Measuring factors affecting stock investment decisions of individual investors at asia commercial joint stock bank securities limited company

MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIET NAM BANKING UNIVERSITY OF HO CHI MINH CITY  TRAN HOANG DANG MEASURING FACTORS AFFECTING STOCK INVESTMENT DECISIONS OF INDIVIDUAL INVESTORS AT ASIA COMMERCIAL JOINT STOCK BANK SECURITIES LIMITED COMPANY BACHELOR THESIS MAJOR: FINANCE – BANKING CODE: 7340201 HO CHI MINH CITY, 2018 MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIET NAM BANKING UNIVERSITY OF HO CHI MINH CITY  TRAN HOANG DANG MEASURING FACTORS AFFECTING STOCK INVESTMENT DECISIONS OF INDIVIDUAL INVESTORS AT ASIA COMMERCIAL JOINT STOCK BANK SECURITIES LIMITED COMPANY BACHELOR THESIS MAJOR: FINANCE – BANKING CODE: 7340201 INSTRUCTOR MA NGO SY NAM HO CHI MINH CITY, 2018 ABSTRACT The structure of the stock market consists of the stock market, bond market and derivative market, in which the stock market share is much larger than the other two markets (Vu Bang, 2010) The advantages of a stock market are simple, low capital and flexible for beginners to invest in Investors at that time were mostly individual investors who did not have a lot of experience, they just chose stocks following among the crowd, were vulnerable to external factors and they gradually lost money in the market stock So, measuring the factors that influence the decision to choose stocks in order to know what factors have led to the wrong choice, and therefore propose recommendations to overcome them The objective of this study is to measure the factors affecting stock investment decisions and recommend solutions to increase efficiency in making decision stock for.individual.investors.at Asia Commercial joint stock Bank Securities limited company (ACBS) Method of data collection by online and paper sheets survey questionnaire to individual investors at ACBS Preliminary qualitative research methodology is used in the construction phase and adjustment of the scale A quantitative research methodology was used in the formal study After conducting a preliminary study and obtaining an official scale, I conducted a questionnaire design and sent surveys to investors Person to gather information From there, process information using SPSS software and perform tests to measure and evaluate the impact of factors on the decision to choose stocks Apart from the introduction, conclusions, list of acronyms, list of figures, list of tables, list of pictures, references and list of appendices, the thesis is composed of five main chapters: Chapter 1: The overview of the research Chapter.2:.Theoretical background on stock investment decisions of individual investors and an overview of securities trading activities at Asia Commercial joint stock Bank Securities limited company (ACBS) i Chapter.3:.Surveying the impact of factors according to stock investment decisions of individual investors at Asia Commercial joint stock Bank Securities limited company (ACBS) Chapter 4: Research results Chapter.5:.Conclusions.and.recommendations.for.improving.stock investment decisions of individual investors at Asia Commercial joint stock Bank Securities limited company (ACBS) The research result is to measure the impact of factors on stock investment decisions of individual investors at ACBS, enabling research and practical application Serving in advising and recommending to investors of brokerage division at ACBS to help individual investors improve their investment efficiency ii DECLARATION This thesis presents work carried out by myself and does not incorporate without acknowledgement any material previously submitted for a degree or diploma in any university To the best of my knowledge it does not contain any materials previously published or written by another person except where due reference is made in the text; and all substantive contributions by others to the work presented, including jointly authored publications, are clearly acknowledged HCM City, October - 2018 Author Tran Hoang Dang iii ACKNOWLEDGEMENT During the period of writing this thesis, I have received the support of many people I wish to express my sincere gratitude