Psychological Biases and Portfolio Decisions: Empirical Study on Gen-Z Stock Investors in Daerah Istimewa Yogyakarta

Abstract

The rapid growth of Generation Z retail investors in Indonesia's stock market highlights the growing relevance of behavioral finance in explaining investment decision-making. Moving beyond the assumption of full investor rationality, this study examines the effects of herding, overconfidence, anchoring bias, and financial literacy on portfolio decisions among Generation Z stock investors in Yogyakarta (DIY), Indonesia. A quantitative explanatory design was employed, using primary data collected via purposive sampling through a structured questionnaire distributed to active Generation Z retail investors on the Indonesia Stock Exchange, yielding 250 valid responses, analyzed using PLS-SEM via SmartPLS. The results indicate that herding, driven by digital information flows, overconfidence, and anchoring bias significantly and negatively influence portfolio decisions, while financial literacy significantly contributes to more rational and disciplined portfolio decision-making among young investors. These findings contribute to behavioral finance literature in emerging markets and offer practical implications for policymakers, brokerages, and financial educators in designing literacy programs and behaviorally informed digital platforms for Generation Z investors in DIY.