ABSTRACT : The purpose of this study is to examine the heuristic factors that cause investors to over / underreact to earnings information. This research uses a full factorial within-subject 2 x 2 laboratory experimental design. Participants in this study were 25 accounting and financial management students who had attended capital market schools (Sekolah Pasar Modal – SPM) on the Indonesia Stock Exchange. the results showed that representativeness heuristic is the role of psychology in overreaction behavior exhibited by investors, whereas underreaction behavior is due to the anchoring-adjustment heuristic experienced by investors.

KEYWORDS – Overreaction, Underreaction, Heuristic, Representativeness, Anchoring-adjustment.