basic before running the factor analysis. The results of the principal components revealed seven psychological factors. In the sample of Indian individual investor behaviour these sevenfactors on the basis of the underlying variables are named as (Representativeness, Anchoring, Information Heuristics, Risk Aversion, Overconfidence, Disposition Effect, and Gamblers Fallacy) Consistent with the prior literature, the result suggests that psychological biases, such as c Representativeness, Anchoring, Information Heuristics, are playing significant role in determining individual investor behaviour; but factor analysis reports certain behavioural factor such as Overconfidence, Disposition Effect, and Gamblers Fallacy which are not yet explained in prior literature in growing economies, particularly in Indian context with respect to Mysore city. The findings from the survey of Indian individual investors show that behavioural biases do influence their investment decision making processes.
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Table 4, in appendix, ranks the frequency distribution of variables least influence the investor’s behavior. First, Social Relevance & image is apparently not important to investors which include Environmental Record, International Operations, Perceived Ethics of Firm and Local Operations. Second, they ignore inputs from family members and friends/coworkers when selecting stocks. While Data in Reports/Prospectuses and Exchange listings of companies were given only cursory considerations. It is evident that investors rely mostly on decision criteria predicted by classic economic utility theory. However, it is also clear that investors use diverse criteria, rather than a single approach. The second focus of this research was to identify whether the variables most important to investors form homogenous groups or not. Factor analysis was applied to determine whether there are underlying constructs that signify a combination of investor concerns and Varimax Algorithm of Orthogonal Rotation was used. The labeling of the variables and the empirical factor formation and identification are rarely perfect, thus endurance is encouraged. Two variables were removed from factor analysis Cronbach Alpha N of Items
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Given its obvious importance, there is surprisingly little empirical evidence on the relation between financial literacy and stock exchange investments at the individual investor level. Derrien, (2005) investigated whether higher levels of financial literacy coincide with improved equity investment decisions. In particular, he examined how financial literacy affects the tendency to rely on actively managed stocks rather than passively managed companies in an event of an IPO issue of such a company. Various empirical studies show that expenses are a major determinant of share prices performance Gillan, et al. (2007). Thus, the study expected the expenses of funds selected by subjects with high financial literacy to be lower. Furthermore, the study analyzed the influence of financial literacy on the accuracy of the participants' return and risk estimates for their shares. Studies by, for instance De Bondt (1998), showed that subjects tend to be overly optimistic about the return and volatility of their investments and he argued that overly optimistic performance recollections of individual investors are one reason for the large amount of money still invested in actively managed funds, because these biased views of the past impede investors learning ability.
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In the personal characteristics model alone, we can see that all demographic variables are statistically significant. As column (4) of Table 4.4 shows, age is negatively related to equity exposure. This finding is in line with previous studies that find relatively older investors tend to hold smaller proportions of equity (Bodie, 2003 and Cocco, 2005). 49 We find that the level of funds under management is positively related to equity investment. The coefficient of logfum in column (4) shows that a 1% increase in the level of funds invested will lead to a 0.048% increase in equity assets held. This result confirms the findings presented by Hong, Kubick, and Stein (2004), who also find that wealth increases equity ownership. We find that gender is only statistically significant for the cash and bond regression and insignificant for property and equity assets. We find that the tax rate and default enrolment are negatively related to equity investments. Our measure of investor inertia, as proxied by the default enrolment variable, provides a nice reality check for our results, since we expect people who are inert to hold more cash and less equity because the default fund—namely, the conservative fund—is composed this way. Our findings also confirm the degree of investor inertia documented in the literature. A number of studies demonstrate the degree of investor inertia among individual investors using 401(K) plans in the United States. They show that once an investment choice has been made, changes to accounts rarely take place (Samuelson & Zeckhauser, 1988; Ameriks & Zeldes, 2002; Agnew, Balduzzi & Sunden, 2003). Although this degree of investor inattention may not be too harmful, since switching funds for the wrong reasons, such as past return chasing, can be an investment mistake (Zhang, 2011).
