Herd behavior in vietnamese stock market,graduation thesis

1 STATE BANK OF VIETNAM BANKING ACADEMY Foreign Language Faculty  GRADUATION THESIS Topic HERD BEHAVIOR IN VIETNAMESE STOCK MARKET Student: Pham Kieu Hoa Class: ATCA – K16 Student’s code: 16A7510054 Lecturer: Dinh Thi Bac Binh Hanoi, May 2017 i DECLARERATION I hereby declare that this submission is my own work in design and execution The thesis has not been applied for any degree, and it is not concurrently submitted in candidature of any other similar titles elsewhere Signature Pham Kieu Hoa Phạm Kiều Hoa Graduation Thesis ii ACKNOWLEDGEMENTS I would like to express my deep appreciation to my supervisor, Ms Dinh Bac Binh, for her continuing support during my implementation process With her profound academic knowledge and professional working manner, she has given me many constructive comments and valuable suggestions, which have helped improve the quality and the progress of this work considerably Moreover, I also want to take this opportunity to extend my gratitude to other lecturers in the Faculty of Foreign Language, Banking Academy, who have equipped me with useful knowledge and skills over the past four years I believe that this foundation will continue help me in my future career and life I sincerely thank investors who volunteered to participate in my survey But for their enthusiastic help, I could not have obtained the data for analysis and evaluation Last but not least, I would like to express my sincere thanks to my family and friends for their unconditional love and supports It is their frequent encouragement during my process of completing this dissertation that has played as spiritual force and given me the strength to fulfill this challenging task and make it such a success Phạm Kiều Hoa Graduation Thesis iii TABLE OF CONTENTS ACKNOWLEDGEMENTS LIST OF ABBREVIATIONS LIST OF TABLES CHAPTER INTRODUCTION 1.1 Rationale of the study 1.2 Objectives of the study 1.3 Scope of the research 1.4 Research methodology 1.5 Discussion on the survey questionnaire 1.6 Discussion on the informants 1.7 Structure of the thesis CHAPTER THEORETICAL FRAMEWORK 2.1 The stock market 2.1.1 Definition of the stock market 2.1.2 Characteristics of the stock market 2.2 Herd behavior 2.2.1 Historical of Herd behavior and its economic existence 2.2.2 Definitions of Herd behavior 2.2.3 Cause of Herd behavior 2.2.4 Classification of Herd behavior 2.2.4.1 Age 10 2.2.4.2 Sex 10 2.2.4.3 Knowledge 10 2.2.4.5 Information 11 2.2.4.6 Reputation 11 CHAPTER HERD BEHAVIOR IN VIETNAMESE STOCK MARKE 3.1 Discussion on the result of the questionnaires 13 3.1.1 Age and sex 13 Phạm Kiều Hoa Graduation Thesis iv 3.1.2 Experience and knowledge 15 3.1.3 Emotion 18 3.1.4 Information 19 3.1.5 Reputation 20 3.2 An overview of Vietnamese stock market over the period 21 3.3 The observation of the herd behavior in Vietnamese stock market over the period from 2005 to 2015 23 CHAPTER RECOMMENDATIONS 27 4.1 Improving the transparency of information 27 4.2 Improve the effectiveness of the legislation 27 4.3 Improving the margin trading policies 28 4.4 Improving investors’ awareness about the importance of knowledge 28 4.5 Increase the number of training bases which courses provides more profound knowledge on stock market 29 CONCLUSION 30 REFERENCES 32 APPENDIX 34 Phạm Kiều Hoa Graduation Thesis v LIST OF ABBREVIATIONS Abbreviation Meaning SBV State Bank of Vietnam US United States EU European Union Brexit United Kingdom's withdrawal from the European Union VN-INDEX Serving to point out; a sign, token, or indication in Vietnamese Stock Market HOSE Ho Chi Minh Stock Exchange HNX Hanoi Stock Exchange IPO Initial Public Offering WTO World Trade Organization OTC Over The Counter SSC State Securities Commission UPCoM Unlisted Public Company Market Phạm Kiều Hoa Graduation Thesis vi LIST OF TABLES Block diagram 1: Herd behavior resulting from investors' age……………… 13 Block diagram 2: Herd behavior resulting from to investors' sex…………… 14 Block diagram 3: Herd behavior resulting from investors' experience………… 15 Block diagram 4: Herd behavior resulting from investors' knowledge………… 16 Pie chart 1: Herd behavior resulting from investors' emotion……… … 18 Pie chart 2: Herd behavior resulting from investors' information……………… 19 Pie chart 3: Herd behavior resulting from investors' reputation…………… … 20 Table 1: Vietnamese stock market over the period from 2005 to 2015…… ….23 Table 2: VN-INDEX over the period from 2005 to 2015…… ….23 Phạm Kiều Hoa Graduation Thesis CHAPTER INTRODUCTION 1.1 Rationale of the study Herd behavior is a psychological phenomenon that drives person decision in every aspect of life In the financial markets, the existence of herd mentality is