(Luận văn) the impacts of behavioral factors on individual investors decision making at the ho chi minh stock exchange

t to ng MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY hi ep w n lo ad ju y th yi pl n ua al NGUYEN HAI NAM n va fu ll THE IMPACTS OF BEHAVIORAL FACTORS ON INDIVIDUAL m oi INVESTORS’ DECISION MAKING AT THE HO CHI MINH nh at STOCK EXCHANGE z z k jm ht vb gm om l.c MASTER OF BUSINESS ADMINISTRATION THESIS an Lu n va ey t re th HoChiMinh City – 2012 t to ng MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY hi ep w n lo ad NGUYEN HAI NAM ju y th yi pl al n ua THE IMPACTS OF BEHAVIORAL FACTORS ON INDIVIDUAL n va INVESTORS’ DECISION MAKING AT THE HO CHI MINH ll fu STOCK EXCHANGE oi m at nh z Business Administration 60.34.05 z k jm ht vb Major: Major Code: l.c gm om MASTER OF BUSINESS ADMINISTRATION THESIS an Lu n va Supervisor: DR TRAN HA MINH QUAN ey t re th HoChiMinh City – 2012 t to ng hi ACKNOWLEDGEMENT ep I would like to express my heartfelt gratitude and deepest appreciation to my w n research Supervisor, Dr Tran Ha Minh Quan for his intensive support, valuable lo ad suggestions, guidance and encouragement during the course of my study ju y th I would like to express my sincere gratitude to all of my teachers at Faculty of yi Business Administration and Postgraduate Faculty, University of Econimics Ho pl Chi Minh City for their teaching and guidance during my MBA course al n ua I would like to express my gratefulness to my friends working at the Ho Chi n va Minh Stock Exchange and securities companies, who help me to arrange ll fu interviews and distribute questionnaires I am also thankful to beneficiary oi m customers who participated in the interviews and the survey at nh I would like to specially express my thanks to all of my classmates, my friends from for their support and encouragement z z I would also like to avail this opportunity to express my appreciation to vb jm ht Professor Nguyen Dong Phong, UEH Board of Directors for creating MBA k program in English and Dr Tran Ha Minh Quan for his support during the l.c gm course Finally, I heartily dedicate this study to my beloved parents, my younger om brother Duc Vinh, and my wife, Doan Phuong who have encouraged and an Lu supported me during my study n va ey t re th Page i t to ng hi ABSTRACT ep This study investigates the impacts of behavioral factors on the investment w n decisions of individual investors in stock market It applies behavioral finance lo ad theory to explore the possible behavioral factors influencing individual investors’ ju y th investment decisions then identify the impact levels of those factors using data yi from respondents of 180 individual investors at the Ho Chi Minh Stock pl Exchange (HOSE) al n ua According to the findings of this study, there are four behavioral factors n va affecting the investment decisions of individual investors at HOSE: Heuristic, ll fu Market, Prospect, and Herding The impacts of four behavioral factors on oi m individual investors’ decision making at HOSE are in varying degrees from high at nh impact to low impact: Market factor has highest impact; Heuristic and Prospect have moderate impact; while Herding factor only has low impact z z jm ht vb k Keywords: “Behavioral finance”, ”Behavioral factors”, “Individual investors’ decision-making”, “Ho Chi Minh Stock Exchange”, “HOSE”, “Vietnam” om l.c gm an Lu n va ey t re th Page ii t to ng hi CONTENTS ep Acknowledgement i w Abstract ii n lo ad Contents iii y th List of Tables v ju List of Figures vi yi pl CHAPTER1: INTRODUCTION al n ua 1.1 Research background va 1.2 Problem statement n 1.3 Research objectives and research questions fu ll 1.4 Research scope oi m 1.5 Research structure nh at CHAPTER 2: LITERATURE REVIEW z z 2.1 Traditional finance theory versus behavioral finance vb jm ht 2.2 Behavioral factors impact the process of investors’ decision-making 2.2.1 Heuristic theory k l.c gm 2.2.2 Prospect theory 12 2.2.3 Market factors 13 om 2.2.4 Herding effect 15 an Lu 2.3 Research model 19 va CHAPTER 3: RESEARCH METHODOLOGY 21 n 3.1 Introduction 21 3.5 Data process and analysis 27 Page iii th 3.4 Design of Measurements and Questionnaire 25 ey 3.3 Data collection method 23 t re 3.2 Research design 22 t to ng hi CHAPTER 4: RESEARCH RESULT AND FINDING DISSCUSSION 30 ep 4.1 Introduction 30 w 4.2 Characteristic of sample 30 n 4.3 Measurement Reliability Test using Cronbach’s Alpha 33 lo ad 4.4 Factor analysis of behavioral variables influencing the individual investment y th ju decisions 35 yi 4.5 Impact Levels of Behavioral Factors on the Individual Investors’ Investment pl ua al Decisions 37 n 4.6 Finding discussion 41 va n 4.6.1 Impacts of Heuristic Variables 42 fu ll 4.6.2 Impacts of Prospect Variables 43 m oi 4.6.3 Impacts of Market Variables 45 nh 4.6.4 Impacts of Herding Variables 46 at z CHAPTER 5: CONCLUSION AND RECOMMENDATIONS 47 z ht vb 5.1 Introduction 47 jm 5.2 Conclusions 47 k 5.3 Contributions of the study 48 gm l.c 5.4 Recommendations for Individual Investors 49 om 5.5 