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It is hereby important to mention that the present study adopted the convenient sampling technique in order to collect the survey responses. But the sample was randomly drawn for the purpose of data collection. The choice of this approach can be explained by following three reasons. First, there is a large number of individual investors scattered across the coverage area of the survey carried out by the researcher. It is very difficult to get the exact number of individual investors. Again these investors are using the stock brokerage and investment advisory services from various stock broking agents and other similar firms. Many of the investors may be the client of multiple brokerage houses simultaneously. The researcher, therefore, opted to consult with only one stock brokerage house with significant client base and good market reputation. Second, the contact details of about 500 individual investors were drawn randomly from the pool of its client base. The only criteria laid down for an individual investor to be included in the sample was that he/she must have an annual income of at least Rs. 500,000 at that point of time with a minimum of Rs. 50,000 of investments in equity. The upper cap of the income as well as equity investment was not set by the researcher. Finally, many of the investors while contacted at initial phase with a request to participate in the survey, declined to respond the survey questions. The reluctance by investors could be attributed to the observation that individual investors tend to be sceptical and perceive the financial matters very sensitive; they were reluctant to reveal their investments and other financial matters for the sake of their financial safety. All these factors made the researcher opt for the convenient sampling technique, but all efforts were taken to keep the sample as random as possible by avoiding any sort of biases associated with the data collection task.
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The study aims to measure the impact of psychological biases on financial decisions of the albanian individual investor. The paper uses primary data provided through structured interviews with 180 individual investors and one semi-structured interview with an expert of the financial market in Albania. Exploratory financial analysis, cronbach alpha test and descriptive analysis are used through R-software. The analysis and its results conclude a significant presence of psychological biases on the albanian individual investor behaviour. As there is too little research done on this field in Albania, the study informs of the presence of these biases and tries to explain their impact not only on the previous crisis the country has experienced, but also on the current situation of the financial market in the country.
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In this study, it was aimed to investigate the factors that influence individual investor behaviour. The data used in the study were obtained via survey method from bankers in Bartın. Descriptive analysis was conducted in order to summarize the empirical analysis results with numerical representation and factor analysis was done to measure the validity and reliability of the designed survey. Furthermore, the analysis regarding hypothesis tests was implemented by means of analysis of moment structure. As a result of the study, it was identified that six factors influenced individual investor behaviour. It was found that the highest correlation was between “conscious investor behaviour” and “banking and payment behaviour.” Also, it was confirmed that 11 of the research hypotheses were accepted and that four of the research hypotheses were refused. Within this framework, it was concluded that there was a statistically significant relationship between the factors affecting individual investors’ investment behaviours.
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capital asset pricing model, model portfolio theory, and more have been formulated. However, since the 2000s, researchers have focused their analysis on various levels within the financial market, such as the aggregate market level, cross-section of average returns, corporate finance, and individual investor behaviour (Barberis and Thaler, 2002). Ackert (2014) conducted a study to compare traditional and behavioural finance and indicated that the application of the concept of behavioural finance in terms of psychology to explain how investors reach their decisions is very popular. This is mainly because the fundamental issues of traditional finance are no longer invalid and thus researchers turned to observe how investors behave in behaviour finance. Bikas et al. (2013) confirmed that investment behaviour is influenced by many factors including psychological factors. This is one of the studies to advocate the emergence and trend of the concept of behavioural finance as they found traditional finance cannot explain the emotional factor on investment behaviour but a limited number of investor rationality. Behavioural finance is the application of psychology to finance, according to Hirshleifer (2014) while Sherfrin (2001) defined behavioural finance as the study of how psychology affects investors’ decision making processes. Hussein and Al-Tamimi (2005) added that behavioural finance explains the impact of psychological principles on the behaviour of financial market participants. This emerging concept has fundamentally changed the research context and today many researchers are engaged in behavioural finance investigation.
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This study attempted to investigate the impact of individual values on investor decision making. Questionnaire was the research instrument and 200 questionnaires were filled from the investors of the Lahore stock exchange. Individual values were selected from Rokeach’s value system. Dependability, tolerance, capability, self-realization and welfare values were used to measure individual values. Investor decision making was measured by risk tolerance level, needs and goals of investors. Regression technique was applied and correlation coefficient was found in the study. The study found the significant impact of individual values on investor decision making. Tolerance, self-realization and capability values had significant positive while dependability and welfare values were significant negatively related with risk tolerance level. Investor needs revealed significant negative relationship with dependability, self- realization and welfare values and significant positive relationship with tolerance and dependability values. It also found significant negative relationship of dependability values and significant positive relationship of tolerance and welfare values with investor goals. Findings of the study concluded individual values as significant and important factors of investor decision making. The study is first of its nature in the sense that it examined the impact of individual values on investor decision making and highlight the need of understanding individual values for decision making.
