The Gambler’s Fallacy, the Halo Effect, and the Familiarity Effect Based on Risk Profile: Bullish and Bearish Market in Indonesia Stock Exchange

  • Putu Anom Mahadwartha University of Surabaya
  • Fitri Ismiyanti Airlangga University
  • Zunairoh Zunairoh University of Surabaya
Keywords: behavioral bias, investors’ risk profile, gambler’s fallacy, halo effect, familiarity effect

Abstract

This study tests three behavioral biases: the gambler’s fallacy, the halo effect, and the familiarity effect. The novelty is the behavioral bias in bullish and bearish markets, based on different investors’ risk profiles. The questionnaire used a Likert scale. This study argues that bullish and bearish markets, and different risk profiles, affect investors’ behavioral bias. The gambler’s fallacy occurs when markets are bullish and partially when markets are bearish. The halo effect without risk profile does not occur in either market, and the familiarity effect occurs in both markets. Investors with a very conservative risk profile will experience behavioral bias, especially the gambler’s fallacy and the familiarity effect, with bullish and bearish markets. Investors with a conservative risk profile will partially experience the halo effect in bullish markets.

Author Biographies

Putu Anom Mahadwartha, University of Surabaya

Mahadwartha, Putu Anom, is lecturer and dean at Faculty of Business and Economics, University of Surabaya. He earned his doctoral degree (2004) in Corporate Finance from Gadjah Mada University. His research interests are behavioral finance, corporate finance, and investment portfolio analysis. He has a publication in several national and international journals and as a reviewer for national and international journals.

 

Author’s contact detail: Faculty of Business and Economics, University of Surabaya; phone number: +6282140085507

Fitri Ismiyanti, Airlangga University

Ismiyanti, Fitri, is lecturer at Faculty of Economics and Business, Airlangga University. She earned her doctoral degree (2007) in Corporate Finance from Gadjah Mada University. Her research interests are behavioural finance, corporate finance, and corporate governance. She has a publication in several national and international journals and as a reviewer for national and international journals.

 

Author’s contact detail: Faculty of Economics and Business, Airlangga University; phone number: +6281336816923; e-mail

Zunairoh Zunairoh, University of Surabaya

Zunairoh, Zunairoh, is lecturer at Faculty of Business and Economics, University of Surabaya. She earned her master’s degree (2020) in Corporate Finance from Airlangga University. Her research interests are behavioural finance, corporate finance, and corporate governance. She has a publication in several national and international journals and as an editor for national journals.

 

Author’s contact detail: Faculty of Business and Economics, University of Surabaya; phone number: +6285735925943

References

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Published
2023-05-02
How to Cite
Mahadwartha, P. A., Ismiyanti, F., & Zunairoh, Z. (2023). The Gambler’s Fallacy, the Halo Effect, and the Familiarity Effect Based on Risk Profile: Bullish and Bearish Market in Indonesia Stock Exchange. Gadjah Mada International Journal of Business, 25(2), 143-171. Retrieved from https://journal.ugm.ac.id/v3/gamaijb/article/view/15804
Section
Articles