scholarly journals The Influence of Behavioural Finance Factors and the Moderating Effects of Contextual and Demographic Factors on Individual Investor’s Investment Performance

2020 ◽  
Vol 9 (3) ◽  
pp. 101
Author(s):  
Tuan Hamidon ◽  
Sampath Kehelwalatenna
Keyword(s):  
Stock Exchange ◽  
Investment Decision ◽  
Individual Investors ◽  
Investment Performance ◽  
Behavioural Finance ◽  
Investment Decision Making ◽  
Study Results ◽  
Aggregate Effect ◽  
Market Factors ◽  
The Relationship

Individual investors trading at the Colombo Stock Exchange (CSE), Sri Lanka, behave irrationally despite objective finance models available for them to refer in making rational decisions. Therefore this paper examines the irrationality by testing whether behavioural finance factors (BF), stock broker’s recommendations (SBR) as a contextual factor, and individual investor’s existing knowledge of the stock market (EK) as a demographic factor affect individual investor’s investment performance (IP). Heuristic behaviour, prospect behaviour and market factors were conceptualised as independent variables of the study whereas SBR and EK act as moderators on the relationship between BF and IP. Data of 221 individual investors of CSE during first half of 2019 were analyzed using structural models to draw empirical evidence to test hypotheses of the study. Results of the study reveal that market information and past stock trends as market factors have a significant bearing on investment decision making, which ultimately affect IP, while the aggregate effect of BF upholds a significant impact on IP. The results expose some novel findings such as: investors receive inferior financial returns when imitating other investors’ trading behaviour whilst trading on SBR; receive lower returns once trading on market factors whilst resuming SBR; and receive mediocre returns when EK is affirmative whilst following other investors’ decisions; and suffer losses when trading on market factors whilst exploiting EK. The findings imply that the stock brokers should not merely consider the output of objective finance models, but market wide herding, market manipulations, market factors and EK in investment recommendations.

scholarly journals An Analysis of Behavioral Biases in Investment Decision-Making

2019 ◽  
Vol 10 (4) ◽  
pp. 55 ◽  
Author(s):  
Geetika Madaan ◽  
Sanjeet Singh
Keyword(s):  
Decision Making ◽  
Positive Impact ◽  
Stock Exchange ◽  
Investment Decision ◽  
Investment Decisions ◽  
Individual Investors ◽  
Behavioral Biases ◽  
Investment Decision Making ◽  
Survey Responses ◽  
The Impact

Individual investor’s behavior is extensively influenced by various biases that highlighted in the growing discipline of behavior finance. Therefore, this study is also one of another effort to assess the impact of behavioral biases in investment decision-making in National Stock Exchange. A questionnaire is designed and through survey responses collected from 243 investors. The present research has applied inferential statistics and descriptive statistics. In the existing study, four behavioral biases have been reviewed namely, overconfidence, anchoring, disposition effect and herding behavior. The results show that overconfidence and herding bias have significant positive impact on investment decision. Overall results conclude that individual investors have limited knowledge and more prone towards making psychological errors. The findings of the study also indicate the existence of these four behavioral biases on individual investment decisions. This study will be helpful to financial intermediaries to advice their clients. Further, study can be elaborated to study other behavioral biases on investment decisions.

scholarly journals Impact of Behavioral Factors in Making Investment Decisions and Performance: Study on Investors of National Stock Exchange

2019 ◽  
Vol 11 (8) ◽  
pp. 80
Author(s):  
Sarika Keswani ◽  
Vippa Dhingra ◽  
Bharti Wadhwa
Keyword(s):  
Decision Making ◽  
Stock Exchange ◽  
Investment Decision ◽  
Individual Investors ◽  
Behavioral Factors ◽  
Performance Study ◽  
Investment Performance ◽  
Factors Affecting ◽  
Cronbach Alpha ◽  
The Impact

Market anomalies and irrational behavior caused investors changes in the stock market, and this has led to an investigation into the impact of various behavioral biases and factors affecting decision-making for individual investors. The purpose of this study was to find out the effect of the four factors, heuristic, prospect, market, herding on decisions of investors at NSE. Data are collected from the questionnaire on the basis of a likert scale. To determine the reliability of the questionnaire, the Cronbach alpha factor, which was 0.728, was used. EFA and multiple regression tests have been applied. Cronbach-alpha was used to check the interal consistency of the element. Cronbach alpha emphasized to each factor: Heuristic, Prospect, Market, Herding, Investment performance and Investors decisions that consistency at an acceptable level. The result of the analysis is that the four variables have greatly influenced the investment decision and return on investment. All behavioral variables have a significant impact on the decision-making process of investors, which led to the acceptance of all assumptions regarding the level of influence of behavioral factors in decision making for individual investors.

