The Effect Of Investor’S Psychological Condition In Investment Decision Making

Abstract

This study aims to analyze the psychology of investor in making investment decision. Investment decision is the factor in constituting market price of stocks as well as composite index in capital market. The purpose is to prove whether stock prices are constituted by merely rational decision making such as using fundamental or technical analysis or also by irrational one such as psychological investors such as fear, ambition, greedy or panic. This study uses qualitative methods approach, especially phenomenological approach to address the research questions. The data are generated from semi-structured interviews with several investors/traders in the Indonesia stock market. The results reveal that psychology condition has a role in the behavior of investors in making investment decisions and not only using rational consideration such as fundamental analysis or technical analysis to analyze the stock prices. Hence, the daily stock market or aggregately stock market composite index are constituted by simultaneously rational and irrational consideration of investors.