Investor Behavior in the Investment Decision Making : Are Expected Utility Theory, Prospect Theory, and Belief System Theory Have the Ability to Explain?

Investor behavior in the investment decision making is something dynamic, since the behavior is influenced by the respond of investor to the opportunity and demanding offered by the changes of economic environment. The changes of the economic environment can support the variety of investor behavior, and therefore, it is needed an evaluation from time to time in order to obtained the newest construct and preposition. The purpose of this paper is to formulate the construct and preposition that can be used to describe, predict and explain the investor behavior in the stock decision making in capital market. In order to achieve the purpose of the research, the method of research used for this research is Grounded Theory (Glaser and Strauss, 1967). The determination of the sampling method is snowball sampling, and the data collection technique is indepth interview. In order to get the construct and preposition as parts of the new theory, or at least to strengthen the existing theory, so before executing the indepth interview, review towards the existing theory that explain the behavior in the decision making to invest in capital market is firstly required. There is three theories to explain the investor behavior in the decision making of investment, i.e. Expected Utility Theory (Neumann and Morgenstern, 1955), Prospect Theory (Kahneman and Tversky, 1974), and Belief System Theory (Nwogugu, 2005). The result of this research is that there are several categories to be developed to become constructs and prepositions to strengthen the existing theory. The above constructs, among other things experience and understanding or knowledge to determine the satisfaction to make decision in investment. The finding construct that determines time period of investment is the source of fund, mean while the finding construct that determines variation in the disposition effect is the type of information analysis done by investor