In FIIB Business Review. https://doi.org/10.1177/23197145231174344
Lawrence, E. R., Nguyen, T. D., & Wick, B. (2024). Gender difference in overconfidence and household financial literacy. Journal of Banking and Finance, 166. https://doi.org/10.1016/j.jbankfin.2024.107237
Marciano, D., Wijaya, L. I., Sugianto, L. L., & Zunairoh, Z. (2025). The effect of behavioral factors on investment decision towards stock market between Indonesia, Japan, and Thailand. Jurnal Siasat Bisnis. https://doi.org/10.20885/jsb.vol29.iss2.art4
Masini, A., & Menichetti, E. (2013). Investment decisions in the renewable energy sector: An analysis of non-financial drivers. Technological Forecasting and Social Change, 80(3), 510–524. https://doi.org/10.1016/j.techfore.2012.08.003
Mishra, K. C., & Metilda, M. J. (2015). A study on the impact of investment experience, gender, and level of education on overconfidence and self-attribution bias. IIMB Management Review, 27(4). https://doi.org/10.1016/j.iimb.2015.09.001
Nga, J. K. h., & Ken Yien, L. (2013). The influence of personality trait and demographics on financial decision making among Generation Y. Young Consumers, 14(3). https://doi.org/10.1108/YC-11-2012-00325
Odean, T. (1998). Are investors reluctant to realize their losses? Journal of Finance, 53(5). https://doi.org/10.1111/0022-1082.00072
Ogunlusi, O. E., & Obademi, O. (2019). The Impact of Behavioural Finance on Investment Decision-making: A Study of Selected Investment Banks in Nigeria. Global Business Review. https://doi.org/10.1177/0972150919851388
Piehlmaier, D. M. (2025). The road not taken: a causal mediation analysis to explore gender differences in investor overconfidence. Humanities and Social Sciences Communications, 12(1). https://doi.org/10.1057/s41599-025-06076-0
Pompian, M. M. (2006). Behavioral finance and wealth management. John Wiley and Sons, NJ.
Prosad, J. M., Kapoor, S., & Sengupta, J. (2015). Behavioral biases of Indian investors: a survey of Delhi-NCR region. Qualitative Research in Financial Markets, 7(3). https://doi.org/10.1108/QRFM-04-2014-0012
Puspawati, D., & Yohanda, A. R. (2022). BIAS PERILAKU PADA KEPUTUSAN INVESTASI GENERASI MUDA. AKUNTABILITAS, 16(1). https://doi.org/10.29259/ja.v16i1.15724
Rahman, M., & Gan, S. S. (2020). Generation Y investment decision: an analysis using behavioural factors. Managerial Finance, 46(8). https://doi.org/10.1108/MF-10-2018-0534
Ritika, & Kishor, N. (2022). Development and validation of behavioral biases scale: a SEM approach. Review of Behavioral Finance, 14(2). https://doi.org/10.1108/RBF-05-2020-0087
Singh, D., Malik, G., & Jha, A. (2024). Overconfidence bias among retail investors: A systematic review and future research directions. Investment Management and Financial Innovations, 21(1). https://doi.org/10.21511/imfi.21(1).2024.23
Singh, H. P., Goyal, N., & Kumar, S. (2016). Behavioural biases in investment decisions?: An exploration of the role of gender. Indian Journal of Finance, 10(6), 51–62. https://doi.org/10.17010/ijf/2016/v10i6/94879
Statman, M., Thorley, S., & Vorkink, K. (2006). Investor overconfidence and trading volume. In Review of Financial Studies (Vol. 19, Number 4). https://doi.org/10.1093/rfs/hhj032
Toma, F.-M. (2015). Behavioral Biases of the Investment Decisions of Romanian Investorson the Bucharest Stock Exchange. Procedia Economics and Finance, 32. https://doi.org/10.1016/s2212-5671(15)01383-0
Tversky, A., & Koehler, D. J. (1994). Support Theory: A Nonextensional Representation of Subjective Probability. Psychological Review, 101(4). https://doi.org/10.1037//0033-295x.101.4.547
Ullah, I., Ullah, A., & Rehman, N. U. (2017). Impact of Overconfidence and Optimism on Investment Decision. International Journal of Information, Business and Management, 9(2).
Wijoyo, F., & Arifin, A. Z. (2024). OVERCONFIDENCE BIAS IN INVESTMENT DECISIONS ON INDONESIAN STOCK MARKET. International Journal of Application on Economics and Business, 2(2). https://doi.org/10.24912/ijaeb.v2i2.3430-3439
Bila bermanfaat silahkan share artikel ini
Berikan Komentar Anda terhadap artikel The Moderating Effect of Gender on Overconfidence in Investment Decisions
ARTICLE HISTORY
How to Cite
Issue
Section
Copyright (c) 2026 Rosyidah Rahmah, Nugraha Nugraha, Dian Kurnianingrum, Margareth Setiawan
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under Creative Commons Attribution 4.0 International License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (Refer to The Effect of Open Access).
