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Jakarta Post

Retail investors prone to bias, herd behavior, experts warn

  • Yunindita Prasidya

    Jakarta

Jakarta   /   Sat, August 1 2020   /  01:00 am
A visitor walks past a giant screen that displays information of the movement of stock prices at Indonesia Stock Exchange (IDX), Jakarta, on Friday, March 13, 2020. IHSG is closed with 11,823 points (0.24 percent) to 4,907.571 rise after experiencing trading halt twice.(JP/Seto Wardhana)

Retail investors, who have surged in numbers during the pandemic, are prone to behavioral bias and herd behavior, experts have warned, although the impact on the country’s stock exchange remained limited. The behavioral biases include confirmation bias, where people only want to hear things that align with their predisposed outlook and ignore those that are not, according to Budi Frensidy, a stock market expert from the Faculty of Economics and Business at the University of Indonesia. Another type of bias is availability bias, which refers to the tendency of people taking action based on familiar information, without further investigation. “Retail investors run into behavioral bias, something that institutional investors do not experience, as institutional investors have to refer to a set of guidelines or strict rules,” Budi said during a webinar on Tuesday, sa...