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behavior . Sochi (2018) found the result that herding behavior had a positive and significant influence on investment decision making . Kengathara and Kengathara (2014) have also found that herding behavior has a positive effect on investor decision making . Grinblatta and Han (2005) see the application of mental accounting to investors after being sanctioned in Iran which affects the buying and selling of these shares . Herding can contribute greatly to analyzing and evaluating professional performance because individuals who have low abilities try to imitate the behavior of individuals who have a high ability to develop their reputation . Herding behavior had a positive effect on investor decision making . Amum and Ameer (2017) examined the influence of behavioral factors in heuristic and herding bias on property investment decisions . The results turned out to show that overconfidence and herding had no significant effect compared to heuristic factors (anchoring, gambler’s fallacy, representativeness, and availability). Anum and Ameer (2017) state that behavioral factors influence the decision of investors to make investment decisions in Pakistan . Based on these explanations, the research hypotheses are as follows:
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From above table it is depicts that each and every independent variable is significantly connected to Achievement Motivation. Result indicates that p-value for all the variable seems to be significant at 5% level. Among all variable, "Sense of Purpose" is having high influence on achievement motivation of investor's behavior with its regression value as 0. 892, followed by the variable "Socially Independent" and "Inner Reliant" are influenced on Investors' Behviour with their regression coefficient value as0.876 & 0.475. "Talent Strengths" is influence with 0.451 coefficient value. The lowest influence is shown by the variable "Personal Goals" (0.363) on Investors behaviour on investment decision making.
Marketing discipline has focused on a wide range of behaviours of which investment behavior may be considered a subset. The broader consumer behaviour literature has identified many factors that have not or have rarely been considered in the finance literature, such as people’s knowledge, experience and self-efficacy. These factors may be especially important and relevant for retail investors to make successful investment decisions. This study is an attempt to assess the impact of investors’ behaviour on investment intention towards mutual funds in Nagapattinam district.
The paper makes a comparative study on the impacts of institutional and individual investor on investment risk based on the data of listed company in China during 2001-2008, and examines the institutional sophistication hypothesis and institutional preference hypothesis. There are three contributions of the paper in theory and practice. Firstly, it checks two hypothesis set up by west scholar using Chinese database. Secondly, it compares the im- pacts of institutional investor with that of individual in- vestor in China, which can help scholars to understand the influence of institutional investor further. The last but not the least, the paper also analysis the combined influ- ences of institutional investor on disclosure and invest-
The investor plays a very important role in the stock market because of their big share of savings in the country. The Regulators of the stock market never can ignore the behavior of individual investor. This study aims to understand the behavior of individual investor in stock market, specifically their attitude and perception with respect to the stock market. A survey is conducted to collect data relating to the above subject. Respondents were classified into different categories like income, profession, education status, sex and age. Primary data is collected from a sample of 150 investors of Mysore City, Karnataka, India. The study also attempts to find the factors affecting the investment behavior of individual investors such as their awareness level, duration of investment etc.
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Socially responsible mutual funds, also known as socially responsible invested funds, are one of the main instruments of Socially Responsible Investment (SRI). The term “fund” is used to refer to a ready-made financial product where investor’s money is pooled into a portfolio and a fund/in- vestment manager decides which shares to buy. Therefore, this financial product is attractive for passive investors without a high degree of financial knowledge. Nevertheless, investment tools aimed at assisting the investors in their selection of socially responsible companies which serve best their social and environmental values are rather scare and this lack of tools assisting inves- tors in SRI is even more important when we refer to socially responsible mutual funds. The aim of this paper is to assist individual passive investors in their investment decisions providing them with a ranking of mutual funds adjusted to their social, environmental and ethical particular prefe- rences. The proposed approach is illustrated with a real US equity mutual funds’ ranking example.
