Risk Tolerance and Investment Performance From The Perspective of Generation
Keywords:
Behavioral Finance, Generation, Investment Performance, Investors, Risk ToleranceAbstract
Millennials now dominate the capital market as first-time investors. Novice investors tend to rely on a heuristic approach to decision-making, which often speeds up the decision-making process but can also lead to misjudgments and investment choices that are more personally satisfying than rational. As a result, these investment decisions are not optimal, which then negatively impacts investment performance. This paper explores how investor generations influence the relationship between risk tolerance and investment performance. This study uses quantitative methods with primary data, and involves 1000 active investors on the Indonesia Stock Exchange as the unit of analysis. The analysis was conducted using Process Macro for SPSS (Hayes model 1) for regression test. The results show that investor generation significantly moderates the effect of risk tolerance on investment performance. This indicates that the relationship between risk tolerance and investment performance gets stronger as the generation variable increases. Risk tolerance is found to have a significant negative impact on investment performance, especially in older generations, who have experience in taking risks (with lower risk tolerance), but ultimately result in better investment performance.
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