to them I am deeply grateful to MA Ngo Sy Nam, my supervisor, for his valuable suggestion and comments on my work He has been a very responsible and dedicated supervisor I am also grateful to other teachers in faculty, especially in finance – banking faculty for their helpful and critical comments on my writings Without them it would have been impossible for me to produce the thesis and to complete my bachelor program I am deeply thankful for my parents and older brother for their support, encouragement and understanding during my study They are the best things in my life Last but not least, I thank my instructor Ngo Sy Nam, for his unconditional instruction and support during the difficult times HCM City, October - 2018 Author Tran Hoang Dang iv TABLE OF CONTENTS ABSTRACT i DECLARATION iii ACKNOWLEDGEMENT iv LIST OF ABBREVIATIONS ix LIST OF TABLES x LIST OF PICTURES xi CHAPTER 1: THE OVERVIEW OF THE RESEARCH 1.1 REASONS OF SELECTING TOPIC OF THESIS 1.2 BACKGROUND TO THE RESEARCH 1.3 OBJECTIVES OF THE RESEARCH 1.4 SUBJECTS AND SCOPE OF THE RESEARCH 1.5 METHODOLOGY 1.6 THE PRACTICAL SIGNIFICANCE OF THE RESEARCH 1.7 STRUCTURE OF DISSERTATION SUMMARY OF CHAPTER CHAPTER 2: THEORETICAL BACKGROUND ON STOCK INVESTMENT DECISIONS OF INDIVIDUAL INVESTORS AND AN OVERVIEW OF SECURITIES TRADING ACTIVITIES AT ASIA COMMERCIAL JOINT STOCK BANK SECURITIES LIMITED COMPANY (ACBS) 10 v 2.1 THEORETICAL BACKGROUND ON STOCK AND STOCK INVESTMENT DECISIONS 10 2.1.1 A summary of stock and stock investment 10 2.1.1.1 Stock definition 10 2.1.1.2 Purpose of stock investment 11 2.1.1.3 Characteristics of stock investment 12 2.1.2 Theory of investment making decisions and stock investment 13 2.1.2.1 Fundamental analysis 13 2.1.2.2 Technical analysis 14 2.1.3 Behavioural finance theory 14 2.1.3.1 The prospect theory 19 2.1.3.2 Loss aversion 20 2.1.3.3 Regret 21 2.1.3.4 Heuristics 22 2.1.3.5 Overconfidence and Underreaction 27 2.1.3.6 Herd behaviour 29 2.2 AN OVERVIEW OF SECURITIES TRADING ACTIVITIES AT ASIA COMMERCIAL JOINT STOCK BANK SECURITIES LIMITED COMPANY (ACBS) 31 2.2.1 THE ESTABLISHMENT AND DEVELOPMENT OF THE COMPANY 31 2.2.2 The structure and organization of the company 33 2.2.3 Security trading activities of the company 33 SUMMARY OF CHAPTER 35 vi CHAPTER 3: SURVEYING THE IMPACT OF FACTORS ACCORDING TO STOCK INVESTMENT DECISIONS OF INDIVIDUAL INVESTORS AT ASIA COMMERCIAL JOINT STOCK BANK SECURITIES LIMITED COMPANY (ACBS) 36 3.1 SURVEY MODEL 36 3.2 THE PROCESS OF SURVEY 36 SUMMARY OF CHAPTER 41 CHAPTER 4: RESEARCH RESULTS 42 4.1 DESCRIPTIVE STATISTICS ABOUT INVESTOR INFORMATION 42 4.1.1 Time of participation in the stock market of investors 42 4.1.2 Investment capital in the stock market 43 4.1.3 Investment strategy 44 4.1.4 The influence of psychological factors on making decision of investment 45 4.1.5 Analysis describes the behavioural factors that influence the decisionmaking process of individual investors at ACBS 47 4.2 ASSESSMENT OF SCALE RELIABILITY 47 4.2.1 Assessing the reliability of the scale of variables observing the behavioural factors 48 4.2.2 Assess the reliability of investment decision scale 49 4.3 EXPLORATORY FACTOR ANALYSIS (EFA) 50 4.3.1 An independent factor analysis 51 4.3.2 Analysis of dependent variable factor (Y) 54 4.3.3 Adjustment study model 56 4.4 REGRESSION ANALYSIS 56 vii 4.4.1 Matrix correlation coefficient 56 4.4.2 Linear regression analysis 57 4.4.3 Check for breach of regression model 61 SUMMARY OF CHAPTER 63 CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS FOR IMPROVING STOCK INVESTMENT DECISIONS OF INDIVIDUAL INVESTORS AT ASIA COMMERCIAL JOINT STOCK BANK SECURITIES LIMITED COMPANY (ACBS) 64 5.1 CONCLUSIONS 64 5.2 RECOMMENDATIONS FOR IMPROVING STOCK INVESTMENT DECISIONS OF INDIVIDUAL INVESTORS AT ACBS 65 5.3 CONTRIBUTIONS OF THE TOPIC 67 5.4 LIMITATIONS OF THE TOPIC 67 5.5 SUGGESTIONS FOR FUTHER RESEARCH 68 SUMMARY OF CHAPTER 69 REFERENCES 1st APPENDIX: THE QUESTIONNAIRE OF SURVEY FORM 2nd APPENDIX: THE QUESTIONNAIRE OF SURVEY FORM 3rd APPENDIX: SPSS ANALYSIS RESULTS 16.0 viii NO ENC FACTOR 13 RG1 Procrastination, regret selling the loss of the stock when in a loss state □ □ □ □ □ 14 RG2 Hurry to sell the