scholarly journals Study of Investment Decisions and Personal Characteristics through Risk Tolerance: Moderating Role of Investment Experience

2020 ◽  
Vol 9 (34) ◽  
pp. 57-68
Author(s):  
Nasira Perveen ◽  
Ashfaq Ahmad ◽  
Muhammad Usman ◽  
Faiza Liaqat
Keyword(s):  
Positive Impact ◽  
Stock Exchange ◽  
Investment Decision ◽  
Investment Decisions ◽  
Personal Characteristics ◽  
Risk Tolerance ◽  
Individual Investors ◽  
Financial Advisors ◽  
Investment Experience ◽  
The Relationship

Investment decisions could be affected by behavioral biases associated with personal characteristics. This study empirically investigates the effect of personal characteristics on investors’ investment decision through risk tolerance. Furthermore, investment experience moderates the nexus between personal characteristics and risk tolerance. The scale consisting of 24 items was used related to selected constructs and variables. Data was collected form 175 individual investors of Pakistan Stock Exchange. PLS-SEM was used to make statistical analysis. The findings indicate that extraversion has substantial positive impact on investment decisions. Moreover, risk tolerance partially mediates the relationship between extroversion and investment decisions. The relationship between introversion and investment decisions is negative and risk tolerance partially mediates the aforesaid relationship. Furthermore, it is statistically proved that investment experience substantially moderates the association between extraversion and risk tolerance. However, investment experience does not play any conditional role in the association between introversion and risk tolerance. This study can be helpful for financial advisors to provide best consultancy to their clients (investors), while considering their personal characteristics.

scholarly journals The Behavior Patterns of Investors in Thailand Stock Market

2017 ◽  
Vol 9 (1) ◽  
pp. 155
Author(s):  
Quan Nhu Tran
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Stock Exchange ◽  
Investment Decision ◽  
Behavior Patterns ◽  
Individual Investors ◽  
True Value ◽  
Investment Decision Making ◽  
Depth Interview ◽  
Decision Making Processes

The purpose of this paper is to investigate behavioral patterns expressed by investors in the Thailand stock market. The paper examines investment decision-making processes in the context of the current financial market in Thailand to shed some light on behavioral-induced pattern behind such investments. Data for this research was collated from 8 individual investors by semi-structured and in-depth interview. There are four behavioral factors of individual investors in Thailand Stock Exchange: Overconfidence, Excessive Optimism, Psychology of risk, and Herding Behavior. Securities Companies may also use the findings of this research for better understanding on investors’ decision to give better recommendations to them. Stock prices then reflect their true value and Thailand stock market becomes the yardstick of the economy’s wealth and helps enterprises to raise capital for business activities.

scholarly journals Impact of Behavioral Factors in Making Investment Decisions and Performance: Evidence from Pakistan Stock Exchange

Market Forces ◽  
2021 ◽  
Vol 16 (1) ◽  
pp. 22
Author(s):  
Muhammad Rehan ◽  
Jahanzaib Alvi ◽  
Lubna Javed ◽  
Baber Saleem
Keyword(s):  
Decision Making ◽  
Behavioral Finance ◽  
Stock Exchange ◽  
Investment Decision ◽  
Investment Decisions ◽  
Individual Investors ◽  
Behavioral Factors ◽  
Factors Affecting ◽  
Investment Decision Making ◽  
The Impact

Market irregularities and irrational behavior triggered investor’s changes in the stock market, and this has led to an investigation into the impact of various behavioral biases and factors affecting decision-making for individual investors. The quality of individual investor behavior in making stock investment decisions is very important to be understood as a reference of the movement of the capital market. This study investigated the role of behavioral finance and investor psychology in investment decision-making at the Pakistan Stock Exchange (PSE). Using a sample of 147 individual investors, the study established that behavioral factors such as Herding, Heuristic, Market and Prospect that affected the decisions of the investors operating at the Pakistan Stock Exchange (PSE). As there are a few studies in Pakistan related to behavioral finance, so this study mainly contributes to the field of behavioral finance in Pakistan. This study focusses on existing theories of behavioral finance which led to develop the hypothesis. The result of the analysis is that the four variables have greatly influenced the investment decision and return on investment. All behavioral variables have a significant impact on the decision-making process of investors, which led to the acceptance of all assumptions regarding the level of influence of behavioral factors in decision making for individual investors

