(Luận văn) behavioral factors affecting investment decision making the case of ho chi minh stock exchange, vietnam ,

MINISTRY OF EDUCATION TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY t to ng INTERNATIONAL SCHOOL OF BUSINESS hi ep - w n lo ad y th ju MASTER THESIS yi pl ua al BEHAVIORAL FACTORS AFFECTING INVESTMENT DECISION- MAKING n THE CASE OF HO CHI MINH STOCK EXCHANGE (HOSE), VIETNAM n va ll fu oi m at nh z z Student: Phung Thai Minh Trang ht vb om l.c gm Ho Chi Minh City, 2013 k Instructor: Dr Dinh Cong Khai jm Course: MBUS 2.2 n a Lu n va y te re ACKNOWLEDGEMENTS t to This research would not have been possible without the valuable contribution ng of many people I would like to take this opportunity to express my great gratitude for hi ep their understanding, encouragement, and support w First, I would like to extend my deepest appreciation to my thesis supervisor, n lo Doctor Dinh Cong Khai, for his numerous valuable comments and suggestions I am ad ju y th very fortunate to have his supervision and his continuous encouragement which has motivated me and gave me confidence to complete this research yi pl In addition, I would like to thank all of the directors and lecturers of ISB for ua al providing me a solid foundation of knowledge, which has been not only useful for this n va research work but also for my future development in my social life and my n ll fu professional career m oi A special “thank you” to my classmates and friends for providing me with nh at their honest and candid comments on my questionnaire as well as instant support z z regardless if day or night All of this contributed to the succcess and the quality of the ht vb research jm k Furthermore, I want to express my appreciation to the managers and gm l.c employees working at the Ho Chi Minh Stock Exchange and various securities om companies, who helped me arrange the interviews and helped in the distribution of the n a Lu questionnaires I am also thankful to the beneficiary investors who participated in the overcome the most difficult times in order to complete this research in time Phung Thai Minh Trang Page: i y husband for all of their understanding, encouragement, and advice which helped me to te re Finally, it would be impossible to say enough about my dear parents and n va interviews and the survey EXECUTIVE SUMMARY t to Although finance has been studied for a long time, behavioral finance, which ng encompasses human behaviors in finance, is a fairly new area Behavioral finance hi ep theories, which are based on human psychology, attempt to understand how emotions w and cognitive errors influence individual investors‟ behaviors (investors mentioned in n lo this study are referred to as individual investors) ad ju y th The main objective of this study is the exploring of the behavioral factors influencing individual investors‟ decisions at the Ho Chi Minh Stock Exchange yi pl Furthermore, it is related to relations between these factors and the results that they ua al achieve Since there are limited studies about behavioral finance in Vietnam, this n va study is expected to significantly contribute to the development of this type of n ll fu research in Vietnam m oi The study begins with the existing theories in behavioral finance, based on nh at which, hypotheses are proposed Then, these hypotheses are tested through the z z questionnaires distributed to individual investors at the Ho Chi Minh Stock Exchange vb ht The collected data is then analyzed by using SPSS software Questions of the jm k interviews with some managers of the Ho Chi Minh Stock Exchange are conducted to gm l.c achieve a deeper understanding of these behaviors The results showed that there were om three behavioral factors affecting the investment decisions of individual investors at y te re impacts Additionally, the behavioral factor of representativeness positively n on investors‟ investment decision making, whereas gambler‟s fallacy had negative va over-under reaction Representativeness and over-under reaction had positive impacts n a Lu the Ho Chi Minh Stock Exchange including representativeness, gambler‟s fallacy and influenced the investment decision at the highest level The results also presented that three behavioral factors did not affect investment decision including availability bias, Page: ii mental accounting bias and herd behavior In addition, the paper gave some implications of study such as preference of investors for buying blue chip stocks, t to midcap and penny stocks as well, avoiding buying stocks with poor performance in ng hi the recent past or useful lessons of stock fluctuation, etc Moreover, the paper also ep gave recommendation for individual investors in using behavioral factors with an w n acceptable level in order to bring good investment results Finally, it mentions lo ad limitation s, colclusion as well as further research ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re Page: iii TABLE OF CONTENTS t to ACKNOWLEDGEMENT .i ng EXECUTIVE SUMMARY ii hi TABLE OF CONTENTS iv ep LIST