EXAMINING BELIEF ADJUSTMENT MODEL AND INVESTORS
OVERCONFIDENCE ON INVESTMENT DECISION MAKING
U N D E R G R A D U A T E T H E S I S
Submitted to Qualify the Requirement of Undergraduate Program of
Accounting Department
Written by :
DYAH ERAS MITA
2013311078
SEKOLAH TINGGI ILMU EKONOMI PERBANAS S U R A B A Y A
2017
EXAMINING BELIEF ADJUSTMENT MODEL AND INVESTORS
OVERCONFIDENCE ON INVESTMENT DECISION MAKING
U N D E R G R A D U A T E T H E S I S
Submitted to Qualify the Requirement of Undergraduate Program of
Accounting Department
Written by :
DYAH ERAS MITA
2013311078
SEKOLAH TINGGI ILMU EKONOMI PERBANAS S U R A B A Y A
2017
v MOTTO
“Stand by yourself, not your title.
All you need is dream, believe, and make it happen”
“All we can do is live until the day we die, control what we can…
and fly free”
“I don‟t know what‟ll happen to me in the future,
but if something has fallen at my feet, then the least I can do is pick
it up”
“Life is about getting knocked down over and over, but still getting up
each time. If you keep getting up, you win”
-Dyah E. Mita-
………
“If you don‟t like the hand that fate‟s dealt with you, fight for a new one”
“When you give up, your dreams and everything else, they‟re gone”
“Every one of us must do what‟s in their power! If we‟re going to die anyway, then it‟s better to die fighting than to do nothing!”
“Sometimes you must hurt in order to know, fall in order to grow, lose
in order to gain. Because life‟s greatest lessons are learned through
pain”
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ACKNOWLEDGMENT
I place on record, my sense of gratitude to one and all, who directly or indirectly. Because of you all this „Bachelor of Economy‟ will be granted. [Pardon for the informal sense which is going to happen. Because you will only find a serious reading after this part.]
First of all, Alhamdulillahirobbil‟alamin, Allah always gives me a lot of mercy and guidance so that I can do this well. Every time I am looking at my last hope who flies away, YOU want me to know that life is a series of beginnings, not endings. Each time one door closes, YOU always open another doors and opportunities for me. Second of all, thanks to my father Maskuri and my mother Mutinah for always giving me permission to do all the things I have decided. No matter how hard for you to say „yes‟ but you let me going on. You have sacrificed in many ways and prayed all time to help me continue my undergraduate study. Finally, I can prove that rural girl also can be highly educated.
Also being grateful to Kemristekdikti and STIE Perbanas Surabaya who gave me chance to study by Bidikmisi Scholarship, especially in my expected major, the Accounting undergraduate. Here I found many great people who inspires me a lot. Thank you for the presidential letter given to me, it always brings me up every time I am going to give up.
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mate and my sharing partner. Mrs. Titik Sumarni who support me in joining some events and competitions. Mrs. Riski as my co-thesis advisor who patiently gave me suggestion and guidance in my thesis writing. Mrs. Erida to become like mother in campus. And all who I cannot mention one by one. Thanks for inspiring me!
I also want to express my sincere thanks to my sister, Lufi Y. Mursita who always be there both in happiness or sadness, becoming my single
parent in this city. You show me that family is not about blood, but it‟s
about someone who‟s willing to lift you up even when you‟re in your worst condition. Hopefully God bless us always and we can succeed in every way!
Damar Nakagawa, who always be there both in supporting and mocking at me, becoming my personal life counselor, and also my mate in pursuing my dreams. You are the greatest man I‟ve ever known; the one who made me jealous because you are accepted in the top university in the world but you choose to study in Switzerland at the end. Good luck on your Ph.D courses. Hopefully I can be as successful as you and let‟s meet up one day!
My sincere thanks goes to my best, Muhammad Andar Rahman, who always be there when I need motivation, becoming my sharing partner, and also my mate who always be matched in thinking. Thank you for sharing your writing course materials freely, it helps me so much in my thesis writing. Good luck on your thesis writing, soon to be Bachelor of Engineering. Hopefully we can always reach our dreams together! Dream, PRAY, Action!
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motivations and inspirations. Hopefully we will be success in our ways! Good Luck on your extension, Gigi!
Thanks also to my forever best friend and brother, Nimas Pujianto, my best partner in Accounting since high school who always be there both in my ups and downs. Truly apologize for leaving you in our old campus for pursuing full scholarship in STIE Perbanas Surabaya. I am glad that we are still connected to each other until know even though we are in different city. I believe that we are going to be successful. Good luck on your semi-accounting technological research!
