How Irrationality Works in Indonesia: A Case of Fake Investment

Tri Hendro Sigit Prakosa

Abstract

In the conventional economic perspective, people or investors are assumed to behave rationally when choosing investment alternatives to maximize their profits. Shiller (2000) showed that the Ponzi scheme is a form of irrational exuberance in which people or investors act irrationally. This study was aimed to investigate the impact of psychological biases (optimism bias, overconfidence, representativeness bias, confirmation bias, framing, and herding) to investors’ decisions to get involved in a Ponzi scheme. Regression analysis was employed to see the impact of these biases on the investment decisions. Data was collected through questionnaire from 38 investors (victims) who lived in several rural areas in Yogyakarta. The results of this study revealed that optimism bias, overconfidence, representativeness bias, confirmation bias, framing, and herding behavior have significant impact on investment decisions. However this study still has some limitations and needs further research.

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Paper Citation


in Harvard Style

Prakosa T. (2018). How Irrationality Works in Indonesia: A Case of Fake Investment.In Proceedings of the 7th International Conference on Entrepreneurship and Business Management - ICEBM Untar, ISBN 978-989-758-363-6, pages 314-319. DOI: 10.5220/0008492403140319


in Bibtex Style

@conference{icebm untar18,
author={Tri Hendro Sigit Prakosa},
title={How Irrationality Works in Indonesia: A Case of Fake Investment},
booktitle={Proceedings of the 7th International Conference on Entrepreneurship and Business Management - ICEBM Untar,},
year={2018},
pages={314-319},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0008492403140319},
isbn={978-989-758-363-6},
}


in EndNote Style

TY - CONF

JO - Proceedings of the 7th International Conference on Entrepreneurship and Business Management - ICEBM Untar,
TI - How Irrationality Works in Indonesia: A Case of Fake Investment
SN - 978-989-758-363-6
AU - Prakosa T.
PY - 2018
SP - 314
EP - 319
DO - 10.5220/0008492403140319