OF TABLES vii LIST OF ABBREVIATION viii w n CHAPTER 1: INTRODUCTION……… lo ad 1.1 Research background y th 1.2 Problem of statement ju 1.3 Research questions yi 1.4 Research scope pl 1.5 Research method al n ua 1.6 Significance of the research 1.7 Structure of the study va n CHAPTER 2: LITERATURE REVIEW fu 2.1 Classical finance theory versus behavioral finance ll oi m 2.2 Review some behavioral factors impacting on the process of investors’ decision making 10 nh 2.2.1 Representativeness 11 at z 2.2.2 Availability bias 11 z 2.2.3 Gambler’s fallacy 12 vb ht 2.2.4 Herd behavior: buying and selling decisions 12 jm 2.2.5 Mental accounting 13 k gm 2.2.6 Over and under-reaction 13 l.c 2.4 Suggested research model 16 2.5 Research model 20 om CHAPTER 3: RESEARCH METHODOLOGY 21 a Lu 3.1 Research design 21 n 3.1.1 Research methods 21 3.3.1 Scales measurement of Representative bias 26 3.3.2 Scales measurement of mental accounting bias 27 Page: iv y 3.3 Scales measurement design 25 te re 3.2 Adjusted research model 23 n 3.1.3 Sample size 22 va 3.1.2 Research process 22 3.3.3 Scales measurement of gambler‟s fallacy 27 3.3.4 Scales measurement of availability bias 28 3.3.5 Scales measurement of herd behavior 29 t to 3.3.6 Scales measurement of over-underreaction 30 ng 3.3.7 Scales measurement of investment decision 31 hi ep 3.4 Data analysis approach 32 3.4.1 Test of scales measurement reliability 32 w 3.4.2 Exploration factor analysis (EFA) 33 n lo CHAPTER 4: DATA ANALYSIS AND FINDINGS 35 ad 4.1 Data description 35 y th ju 4.2 Factor analysis of behavioral variables influencing the individual investment decisions 36 yi pl 4.2.1 Pilot survey (N=52) 36 ua al 4.2.2 Results of Cronbach‟s alpha analysis of pilot survey (N=52) 36 4.2.3 Results of Cronbach‟s alpha analysis of official survey (N=220) 37 n n va 4.2.4 Factor analysis (EFA) 39 4.3 Regression analysis 42 fu ll 4.3.1 Results of regression analysis 43 m oi 4.3.2 Test of assumptions 46 at nh CHAPTER 5: RECOMMENDATION AND CONCLUSION 48 Implications of the study 48 5.2 Recommendations for individual investors at the HOSE 52 5.3 Limitations of the study 53 z 5.1 z ht vb jm 5.4 Conclusion 54 k 5.5 Further research 55 gm Appendix 5.1 63 l.c Appendix 5.2 70 om Appendix 5.3 73 a Lu Appendix 5.4 80 Appendix 5.5 81 n n Appendix 5.7 91 va Appendix 5.6 90 y te re Page: v LIST OF TABLES t to Table 1: The highest and lowest VN-index from 2000 to 2012 ng hi Table 2.1: Summarizing results of researches of behavioral factors 17 ep Table 3.1: Items of Representative 26 w n Table 3.2: Items of mental accounting bias 28 lo Table 3.3: Items of gambler‟s fallacy 29 ad Table 3.4: Items of availability bias 30 y th ju Table 3.5: Items of herd behavior 32 yi Table 3.6: Items of over-underreaction 36 pl Table 3.7: Items of investment decision 33 al n ua Table 4.1: Idependent variables, dependent variables and items 38 va Table 4.2: Cronabach‟s alpha test of items (N=52) 39 n Table 4.3: Cronbach‟s alpha test of items (N=220) 40 fu ll Table 4.4: KMO and Bartlett‟s Test, total variance explained and rotated component m oi matrix (EFA time 1) 42 at nh Table 4.5: Summary of KMO and Bartlett‟s Test, total variance explained and rotated component matrix (EFA time 2) 43 z z Table 4.6: Rotated component matrix (EFA time 2) 44 vb ht Table 4.7: summary of grouped items 45 jm Table 4.8: Means, Standard Deviations, and Intercorrelations of RETURN and k gm Predictor Variables 46 l.c Table 4.9: Simultaneous Multiple Regression Analysis Summary 54 Table 4.10: Results of hypothesis test 56 om Table 2.2: Summarizing researchers studying behavioral factors that impacts a Lu investment decision making 95 n n va y te re Page: vi LIST OF ABBREVIATION t to : Exploratory Factor Analysis HOSE : Ho Chi Minh Stock Exchange HAS : Ha Noi Stock Exchange ng EFA hi ep w : Statistical Package for the Social Sciences n SPSS lo ad VN-Index : Vietnam Index of Stock Price ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re Page: vii CHAPTER 1: INTRODUCTION 1.1 Research background t to ng The Vietnamese stock market was established in 1998 It consists of the Ho hi ep Chi Minh City stock exchange (HOSE) and the Ha Noi stock market (HAS) At the first stage, in 2000, the Vietnam stock market had only listed companies and w n lo security companies However, after more than ten years, there are currently 682 ad y th member securities companies These mark the development of the Vietnamese stock ju market in general and the HOSE specifically Starting at 100 points in July 2000, after yi pl one year in operation in June, 2001, the VN-Index had increased fivefold and reached al n ua a peak at 571 points Investors were overly excited and dreamed of earning quick n va money as demand rose significantly even though there were only a few listed stocks fu on the stock exchange However, it was lack of knowledge and trading experience of ll m oi investors as well as the insufficient support from the authorities that made the VN- nh at Index to suddenly unceasingly fall until it reached the bottom at 139 points