Thanks to my best friends since the first day of my college-life until now: Isna, Theza, Evik, Nindita, Sandra, Laily, Eka, Jenny, Yasfin, Ryan, Hasan, Dao, Galih, and Andika. Thank you for all supports, kindness, and craziness. I am so overwhelmed with your support and kindness. My college-life has been completely messed-up and I think it could be worse without you all. I am so glad that we are still connected
to each other until know. You‟ve colored my days, guys. I cannot say
anything but love you. Let‟s reunite one day in the first marriage day of one of us! Haha
Thanks also to my BPM-BEM family in the year 2015-2016. That should be unforgettable memories we have ever had along this life journey. We have done and succeed many work programs together. You also can understand me so much. I believe you all are going to be successful. Let‟s reunite with a werewolf game one day! Haha. Cc: Laily, Dian, Nindita, Ria, Ilhaq, Lukman, Anjar, Gaby, Cici, Gitta, Noisa, Dhyas, Ikbar, Reny, Iil, Iffah, and Sely.
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A lot of appreciation is also given to my collaboration research team: Fairita, Eva, Taufan, Zahid, Rika, Aulida, Riza, and Anita. We already have done guys! Thank you for the great teamwork, togetherness, and craziness. Let‟s come on holiday! Thanks also to Ria, Alif and Sinta as Mrs. Lucy‟s students.
Thanks to my Amin-18 boardinghouse squad since 2013-2017: Diana, Grace, Sicil, and Fitri. You are so nice guys! Let‟s gather again in our rooftop to keep gossiping! May our sins are forgiven by Allah. LOL!
Thanks to all full-scholarshipers STIE Perbanas Surabaya 2013: Laily, Sandra, Ria, Maftuh, Dita, Anis, Rahayu, Agnes, Noisa, Dian, Nela, Reny, and Fiqhi. You all guys are definitely inspiring. Also my awesome partner for Accounting, Anis and Sandhi. I can not made it without you, guys. If those many occasions can be replayed, and we are back to the competition, let‟s do it once again with all sweat! I am always proud of our teamwork, although we just enjoyed our winning in the last days before my final study. Thank you for all the memories, the great experiences, the spirit, and all the fight. Let‟s chase a better future for a better life! I‟ll see you on the top, guys!
Thanks to all my Accounting Competition Team (AccTion Team) 2014-2016. I truly appreciate our togetherness. I entrust this lovable team to you all. Do not think to be the best, but think to do the best. All we need to do is simply trying to be better than the person we were yesterday. Keep solid and keep struggling for the periods ahead! Last but not the least, do not envy to one another!
Finally, once again thanks to all of people surround me to help me much in my process of study. Alhamdulillah, finally I got these 2 letters behind my name in 3.5 years. Hello all, see you on the top!
x PREFACE
The author would like to thank to the Most Merciful, Allah SWT who always give His grace for blessing me to finish this research entitled “Examining Belief Adjustment Model and Investors Overconfidence on Investment Decision Making”. My sincere thanks and appreciation are also given to all parties who
guided, helped, and prayed for me in completing this research, they are:
1. Dr. Lutfi, S.E., M.Fin. as the Head of STIE Perbanas Surabaya who has given me motivation in learning English and pursue my dreams.
2. Dr. Luciana Spica Almilia, S.E., M.Si, QIA, CPSAK as the Head of Accounting Undergraduate Department and my Thesis Advisor who has given her valuable guidance, patience, and suggestion in writing this thesis and also gives me support to push myself harder.
3. Riski Aprillia Nita, S.E., M.A. as my Co. Thesis Advisor who always gives me support and also recommendation in writing this thesis.
4. My parents who always support my effort and give me freedom to choose my own path.
5. All friends who were willing to listen and share each other for the thesis writing.
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try to deeply and specifically identify this topic combined with the investors overconfidence characteristics. Therefore, this can be categorized as a new research topic in STIE Perbanas Surabaya.
Since the emergence of stock market, it is considered to be paramount to study about the existence of overconfidence characteristics or bias judgment in investors belief revision on investment decision making. The result of this research is addressed to contribute to the accounting literature is the existence of belief adjustment model developed by Hogarth and Einhorn that will be examined in this research in setting the investment decision. The author expect this research is going to be useful and beneficial for all the parts who read this.
