Investment Decision-Making Under Behavioral And Market Influences

Abstract

This study examines the effects of herding behaviour, perceived market efficiency, and investment performance on the investment decisions of individual investors in the Indonesian capital market, while investigating investor experience as both a direct predictor and a moderating variable. A quantitative approach was employed using data from 225 individual investors, and the proposed relationships were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results show that herding behaviour has no significant effect on investment decisions, whereas perceived market efficiency has a significant negative effect and investment performance has a significant positive effect. Investor experience has a positive and significant direct effect on investment decisions. Furthermore, investor experience positively moderates the relationship between perceived market efficiency and investment decisions and negatively moderates the relationship between investment performance and investment decisions, but does not significantly moderate the effect of herding behaviour. These findings extend the behavioral finance literature by demonstrating that investor experience functions as a boundary condition that alters the effects of market perceptions and prior investment performance on investment decisions. Practically, the findings highlight the importance of investor education that strengthens market information evaluation, risk assessment, and learning from previous investment outcomes rather than relying primarily on social investment cues.