very clear Herd behavior is the behavioral trend of investors They choose to follow someone without sufficient information The herd behavior of investors can lead to the market value far beyond its real value Therefore, it may result in more frequent levels of fluctuation and financial market failures The rapid development of economy has led to the strong development of the financial market which draws the involvement of more and more investors Therefore, their herd behavior appears to lay more and more on the market Vietnamese stock market has experienced nearly 20 years of formation and development However, in practice, many transactions in the market are emotionally and psychologically made There have been many researches on herd behavior problems in the stock markets However, there has been not much research on causes as well as effects of herd behavior in Vietnamese stock market In general, has given me an inspiration to undertake the research on topic "Herd behavior and its effect towards Vietnamese stock market The number of investors participating in the stock market is increasing The number of domestic and foreign ordinary and institutional investors has increased significantly According to Vietnamese stock market news, approximately 3000 accounts of investors joined the market in 2000, up to now there have been over 90,000 trading accounts, of which the number of domestic institutional investors is 2,662, the number of individual domestic investors is 807,558, the number of foreign investors is more than 13,000 investors In Vietnamese stock market, the ordinary investors make up larger proportion than the institutional one So in this Phạm Kiều Hoa Graduation Thesis study I would like to pay my total attention to herd behavior of the ordinary investors 1.2 Objectives of the study In recent years, researchers are more interested in investors’ behaviors because more and more empirical studies find that people’s behaviors can affect stock prices Herd behavior focuses on the relationship of different investors’ actions during their trading transactions Prior to the start of this research on this topic, there have been a great number of questions such as: What is herd behavior? What are the causes of herd behavior? What measures should be implemented to prevent and restrict herd behavior in Vietnamese stock market? To answer the above questions in the fullest possible manner, there are several specific objectives to this study Firstly, I intend to prove that in Vietnamese stock market and there is the existence of herd behavior To achieve this purpose, I have conducted a survey on ordinary investors who have participated in the Hanoi stock market and whose responses would be likely to help me get one step closer to the answer Finally, I would like to give some suggestions to minimize effects of herd behaviors to the market in order to improve herd behavior in Vietnamese stock market 1.3 Scope of the research The research aims at herd behavior in Vietnamese stock market to the extent of ordinary investors’ age, sex, knowledge, emotion, information and reputation of the listed company 1.4 Research methodology The major method used in this study is the quantitative one That is all Phạm Kiều Hoa Graduation Thesis considerations, comments, assumption, suggestions and conclusions given in the thesis are largely based on the analysis of the statistic data collected from questionnaire responded by ordinary investors in Hanoi stock market The major approaches are: - Conducting survey questionnaires - Studying relevant publications - Consulting the supervisor - Resorting to personal observations 1.5 Discussion on the survey questionnaire The questionnaires are designed to investigate herd behavior in Vietnamese stock market The questionnaire consists of 35 questions aiming at investigating the views of ordinary investors when making investment in securities Question 1, Question 2, Question and Question are to explore the investors’ basic information including age, sex, education level, occupation From Question to Question 7, there are a closer look on investors’ experience and motivation to participate in the stock market as well as their perception of the existence of herd behavior on the stock market From Question to Question 12 is to display investors' views on dynamics, risk appetite, and investment strategies From Question 13, Question 14, Question 15 and Question 16 are to reflect the factors to get more profit out of investors’ investment Purpose of question from No.17 to No.25 is to display the factors that affect investors such as successful securities investors, reputable companies, insider information, rumors and recommendations of analysts, brokers From