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Judge (2009) argue that OCB is voluntary behaviour that does not form part of an employee's formal obligations, but effectively supports the functioning of the organisation. Furthermore, Brief and Montowidlo (1986) state that pro-social organisational behaviour is the behaviour displayed by members of the organisation intended to interact with other members, groups and organisations or anyone while doing their work to improve the welfare of individuals, groups or organisations. Next, George and Brief (1992) state that organisational spontaneity is an extra role behaviour that is voluntary and that contributes to organisational effectiveness. Individuals who behave in organisational spontaneity, have characteristics including; likes to help colleagues, protect the interests of the organisation, provide constructive advice, take the initiative to develop themselves, spread good things. Related to the statement, Borman and Motowidlo (1993) state that contextual performance as work activities that do not technically directly support the core of the work itself, but rather support the organisation's social and psychological environment. Borman and Motowidlo (1993) argue that this contextual activity generally occurs in all types of work with two (2) dimensions, namely: 1) Interpersonal facilitation, and 2) Job dedication. Van Dyne et al. (1994); there are differences in in-role behaviour and extra-role behaviour. In- role behaviour is the behaviour displayed by employees in carrying out work under the tasks in the job description, while employee contributions "above and beyond" formal job descriptions are what are called extra-roles. Organ and Mackenzie et al., (1993) state that the following characteristics characterise extra-role behaviour: 1) goes beyond the prescribed formal role, 2) is based on individual initiative, 3) is not included in the formal reward system applicable in the organisation, and 4) has an essential function for organisational effectiveness.
Expected utility theory is the predominant approach to analyzing individual risk preferences. Risk aversion reflected in strictly concave utility functions is the standard assumption in economics and finance. However, global risk aversion has been criticized for not describing how investors actually behave. For example, examining the relative attractiveness of various forms of investments, Friedman and Savage (1948) claim that the strictly concave functions may not be able to explain why investors buy insurance or lottery tickets. Several alternative theories have been proposed to provide more realistic descriptions of individual risk preferences. For example, Hartley and Farrell (2002) and others propose using global convex utility functions, the functions for risk seekers, to indicate risk-seeking behavior. Markowitz (1952) addresses Friedman and Savage's concern and proposes a utility function that has convex and concave regions in both the positive and the negative domains.
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Due to the contemporaneous or near contemporaneous timing of the SRO Rules, a series of regulatory reforms implemented in the early 2000s have the potential to confound attempts to isolate the effect of any specific reform on analyst behaviour in general. In particular, the introduction of Regulation Fair Disclosure (hereafter ‘Reg FD’), effective 23 October 2000, was intended to reduce analysts’ incentives to issue optimistic output in order to win favour with management and gain access to private information. To examine the potential confounding effect of Reg FD, I regressed recommendation optimism on ChgtoTier3, an indicator of post-Reg FD observations (POST-RegFD), their interaction and controls using samples terminating at the end of 2001. The results of these regressions, using both the full samples and PSM samples with each of investment banking windows are reported in the table Appendix 5.3. While POST-RegFD is negative and significant in the M&A regressions, there is no evidence that this effect was stronger for firms who subsequently change to the three-tier system (ChgtoTier3 × POST-RegFD is positive and insignificant in both samples). Regressions estimated during post-IPO and SEO windows (Columns 3 to 6) also report insignificant interactions between ChgtoTier3 and POST-RegFD.
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It is obvious, that the aim of personal finance management is to ensure necessary financial resources at all times – now and in the short and long terms. Although there are a lot of educational literature of personal finance management solutions and lessons, not everybody wants or try to get acquainted. The statistics showed that the propensity to save exists and quite a lot of people keeps their money in the “socks”, when question arises – why do people consciously understanding that they don’t have enough knowledge to make efficient decisions do not consult with specialists and keep their money in “jar”. Maybe the main reason is that people in the conservative countries, such as Lithuania, do not trust banking system or a part of it. On the other hand, if private investor takes into account some investment decisions, do he really understand the quality of it or which multi criteria decision manage him to do it.
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Behavioural finance is a relatively new paradigm of finance, which seeks to supplement the standard theories of finance by introducing behavioural aspects to the decision making process. Early proponents of behavioural finance are considered by some to be visionaries. This was the first time a psychologist was awarded the Nobel Prize and played a key role in convincing mainstream financial economists that investors can behave irrationally. It attempts to explain and increase the understanding of the reasoning patterns of investor, including the emotional processes involved and the degree to which they influence the decision making process. Essentially, it explain the what, why, and how of finance and investing. It endeavors to bridge the gap between neo-classical finance and cognitive psychology. It takes into account the individual investor’s decision making formula as well as his / her behaviour, which, in turn, sheds light on the observed departures from the traditional finance theory. Thus, behavioural finance is the application of scientific research on the psychological, social and emotional contributions to market participants and market price trends.