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2.2 Theoretical Review ... 38
2.3 Theoretical Framework ... 45
2.4 Research Hypothesis ... 50
CHAPTER III RESEARCH METHOD ... 54
3.1 Research Design ... 54
3.2 Research Scope ... 55
3.3 Variable Identification ... 56
3.4 Operational Definition ... 57
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3.6 Experimental Procedure ... 61
3.7 Data Analysis Technique……….70
CHAPTER IV HYPOTHESIS TESTING AND DISCUSSION……...…...73 4.1 Demographic Data and Manipulation Check………...73 4.2 Experimental Research Chronology…...……….77 4.3 Examining The Effect of Information Order Presentation and Step-by-
Step Information Disclosure Pattern on Investment Decision Making....83 4.4 Discussion on The Effect of Information Order Toward The Final
Judgment of Participants in Step-by-Step………....90 4.5 Examining The Effect of Information Order Presentation and
End-of-Sequence Information Disclosure Pattern on Investment Decision
Making……….96
4.6 Discussion on The Effect of Information Order Toward The Final
Judgment of Participants in End-of-Sequence ….……….101
CHAPTER V CONCLUSIONS……….108
5.1 Conclusions………108
5.2 Research Limitations………..111
5.3 Recommendations………..112
REFERENCES
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LIST OF TABLE
Table 2.1 Expected Order Effect based on Belief Adjustment Model...40
Table 3.1 Hypothesis Testing Cell………..……….71
Table 4.1 List of Available and Eligible Participant………...75
Table 4.2 List of Participant based on Research Scenarios…………....75 Table 4.3 Demographic Information of Research Participant...76
Table 4.4 Average Final Judgment on SBS Accounting……...……….84
Table 4.5 Average Final Judgment on SBS Non-Accounting………..…..84
Table 4.6 Normality Test Result for H1………..………...85
Table 4.7 Normality Test Result for H2……….………....86
Table 4.8 Independent Sample T-Test for H1…..………..…87
Table 4.9 Independent Sample T-Test for H2………….………..89
Table 4.10 Hypothesis 1 Testing Result………..………..…...91
Table 4.11 Hypothesis 2 Testing Result……….………...91
Table 4.12 Normality Test Result for H3………..…...96 Table 4.13 Normality Test Result for H4………...………..……97 Table 4.14 Mann-Whitney U Test Result for H3………..…...98
Table 4.15 Independent Sample T-Test for H4………...……….….100
Table 4.16 Hypothesis 3 Testing Result……..…...………..…..102
Table 4.17 Hypothesis 4 Testing Result...…….………102
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LIST OF FIGURE
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LIST OF APPENDIX
Appendix 1 List of Available and Eligible Participant Appendix 2 List of Eliminated Participant
Appendix 3 List of Participant Based on Scenario Appendix 4 Basic Investment Test Instrument Appendix 5 Calibration Test Instrument Appendix 6 Research Instrument (Scenario I) Appendix 7 Research Instrument (Scenario II) Appendix 8 Research Instrument (Scenario III) Appendix 9 Research Instrument (Scenario IV) Appendix 10 Research Instrument (Scenario V) Appendix 11 Research Instrument (Scenario VI) Appendix 12 Research Instrument (Scenario VII) Appendix 13 Research Instrument (Scenario VIII) Appendix 14 Calibration Test Result
Appendix 15 Hypothesis Testing Result
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EXAMINING BELIEF ADJUSTMENT MODEL AND INVESTORS OVERCONFIDENCE ON INVESTMENT DECISION MAKING
This research aims to examine whether there is a different judgment between the investor who receives good news followed by bad news (++--) and the one who receives bad news followed by good news (--++) information order in both the Step by Step disclosure pattern and the End of Sequence disclosure pattern by using accounting information type and non-accounting information type with long series information and investor overconfidence characteristics on investment decision making. This research is included to the experimental design by using a mixeddesignof between-subjectsandwithin-subjectdesign. This research is classified as an experimental research which uses 2x2x2x2 experimental method. To find the result, it conducts normality test, independent sample t-test, and Mann-Whitney U test examined by SPSS version 22.0. This current research uses primary data. Participants used in this research are undergraduate business students (management undergraduate or accounting undergraduate) in STIE Perbanas Surabaya who are studying and/or has completed investment management and/or financial statement analysis courses who will serve as non-professional investors. The results obtained in this research showed that recency effect occurred between the investor who receives good news followed by bad news and the one who receives bad news followed by good news in the step by step disclosure pattern, while there is no order effect occurred when the disclosure pattern used is the end of sequence.The result of this research is addressed to contribute to the accounting literature, practices and policies in setting investment decision.
