THE SIGNIFICANCE OF ANCHORING BIAS IN ESTIMATING FINANCIAL AND ECONOMIC INDICATORS: AN EXPERIMENTAL STUDY IN INDONESIA SETTING
ABSTRACT: Anchoring, in
Behavioral Finance terminology, refers to people's tendency to rely too much on
the initial piece of information offered (the "anchor"). Anchoring is
widely found in decion making processes, where people make estimates about the
likelihood of uncertain events or to predict or recall certain values or
outcomes by considering the anchor value and adjusting it upwards or downwards
to reach a final estimate. Such adjustments are often insufficient, leaving a
cognitive bias in the direction of the initial anchor value (Tversky & Kahneman,
1974). This experimental study was performed in order to detect the presence of
anchoring bias in Indonesian setting. Following Kudryavtsev and Cohen (2010)’s
procedure, we randomly devided participants into two groups, namely: “control
group” (where participants did not receive any anchor value) and “anchoring
group” (where participants received some anchoring values). Participants in
both groups were instructed to provide their best estimations or answers to
questions regarding financial and economic issues. Anchors and the questions
were presented with the same order and were expressed in the same scale. Using
students of Master of Management Program Universitas Gadjah Mada as
respondents, this research was aimed to see whether the answers provided by
participants in the anchoring group were affected by the anchor values.
Further, we would like to test whether the degree of anchoring biases among
female respondents were higher than the biases among male respondents; whether
questions related to older topics created higher anchoring biases than the
newer ones; and finally, whether anchoring bias among non-finance major
students were higher than those among finance students. The results show that
anchoring biases were identified among all participants. However, we could not
identify higher degree of anchoring bias among female participants than those
among male participants. Similarly, we did not identify higher biases in
answering questions with older topics than the newer ones. Finally, higher degree
of anchoring biases were found among non-finance major students than in finance
major students, suggesting the type of
knowledge might affect the degree of anchoring bias.
Keywords: anchoring, anchoring
bias, anchoring and adjustment, financial and economic indicator
Penulis: Tassya Andini, Marwan
Asiri
Kode Jurnal: jpmanajemendd141300