question No.26 to No.30 present the accessible capacity to formal and Phạm Kiều Hoa Graduation Thesis 22 The biggest impact on the stock market in 2008 was the widespread financial crisis in the world With the efforts to rescue the economy of the Government and the movement from the State Bank, intermingling with the decline session, Vietnamese stock market still had strong recovery sessions However, the recovery was too short and unstable For the first two months of 2009, the stock market was in a state of bleak The stock market was no longer attractive to investors at this time so investors lost confidence in the market and the bank sold stock mortgage By the time of 07/05/2010, the market had 516 shares and four fund certificates listed: HOSE had 229 shares and fund certificates; HNX had 287 shares The value of listed shares and fund certificates on HOSE now is over 116 trillion dong; HNX reach more than 40 trillion Besides the two centralized stock exchanges, the stock market in Vietnam also has a decentralized stock market (OTC market) and UPCoM stock exchange 2011 was the only year that average daily trading volume and value decreased due to general economic difficulties and the impact of tightening monetary policy To 2012 and 2013, the stock market gradually recovered then volume and value increased again 2014 marked the strong development of the stock market Statistical data showed that on average, there were 123.5 million shares, equaling 2.171 billion dong traded that increased 90.4% in volume and 104 , 3% in value comparing to 2013 2015 and 2016 marked the events that not too many investors are predictable as the Chinese stock market closes on April 1.4, United Kingdom's withdrawal from the EU (Brexit) on June 24, US presidential election on 9/11 Most of these events have had a very strong impact on the Vietnamese stock market Phạm Kiều Hoa Graduation Thesis 23 11 analysts surveyed by Bloomberg said that VN-INDEX would rise to 745 at the end of 2017 or 12% increase compare with the end of 2016 2017 promises to be strong development of Vietnamese stock market 3.3 The observation of the herd behavior in Vietnamese stock market over the period from 2005 to 2015 The data were collected from January 1, 2005 to December 31, 2010 According to the data published in VN-INDEX report Herd behavior was performed when the index> and reverse herd behavior were performed when the index 50 tuổi Ơng/ bà cho biết giới tính? A Nam C 35- 50 tuổi C Đại học D Sau đại học Hiện ông/ bà làm lĩnh vực nào? A Ngân hàng- Tài B Cơ quan QLNN C Cty chứng khoán D Lĩnh vực khác Ghi rõ lĩnh vực:…………………………………………………………………………………………………… Ông bà hay tham gia khóa học đào tạo chứng khốn khơng? A Có B Khơng Nếu có, chương trình đào tạo nào? A Cơ chứng khốn B Phân tích đầu tư chứng khốn C Chương trình CFA D Các chương trình đào tạo khác Ông/ bà cho biết số năm kinh nghiệm tham gia đầu tư thị trường chứng khoán? A < năm B 1- năm C 3- năm D > năm Động lực khuyến khích ơng/ bà tham gia đầu tư thị trường chứng khoán? A Lợi nhuận lớn B Thị trường có tính rủi ro thấp C Thanh khoản cao D Khác Ông bà cho biết nhận định hoạt động kinh doanh thân ? Từ câu đến câu 13 A Hồn tồn khơng B Khơng đồng ý C Đồng ý D Hoàn toàn đồng ý đồng ý Năng động Chấp nhận rủi ro 10 Khơng thực giao dịch mang tính cảm xúc Phạm Kiều Hoa Graduation Thesis 35 11 Cân nhắc cẩn thận trước thực giao dịch 12 Có chiến lược đầu tư Ông bà cho biết quan điểm yếu tố làm tăng khả sinh lời kinh doanh chứng khoán? Từ câu 14 đến câu 17 A Hồn tồn khơng B Khơng tác động C Tác dộng D Hoàn toàn tác động tác động 13 Do kỹ 14 Kỹ may mắn 15 May mắn 16 Kinh nghiệm thân Khi định đầu tư vào cổ phiếu Ơng bà có cân nhắc đến nhân tố sau không? Từ câu 14 đến câu 25 A Hồn tồn khơng B Khơng đồng ý C Đồng ý D Hoàn toàn đồng ý đồng ý 17 Các nhà đầu tư chứng khoán thành công 18 Các nhà đầu tư lớn quỹ đầu tư 19 Danh tiếng, thương hiệu 20 Khuyến nghị nhà mơi giới chứng khốn 21 Khuyến nghị nhà phân tích, nghiên cứu 22 Thơng tin mua bán nội gián 23 Các thông tin từ internet 24 Tin đồn 25 Trực giác, khả cảm nhận Ơng bà có khả tiếp cận thơng tin liên quan đến cổ phiếu mà ông bà quan tâm khơng? Từ câu 26 đến câu 30 A Hồn tồn khơng B Khơng dễ dàng C Dễ dàng D Hồn toàn dễ dàng dễ dàng 26 Các báo cáo tài 27 Các báo cáo nhận định thị trường Phạm Kiều Hoa Graduation Thesis 36 28 Thông tin bất thường từ doanh nghiệp 29 Thơng tin thống kinh tế Việt Nam 30 Thông tin nội gián nghe Theo ơng bà nguồn thơng tin có độ tin cậy nào? Từ câu 31 đến câu 39 A Hồn tồn khơng B Khơng dễ dàng C Dễ dàng D Hoàn toàn dễ dàng dễ dàng 31 Các báo cáo tài 32 Tư vấn đầu tư chun gia phân tích CK 33 Thơng tin bất thường từ doanh nghiệp 34 Thông tin nội gián nghe 35 Tin đồn Phạm Kiều Hoa Graduation Thesis