The Influence of Investment Horizon on Expected Returns and Risk Perception : Evidence from the Indonesian Market

This study analyzes the investment horizon from a behavioral point of view by examining the overall influence of different investment horizons on expected returns and risk perception in Indonesia. We used students of Master of Science, Master of Management, and Doctorate Programs at the Faculty of Economics and Business, Universitas Gadjah Mada, Indonesia as the sample in this research. Of the 217 questionnaires delivered, 172 questionnaires were completed, and hence were utilized in this study. We found that the respondents tend to overestimate the investment returns in shorter investment horizon, and tend to underestimate the expected returns in longer investment horizon. The participants tend to underestimate the long-term risk while overestimating the short-term risk. They also tend to assess lower subjective risk in longer horizon and are significantly inclined to forecast higher risk-adjusted expected returns in long investment horizon than those in short investment horizon