Disposition Bias Investor Decisions, Accounting Measures, Stock Price, and Certain Market Indicators in the Financial Crisis Period: The Fact from Indonesian Stock Exchange 2008-2009

Abstract

This study investigates how investor’s behavior i.e. disposition effect affect stock price in Indonesian Stock Exchange in the period of financial crisis (2008 – 2009). This study also investigates how are accounting measures (earning per share and book value per share) and certain market indicators (stock trading volume and stock price volatility) in the relationship of disposition effect and stock price. Multiple linear regression analyses perform to analyze of the population of 398 firms listed in the IDX in the year 2009, from where a sample of 53 firms was selected based on an inclusion criterion. This study uses daily investors transaction data of the period January-June 2008 (before financial crisis), July-December 2008 (during financial crisis), and January-June 2009 (after financial crisis). This study indicated that disposition bias by investors affect negatively stock price and weaken the positive relationship between EPS and SP during and after financial crisis period, but weaken the positive relationship between BVS and SP before financial crisis period. The other results show that VOL elicit negative effects on SP in the period before the financial crisis, but VOT has a negative effect on SP for the period during and after a financial crisis. Stock market practitioners and researchers should consider disposition bias by investors in the stock market to make better analyses of stock price, accounting measures, and certain market indicators. This study provide evidence that behavioral bias i.e. disposition effect by investors in decision making occurred in Indonesian Stock Exchange and affect negatively stock price and weakens the relationship between information of firm fundamental value and stock price during period of normal and financial crisis.