Jogiyanto Hartono
Faculty Economics And Business, Universitas Gadjah Mada, Indonesia

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Journal : Indonesian Capital Market Review

The Formation of Rational and Irrational Behaviors in Risky Investment Decision Making: Laboratory Experiment of Coping Theory Implication in Investors’ Adaptation Model Wendy, Wendy; Asri, Marwan; Hartono, Jogiyanto
The Indonesian Capital Market Review Vol. 4, No. 2
Publisher : UI Scholars Hub

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Abstract

This study analyzes the stock investor's rational and irrational behavior formation through Investor's Adaptation model. Hypotheses testings were conducted by manipulating four market conditions using between-subject experimental design. The results supported the hypotheses proposed in this study. When given treatment one (opportunity-high control), investors tended to adapt the profit maximizing strategy (rational). Meanwhile, when given treatment two (opportunity-low control), three (threat-high control) and four (threat-low control), they tended to adapt the profit satisfying strategy (rational-emotional), bad news handling strategy (emotional-rational), and self-preserving strategy (irrational) respectively. The application of rational strategies are intended to obtain personal benefits and profit, while adapting irrational strategy is intended to recover emotional stability and reduce some other tensions. Another finding showed that for the investors, the relatively irrational decision formation was "harder" than that of rational.