Risk perception and psychological behavior of investors in emerging market: Indonesian Stock Exchange

Capital market functions as a mediator between parties who have excess funds that is, investors and those who need the funds that is, emitents. Decision to sell and buy shares of a financial asset is very strategic decision for investors because it is associated with the chances of return to be earned in the future. The objective of this paper is to investigate the investor's psychology on buying and selling common stock in the stock exchange in emerging market. The specific purpose of this research is to provide the simultaneous empirical evidence about the perception of risk, psychology aspects towards the confidence and performance. The sample consists of 100 individual investors in Palembang, South Sumatera, Indonesia. The data were collected during March-May 2016 using questionnaire. Research findings show that perception of risk and psychology significantly affect confidence. Furthermore, confidence has a significantly positive impact on performance. This research has not been explained entirely towards the investor's psychological behavior aspects, so the additional variable may be needed as the full reflection of investor's psychology. The further research may use experimental study, starts from buying stocks, and factors that can be considered in selling stock.