The Effect of Overconfidence and Representativeness on Investment Decisions of Capital Market Investors with Financial Literacy as a Moderating Variable

Abstract

This research aims to determine the influence of behavioral finance factors on investors’ investment decisions in the capital market, where investment choices are often affected by emotional and irrational factors that may lead to suboptimal returns. The study focuses on two behavioral biases, namely overconfidence and representativeness, while also examining financial literacy as a moderating variable that is expected to reduce bias in investment decision-making. This research was conducted by distributing questionnaires to 100 respondents consisting of investors in Semarang City who have been actively investing for at least one year. Data analysis was carried out using SPSS version 25 with Multiple Regression Analysis (MRA) techniques. The results show that both overconfidence and representativeness have a significant effect on investment decisions. Furthermore, financial literacy is able to moderate the influence of representativeness on investment decisions, but it is not able to moderate the effect of overconfidence on investment decisions among investors in Semarang City.