Abstract
AbstractThe purpose of this study was to understand and determine the difference between the effects of Psychological and Economic factors on individual investor’s decision-making. To achieve this purpose, questionnaire was used as an instrument to gather primary data from the investors of stock exchange using convenient sampling. Total numbers of responses collected were 254. Factor analysis was applied to find out major contributing components of psychological and economic factors. Main components of psychological factors were contributing 61.671% variance to it and components of economic factor were contributing 56.697% variance to it. Findings show that there is significant relationship of psychological factors and economic factors with individual investor’s decision-making. Regression analysis shows that psychological factors as compared to economic factors have more effect on decision-making behavior. Results of t-test showed that there is no significant relationship between the gender and investmen...
Highlights
Stock exchange is a platform where investors can buy or sell bonds, stocks, and other securities of companies on their own or with the help of brokers.For retail investors, investment decision-making is very important
Results of regression analysis Linear regression has been used for two independent variables (Psychological Factor and Economic Factors) separately
This research was conducted on investors of Lahore Stock Exchange (LSE) in order to determine the various factors affecting individual investor behavior
Summary
The investor should be aware of his/her decision-making and the factors affecting these decisions. There can be many factors affecting the investor’s decision-making, i.e. economical and psychological. Investors keep in mind about economic factors like expected earnings, condition of financial statements of firms/companies, recent price movements, risk, returns, etc. Psychological factors have strong effects on decision-making, because they have the tendency to make us like and dislike something. There is no doubt that investors act on market sentiments but they use their gut feelings (Riaz & Hunjra, 2015). Studies have been conducted on behavorial finance as researchers want to know the charecteristics of investors that help them im handling their investment decisions. This study aims to compare these factors for unique insight into investor’s decision-making
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