Factors affecting investment decision-making in Pakistan stock exchange

2018 ◽  
Vol 05 (04) ◽  
pp. 1850033 ◽  
Author(s):  
Adeel Mumtaz ◽  
Tahir Saeed ◽  
M. Ramzan
Keyword(s):  
Decision Making ◽  
Corporate Governance ◽  
Risk Aversion ◽  
Stock Exchange ◽  
Investment Decision ◽  
Least Square ◽  
Individual Investors ◽  
Investment Decision Making ◽  
Tools And Techniques ◽  
The Impact

This study analyzes the impact of various factors like heuristic, risk aversion, financial tools and techniques, firm’s corporate governance, and day-to-day experience on the investor’s decision-making. The sample consisted of 701 individual investors trading in the Pakistan Stock Exchange. The Ordinary Least Square (OLS) is used for the estimation of research models. The findings revealed that heuristics, risk aversion, financial tools and techniques have a significant positive effect on the investment decisions of investors. The day-to-day experience and corporate governance (CG) play an important role in investment decision-making of the financial sector in Pakistan. This study will contribute to creating awareness in a diversity of investors for investing in the equity market and increases the investors’ confidence.

The impact of social influence on the relationship between personality traits and perceived investment performance of individual investors

2018 ◽  
Vol 14 (1) ◽  
pp. 130-148 ◽  
Author(s):  
Fatima Akhtar ◽  
K.S. Thyagaraj ◽  
Niladri Das
Keyword(s):  
Social Influence ◽  
Personality Traits ◽  
Personality Trait ◽  
Investment Decision ◽  
Individual Investors ◽  
Research Approach ◽  
Investment Performance ◽  
Content Type ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to clarify the relationship between an individual investor’s personality trait and his perceived investment performance. It proposes a novel conceptual framework that integrates social influence (as a moderating construct) and outlines the role of personality in determining the perceived investment performance during the investment decision-making process. Design/methodology/approach A questionnaire-based survey was conducted to collect responses from 396 individual investors through stratified and quota sampling approach. The collected data were then analysed using both hierarchical regression analysis and structural equation modelling to evaluate the strength of the relationship between the constructs, namely, personality trait, perceived investment performance and social influence. Findings This study suggests that social influence positively moderates the relationship between extraversion-perceived investment performance, whereas it negatively moderates the relationship between agreeability-perceived investment performance. Research limitations/implications This study has certain limitations. First, this work follows a modelling approach which is more centred towards the prediction of relationships. Second, because of choosing a research approach (since the study has been conducted in one country, i.e. India), the results of the study may lack generalisability. Therefore, further studies could be encouraged to test the proposed hypotheses. Practical implications Insights from this study suggest that investors should look in for their personality traits while making an investment decision. In fact, psychologically modified portfolios should be developed as per the personality traits of the investors. Originality/value The study, perhaps, is the only study to apply social influence in a framework using Big Five personality traits as a possible factor to understand the individual differences in terms of perceived investment performance.

scholarly journals Demographic Factors and Herding Behaviour of Investors: Moderating Role of Islamic Religiosity

2020 ◽  
Vol 3 (2) ◽  
pp. 193-203
Author(s):  
Saeed Ahmad Sabir ◽  
Tasawar Javed ◽  
Waseem Ul Hameed ◽  
Hummaira Qudsia Yousaf
Keyword(s):  
Quantitative Research ◽  
Stock Exchange ◽  
Investment Decision ◽  
Demographic Factors ◽  
Individual Investors ◽  
Policy Makers ◽  
Investment Decision Making ◽  
Relationship Of ◽  
Moderating Role