stock when switching positions from loss to interest □ □ □ □ □ Part III: Would you please indicate your level of agreement on the impact of the following factors on your investment decision (please not leave any blanks): Absolutely agree NO ENC Agree Have no ideas Disagree Totally disagree FACTOR 15 P Volatility of stock prices at the moment 16 I Information on domestic and international markets 17 L The trend of stock price trend in the past 18 F Report on profit and performance of listed companies □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ 2nd APPENDIX: THE QUESTIONNAIRE OF SURVEY FORM SURVEY FORM “MEASURING FACTORS AFFECTING STOCK INVESTMENT DECISIONS OF INDIVIDUAL INVESTORS AT ASIA COMMERCIAL JOINT STOCK BANK SECURITIES LIMITED COMPANY” (THE OFFICIAL QUESTIONAIRE) Hello At present, I am doing a bachelor thesis at the Banking University of Ho Chi Minh City with the topic “Measuring factors affecting stock investment decisions of individual investors at asia commercial joint stock bank securities limited company” To finish my bachelor thesis, I would like to receive your interest in helping to answer this questionnaire All the information you provide in the survey is for research purposes only Also, I'm totally not used for other purposes Thank you for your help ! In the beginning, would you please answer the following questions: Question 1: You or your family members work in the following areas: □ Funds or financial investment organizations □ Stop □ Others □ Continue Question 2: You have invested in the stock market: □ Never □ Stop □ Used to □ Continue Part I: Please tell me some information about you: Question 1: Time to join in the stock market: □ Under year □ From to years □ From to years □ Over years Question 2: The current amount of capital you invest in the stock market (Unit: VND): □ Under 100 millions □ From 100 to 500 millions □ From 500 millions to billion □ Over billion Question 3: Which of the following groups of investors you belong to: □ Short-term investment (surfing) □ Medium term investment (from year to years) □ Long-term investment (over years) Question 4: Would you please tell me your views on the following statement: “there is an impact of psychological factors on the decision making process of stock investment” □ Agree □ Disagree Part II: Survey questions: Would you please indicate your level of agreement on the following statements (by ticking the appropriate box, please not leave any blanks) with the following convention: Absolutely agree Agree Have no ideas Disagree Totally disagree NO ENC FACTOR RP1 I think that investing in stocks is hot in the market despite the risks, but that way to invest which is the fastest profitability □ □ □ □ □ NO ENC RP2 FACTOR Stocks have had good growth results in the past which will usually have good growth in the future □ □ □ □ □ OV1 I think I have enough knowledge and experience to self-analyze and forecast the market situation □ □ □ □ □ AN1 Reference price to decide whether to buy a stock is the price sold before or the stock price on the first trading day □ □ □ □ □ AN2 Stocks of well-known large companies are often more liquid and their growth rates are often higher than small and less-engaged stocks □ □ □ □ □ HB1 When you have to make a decision to buy or sell stocks in a short period of time, the trend of the majority is fast and quite sure □ □ □ □ □ HB2 Highly reliable references are information from relatives, friends and colleagues □ □ □ □ □ HB3 I think that depending on the daily trading situation of foreign investors in the market to make investment decisions is a safe and effective investment measure □ □ □ □ □ HB4 I believe that securities specialists are the □ □ □ □ □ □ □ □ □ □ most knowledgeable people in the market and we should follow their recommendations when deciding to buy or sell stocks 10 LA1 Considering the same unit of value for profit or loss, the feeling of suffering and torment when losing money is often much stronger than the feeling of happiness and when reaping the profits in the investment 11 LA2 The stock has had several sessions of continuous increase, if this stock investment, the safest method is to immediately sell stock when