Limitations and further researches 50 an Lu References 52 Appendix 55 va n Appendix 59 ey t re Appendix 61 th Page iv t to ng hi LIST OF TABLES ep w Table 2.1: Behavioral factors influencing the investment decision-making 18 n lo Table 3.1: Type of measurements for personal information 25 ad Table 3.2: Type of measurements for behavioral variables 26 y th ju Table 4.1: Sex of respondents 30 yi Table 4.2: Age of respondents 31 pl ua al Table 4.3: Time for attending stock market 31 n Table 4.4: Attending course of stock exchange 32 va n Table 4.5: Amount of investment last year 32 fu ll Table 4.6: Cronbach’s Alpha Test for items of Factors 34 m oi Table 4.7: Factor analysis (EFA) for behavioral variables 36 nh Table 4.8: Impacts of variables on investment decision at HOSE 38 at z Table 4.9: Results of the hypotheses 41 z k jm ht vb om l.c gm an Lu n va ey t re th Page v t to ng hi LIST OF FIGURES ep w Figure 2.1: The research model of behavioral factors’ impacts on investment n lo decisions of Individual investors at HOSE 21 ad Figure 3.1: The research process 22 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 an Lu n va ey t re th Page vi CHAPTER t to INTRODUCTION ng hi ep 1.1 Research background w n Stock market is a market where stocks are bought and sold (Zuravicky, lo ad 2005) It has the important role on the development of an economy It can be y th considered as the yardstick for economic strength and healthy Stock market ju is a source of financing investment Besides, stock market also performs a yi pl function as a signaling mechanism to managers regarding investment al n ua decisions and a catalyst for corporate governance (Supat, 1998) Additionally, va stock market may push the development of an economy through efficient n allocation of resources and better utilization of resources (Supat, 1998) fu ll However, stock market is best known for being the most effective m oi channel for company’s capital raise (Zuravicky, 2005) There are some nh at reasons that make interesting to people when investing in stock market The z z first reason is because of “long-term growth of capital, dividends, and a hedge vb jm ht against the inflationary erosion of purchasing power” (Zuravicky, 2005) The other reason that makes the stock market more attractive than other types of k l.c gm investment is its liquidity (Bencivenga et al., 1996) Liquidity allows investors to trade stocks easily and quickly while firms still have permanents om use of capital for stable development (Bencivenga et al., 1996) Most people an Lu invest in stocks because they want to be the owners of the firm, from which set directions for the firms Page ey of shares to be in the board of directors who can make strategic decisions and t re control over the firms Regularly, shareholders need to own specific amount n (Zuravicky, 2005) However, many people buy stocks for the purpose of va they benefit when the company pay dividends or when stock price increases Vietnam stock market, which established from 2000, is still a frontier t to or pre-emerging market due to the quality of market criteria (FTSE, 2011) In ng hi comparison to developed markets (such as the USA, the UK, Japan, EU,…) ep and emerging markets (such as Mexico, China, India,…), Vietnam stock market appears to be much smaller in terms of scale and maturity w n lo However, Vietnam stock market with reprentativeness from Ho Chi ad Minh Stock Exchange (HOSE) has been developed significantly in both the y th ju number of listed stocks and transaction value for 11 years During that period, yi the price movement at HOSE seems to fluctuate unpredictably In addition, pl ua al Vietnamese investors’ decisions are still difficult for financial analysts to n understand Many comments and recommendations given by security va companies or even global financial organizations did not match with what has n ll fu really happened At the early of 2008, when VN-Index was standing at around m oi 830 points, Yoong, the analysis manager of Mekong Securities was confident at nh to assert that VN-Index would go up to 1140 point in 2008 (Tu, 2008) z Publishing the same opinion, HSBC and many security companies affirmed z ht vb that VN-Index would be likely to reach 1,100 point by the end of 2008 jm (HSBC, 2007) Belief in the growth of stock market did not help these k analysts to save the VN-Index from remarkable declination In a forecast at gm l.c the early of 2009, HSBC predicted that 2009 would be another difficult year om and the Ho Chi Minh stock market would be volatile with some large up and an Lu down swings, but end up at the same level as 2008, around 316 points (HSBC, 2009) This forecast is not accurate as at the end of 2009, VN-Index n va was 1.5 times more than that of 2008 Therefore, it is possible to state that the investors rationally maximize their wealth by following basic financial rules Page ey for Ho Chi Minh stock market in this context These theories assume that t re forecast methods based on the conventional financial theories are not suitable