Investors indulge in biases while making investment decision because investment decision making in stock market is a difficult process. One of the factors that affect risk taking behaviour of individual investors is Demographic factor. However, little work has been done to investigate the effect of demographic factors on herding behaviour of individual investors of Pakistan stock exchange. Therefore, the ultimate aim of this study is to highlight the role of the effect of demographic factors on herding behavior of investors with moderating role of Islamic religiosity. Quantitative research method was employed and data collected was collected from 166 individual investors by using survey questionnaires. Convenience sampling method was used to collect the data. Partial Least Squares analysis was conducted to test the hypotheses. The findings of this study directed that Islamic religiosity moderate the relationship of demographic factors with herding behaviour. This study is contributed a new empirical insights on behaviour of Pakistan stock market’s investors, therefore the results of this study have implications for policy makers of Pakistan stock exchange (PSX) while they making the strategies related to investment.

scholarly journals How Behavioral Factors Influence Investment Performance of Individual Investors in Pakistan Stock Market: A Moderated Mediation Approach

2021 ◽  
Vol 7 (3) ◽  
pp. 395-405
Author(s):  
Mumtaz Ahmad ◽  
Iqra Mehboob ◽  
Syed Zain ul Abdin
Keyword(s):  
Financial Literacy ◽  
Stock Exchange ◽  
Investment Decision ◽  
Primary Objective ◽  
Primary Data ◽  
Individual Investors ◽  
Security Market ◽  
Investment Efficiency ◽  
Behavioral Factors ◽  
Investment Performance

The primary objective of study is to know the influence of behavioral factors on investor’s investment decision and investment performance. Four behavioral factors as herding, prospect factors and market factors are used in this study and financial literacy as a moderating variable among the behavioral factors and investment decision. We use the questionnaire to collect primary data from individual investors actually trading in Pakistan Stock Exchange. For data analysis, we utilize AMOS software and Hayes Process tool in two stages. The findings reveal that behavioral factors positively influence investment decision and investment performance. But there is no moderating role of financial literacy. In addition to these, individual investors and security organizations can ultimately take advantage from the results of this research as a guide for their analysis and forecasting of security market trends in order to maximize the outcome and to improve their investment efficiency. Further, study recommended investigation of all investor types and in all financial markets including the behaviors of institutional investors along with behavioral financial factors; we should consider some economic factors that could have an impact on investors' decisions.

scholarly journals SOCIO-ECONOMIC, TRADING SOPHISTICATION AND SELF-REFLECTION ON INVESTORS’ HERDING BIAS: EVIDENCE FROM COLOMBO STOCK EXCHANGE

2020 ◽  
Vol 6 (2) ◽  
pp. 128-138
Author(s):  
B.A.H Kawshala ◽  
P. A. N. S Anuradha ◽  
Mohamed M. Shamil
Keyword(s):  
Behavioral Finance ◽  
Stock Exchange ◽  
Investment Decision ◽  
Sampling Technique ◽  
Individual Investors ◽  
Herd Behavior ◽  
Financial Advisors ◽  
Financial Decisions ◽  
Self Reflection ◽  
Investment Decision Making

Purpose of the study: Individual investor’s behavior is extensively influenced by biases that are highlighted in the growing discipline of behavioral finance. The present study sought to investigate the influence of socio-economic factors (i.e., investors’ age, gender, education, profession, and income), trading sophistication factors (i.e., trading experience and trading frequency), and self-reflection on herding bias in investment decision-making in Colombo Stock Exchange (CSE). Methodology: The study adopted descriptive and explanatory research designs. It was a census of all 243 individual investors registered with CSE as of September 2020. Sampling was done applying proportionate stratified random sampling technique and data was gathered using self-administered semi-structured questionnaires. The analysis was conducted using means, standard deviations, and regression. Main Findings: The results show that herd behavior is mostly seen among females, having less educational qualifications, who are engaged in the finance field professions, those who are with a very low monthly income, low experience, and who trade less frequently. Self-reflection can be seen in herding bias. On the other hand, age does not impact on herding bias of investors. Applications of this study: This study will be helpful to financial intermediaries to advise their clients. Moreover, the results of the present study facilitate individual investors to realize their herding bias by its’ determinants in the pursuit of making sensible and effective financial decisions. Novelty/Originality of this study: This study gives a unique insight into the investors’ profile corresponding to herding bias under consideration. It not only updates the evidence on herding bias but also highlights which factors are the most influential on herding bias in the Sri Lankan context. With the peculiar scenario in Sri Lanka, this paper contributed to the behavioral finance field as a reference for individual investors and financial advisors.

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