the stock just reached the account □ □ □ □ □ 12 LA3 Willing to take more risks when in a negative state □ □ □ □ □ 13 RG1 Procrastination, regret selling the loss of the stock when in a loss state □ □ □ □ □ 14 RG2 In the case of a loss-making stock that has been held for a long time, if the stock price goes up again, it will immediately sell the stock to return the stock and invest in stocks other than to continue holding to wait for higher prices □ □ □ □ □ Part III: Would you please indicate your level of agreement on the impact of the following factors on your investment decision (please not leave any blanks): Absolutely agree NO ENC Agree Have no ideas Disagree Totally disagree FACTOR 15 P Volatility of stock prices at the moment 16 I Information on domestic and international markets 17 L The trend of stock price trend in the past 18 F Report on profit and performance of listed companies □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ □ 3rd APPENDIX: SPSS ANALYSIS RESULTS 16.0 3.1 Statistics of securities market participants' time of individual investors at ACBS N Valid Missing Mean 174 2.65 Minimum Maximum Time to participate Frequency Percentage (%) Accumulative percentage (%) Under year 17 9.8 9.8 From to years 78 44.8 54.6 From to years 21 12.07 66.67 Over years 58 33.33 100.0 174 100.0 Total 3.2 Statistics describing the investment capital of individual investors Unit: VND Investment capital Frequency Percentage (%) Accumulative percentage (%) Under 100 millions 52 29.9 29.9 From 100 to 500 millions 65 37.4 67.3 From 500 millions to billion 43 24.7 92.0 Over billion 14 8.0 100.0 174 100.0 Total 3.3 Statistics describing the investment strategy of individual investors N Valid 174 Missing Mean 1.21 Minimum Maximum Accumulative Investment strategy Frequency Percentage (%) percentage (%) Short-term investment (surfing) 140 80.5 80.5 30 17.2 97.7 2.3 100.0 174 100.0 Medium term investment (from year to years) Long-term investment (over years) Total 3.4 Descriptive statistics of the influence of psychological factors on the investment making decision of individual investors at ACBS N Valid Missing 174 Minimum Maximum Cumulative Frequency Valid Agree Disagree Total Percent Valid Percent Percent 153 87.9 87.9 87.9 21 12.1 12.1 100.0 174 100.0 100.0 3.5 Descriptive statistics on behavioural factors affecting the decisionmaking process of individual investors at ACBS N Minimum Maximum Mean Std Deviation HB4 174 2.43 1.000 HB2 174 2.16 957 HB3 174 2.09 854 AN2 174 1.99 778 LA2 174 1.97 785 HB1 174 1.95 809 LA3 174 1.94 794 LA1 174 1.88 750 RG1 174 1.84 754 OV1 174 1.77 744 RP2 174 1.75 737 RG2 174 1.73 736 AN1 174 1.70 728 RP1 174 1.65 717 Valid N (listwise) 174 3.6 Results of the assessment of the reliability of the observation variables Cronbach's Alpha 911 Scale Mean if Scale Variance if Corrected Item- Cronbach's Alpha if N of Items Item Deleted 14 Item Deleted Total Correlation Item Deleted RP1 25.19 51.494 675 906 RP2 25.10 53.311 474 912 OV1 25.07 50.697 727 904 AN1 25.14 52.648 547 910 AN2 24.86 50.888 672 905 LA1 24.97 50.547 735 903 LA2 24.88 51.283 628 907 LA3 24.91 50.323 710 904 HB1 24.90 51.304 604 908 HB2 24.68 50.721 537 911 HB3 24.76 50.091 672 905 HB4 24.42 50.291 540 912 RG1 25.01 50.829 703 904 RG2 25.12 51.980 606 908 3.7 Results of the evaluation of the reliability of the investment decision scale Reliability Statistics Cronbach's Alpha N of Items 883 Item-Total Statistics Corrected Cronbach's Scale Mean if Scale Variance if Item-Total Alpha if Item Item Deleted Item Deleted Correlation Deleted Volatility of stock prices at the moment 6.14 3.883 687 880 Information on domestic and international markets 6.13 3.474 764 852 The trend of stock price trend in the past 6.15 3.479 815 833 Report on profit and performance of listed companies 5.90 3.475 756 855 3.8 Results of factor analysis of independent variables KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity 851 Approx Chi-Square 1512.207 df 91 Sig .000 3.9 Analysis of total variance Total Variance Explained Extraction Sums of Squared Initial Eigenvalues Loadings % of Factor Total Variance Rotation Sums of Squared Loadings % of Cumulative % Total