Recognition Heuristic Bias and Cognitive Heuristic In Investment Activities

Abstract

This study aims to examine in more depth the impacts caused by behavioral bias driven by recognition heuristics and cognitive heuristics in investment activities. This research method uses qualitative with phenomenology of data collection using participant observation and interviews with investors who join the domestic investment community. The results of this study indicate that investor perceptions of heuristic bias in investment activities consist of mental shortcuts and practical mindsets. The second finding is the type of heuristic bias in investment activities such as recognition heuristic bias and cognitive heuristics. The last finding in this study is the impact of recognition heuristic bias and cognitive heuristics in investment activities including suboptimal portfolio performance diversification and major losses on investments owned due to the use of heuristics. The implications of this study as a source of insight for investors to pay more attention to market information and financial readiness in order to avoid detrimental investment decisions and provide the expected benefits in the future. For the Financial Services Authority (OJK), it can be a guideline so that it can provide socialization to the public, especially for novice investors, regarding knowledge, benefits and how to invest properly and correctly to increase the interest and quality of knowledge of novice investors regarding investment.