in March z z 2003 (Huy, 2010) Investors who joined the market during this period and who were vb ht not able to jump out quickly had to face severe financial difficulties due to the huge jm k loss of assets The stock market then seemed to go into a hibernative status until 2005 gm and finally “woke up” in 2006 The boom started in the second half of 2006 and the l.c om stock market rocketed up to 1170 points by March 2007 It fluctuated around the 1000 “hotter” than at that time However, VN-Index went again into a decline stage after n a Lu point mark until October, 2007 The Ho Chi Minh stock market had never been va n being pushed up to the peak The Ho Chi Minh stock market experienced a gloomy te re y year in 2008 and VN-Index only stopped decreasing in February 2009 at 245 points Economic experts and analysis explained the sharp decline of the VN-Index that was affected by various factors such as the tightening of monetary policies, especially the lending for stock investment, high deposit interest rates, high inflation rates, and a recession in the United States economy Lack of timely intervention by the authorities t to was also a reason why VN-Index fell so dramatically (Vo and Pham, 2008, p.15) ng hi From 2009 to the first quarter of 2011, VN-Index continued to undergo many ups- ep and-downs: reaching another peak at 542 points in May 2010, another bottom at 351 w n points in November, 2010 However, it seemed to fluctuate around 400-500 points lo ad and no significant amplitude was found in 2012 y th Table 1: The highest and lowest VN-index from 2000 to 2012 ju yi Highest prices pl Year 132.7 (2004) 591.4 439.6 1170.67 883.9 921.07 (2008) 244.4 (2009) n 2006 571.04 (2001) ua al 2000-2005 n ll fu 2008-2009 va 2007 Lowest prices oi 350.5 (2011) 490 335 at nh 2012 542 (5/2010) m 2010-2011 (Source: www.cafef.vn) z z ht vb 1.2 Problem of statement k jm During twelve years, the HOSE specifically and the Vietnamese Stock gm exchange in general went through many different stages Its prices fluctuated, up and om l.c down, and it seemed to be difficult for investors to make sound investment decisions Especially, with the boom of VN-Index 2007, the Vietnam Stock Market was a Lu negatively impacted by foreign newspapers The Financial Times showed that the n n va HOSE was a „too hot place‟ and overstated its value The AMCHAM (The American y te re Chamber of Commerce) declared that the Vietnam stock market‟s growth was impractical, just another case of a „bubble market‟ Appendix 5.5 Conbrach’s alpha analysis t to Reliability test of Representative bias ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 81 Reliability test of mental accounting bias t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 82 Reliability test of gambler’s fallacy t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 83 Reliability test of Availability bias t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 84 Reliability test of herd behavior t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 85 Reliability test of over-underreaction t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 86 Reliability test of investment decision t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 87 Exploration factor analysis (EFA) time t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 88 Exploration Factor Analysis (time 2) t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 89 Appendix 5.6 Regression analysis t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 90 Appendix 5.7 Test of assumptions t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 91 t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 92 n lo ad ju y th yi pl Gambler’s fallacy Overconfidence Mental accounting Herding behavior: selling and buying decisions Over and under reaction X X oi nh X X at z X z X jm ht vb X X X X k Barberis & Huang (2001) gm Lai (2001) X X om X l.c X an Lu X X X Rabin (2002) X X va X n X X ac th X y te X re si Lehenkari & Perttunen (2004) Rockenbach (2004) Oberlechner& Osler (2004) Regret aversion m ll X Odean (1998) Statman (1999) Johnsson, Andrén, Lindblom & Platan (2002) Ritter (2003) Barberis & Thaler (2003) Caparrelli et al (2004) Loss aversion fu X Anchoring n Kahneman & Tversky (1974) Lakonishok, Shleifer & Vishny (1994) DeBondt & Thaler 1995) Barberis, Shleifer & Vishny (1998) Availability bias va Representativeness n researchers ua al Table 2.2: Summarizing researchers studying behavioral factors that impacts investment decision making: eg cd 93 jg hg n lo ad ju y th yi ua al X n va X n Forgel & Berry (2006) fu X X X X X at nh X z X X k jm X X ht Jahanzeb, Muneer, & Rehman (2012) X vb X z Chandra and Kumar (2011) X X X X X X X gm X X om l.c Chaudhary (2013) oi X Goodfellow, Bohl & Gebka (2009) Vuong & Dao (2012) X m ll Tan, Chiang, Mason and Nelling (2008) Waweru et al (2008) X pl Dittrich, Güth & Maciejovsky (2005) Kempf & Ruenzi (2006) an Lu va n y te re ac th si eg cd 94 jg hg t to ng hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z k jm ht vb om l.c gm n a Lu n va y te re th 95