Variance Cumulative Cumulative % Total % of Variance % 6.772 48.371 48.371 6.772 48.371 48.371 3.384 24.169 24.169 1.355 9.680 58.050 1.355 9.680 58.050 2.569 18.348 42.517 1.140 8.140 66.191 1.140 8.140 66.191 2.542 18.156 60.673 1.065 7.607 73.798 1.065 7.607 73.798 1.837 13.125 73.798 765 5.462 79.260 593 4.238 83.498 469 3.350 86.848 436 3.114 89.962 373 2.664 92.626 10 246 1.760 94.386 11 241 1.721 96.107 12 209 1.495 97.603 13 203 1.453 99.055 14 132 945 100.000 Extraction Method: Principal Component Analysis Rotated Component Matrixa Component RG1 RP1 OV1 RG2 831 812 749 733 843 LA2 744 LA1 714 HB2 605 LA3 791 HB4 752 HB1 704 HB3 870 AN1 674 RP2 525 AN2 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations 3.10 Results of the dependent variable EFA analysis KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity Approx Chi-Square df Sig .827 394.856 000 Total Variance Explained Initial Eigenvalues Component Total % of Variance Extraction Sums of Squared Loadings Cumulative % 2.996 74.905 74.905 456 11.392 86.297 297 7.430 93.727 251 6.273 100.000 Total % of Variance 2.996 74.905 Extraction Method: Principal Component Analysis Component T The trend of stock price trend in the past .904 I Information on domestic and international markets .871 Report on profit and performance of listed companies .866 F P Volatility of stock prices at the moment Extraction Method: Principal Component Analysis a components extracted .819 Cumulative % 74.905 3.11 Correlation matrix between factors Correlations X1 X1 Pearson Correlation X2 Sig (2-tailed) X2 000 000 000 372** 1.000 1.000 1.000 000 174 174 174 174 Pearson Correlation 000 000 000 256** 1.000 1.000 001 1.000 N 174 174 174 174 174 Pearson Correlation 000 000 000 245** 1.000 1.000 1.000 001 N 174 174 174 174 174 Pearson Correlation 000 000 000 1.000 1.000 1.000 174 174 174 Sig (2-tailed) N Y Y 174 Sig (2-tailed) X4 X4 N Sig (2-tailed) X3 X3 ** ** 165* 019 174 ** 174 * Pearson Correlation 372 256 245 165 Sig (2-tailed) 000 001 001 019 N 174 174 174 174 174 ** Correlation is significant at the 0.01 level (2-tailed) * Correlation is significant at the 0.05 level (2-tailed) 3.12 The summary of regression model Variables Entered/Removedb Model Variables Entered X4, X2, X3, X1a Variables Removed Method Enter a All requested variables entered b Dependent Variable: Y Model Summaryb Change Statistics Model R R Square Adjusted R Std Error of Square the Estimate R Square F Change df1 df2 Sig F Durbin- Change Watson Change 555a 304 273 a Predictors: (Constant), X4, X2, X3, X1 b Dependent Variable: Y 84127500 304 19.066 171 000 1.752 ANOVAb Model Sum of Squares Regression df Mean Square 53.976 13.494 Residual 121.024 171 708 Total 175.000 175 F Sig 19.066 000a a Predictors: (Constant), X4, X3, X2, X1 b Dependent Variable: Y1 Coefficientsa Unstandardized Coefficients Model B (Constant) Std Error Standardized Coefficients Beta Collinearity Statistics t Sig Tolerance VIF -8.324E-17 052 000 1.000 X1 372 053 372 6.029 000 1.000 1.000 X2 256 053 256 4.033 000 1.000 1.000 X3 245 053 245 3.993 000 1.000 1.000 X4 165 053 165 2.775 006 1.000 1.000 a Dependent Variable: Y1 3.13 Anova test results ANOVA Sum of Squares Time Time to participate in the stock market Between Groups 11 761 159.745 164 1.097 166.533 175 5.944 11 613 Within Groups 143.612 164 837 Total 149.556 175 1.698 11 172 Within Groups 34.264 164 221 Total 35.962 175 Total Strategy Investment securities Investment strategy Mean Square 6.788 Within Groups Capital df Between Groups Between Groups F Sig .635 781 723 761 775 664 ... activities at Asia Commercial joint stock Bank Securities limited company (ACBS) i Chapter.3:.Surveying the impact of factors according to stock investment decisions of individual investors at Asia Commercial. .. topic ? ?Measuring factors affecting stock investment decisions of individual investors at Asia Commercial joint stock Bank Securities limited company? ?? CHAPTER 2: THEORETICAL BACKGROUND ON STOCK INVESTMENT. .. and recommendations for improving stock investment decisions of individual investors at Asia Commercial joint stock Bank Securities limited company (ACBS) SUMMARY OF CHAPTER Chapter of this thesis