AN EMPIRICAL STUDY OF INDIVIDUAL INVESTORS’ BEHAVIORAL BIASES IN THE VIETNAMESE STOCK MARKET

Phuc Quy Dao,Quan Duc Hoang Vuong

doi:10.32508/stdj.v15i1.1779

Abstract

The study aims to determine individual investors’ behavioral biases at individual level in the Vietnamese stock market and investigate the relationships between mutual behavioral biases, between demographic variables and behavioral biases, between stock investment variables and behavioral biases. This is a quantitative research in behavioral finance with the survey conducted in forms of questionnaire. Each question is a problem which requires investors to make decision. The research finds out that there are specific behavioral biases which influence investors’ investment decisions. Furthermore, there are relationships between gender and illusion of control bias, gender and optimism bias, gender and self-control bias. We also realize relationships between average value per trading times and investment experience, average value per trading times and loss aversion bias, trading frequency and optimism bias, investment experience and optimism bias, monthly income and optimism, age and cognitive dissonance bias. Our findings confirm relationships between mutual behavioral biases mentioned in behavioral finance such as relationships between framing bias and mental accounting bias, illusion of control bias and overconfidence bias. Additionally, we find out relationships between ambiguity aversion bias and confirmation bias.

Highlights

Standard finance fails to explain determinants of investment performance
Many phenomenon and individual investor’s behaviors in the Vietnamese stock market can not be explained by standard finance, which based on the efficient market hypothesis (EMH)
Johnsson et al get the results that behavioral biases of individual investor with high percentage appearing in the research sample such as loss aversion bias (67%), optimism bias (39%), representative bias

Summary

INTRODUCTION

Standard finance fails to explain determinants of investment performance. The reason for this failure can be found with the assumption which is usually taken by traditionalists: investors’ rationality in decision-making process. Decision-making of individual and institutional investors in Sweden These are behavioral biases such as mental accounting bias, overconfidence bias, cognitive dissonance bias, regret aversion bias, loss aversion bias, representative bias, anchoring bias, optimism bias. Johnsson et al get the results that behavioral biases of individual investor with high percentage appearing in the research sample such as loss aversion bias (67%), optimism bias (39%), representative bias (33%), regret aversion bias (32%), overconfidence bias (26%). They determine relationships between overconfidence bias and cognitive dissonance bias, anchoring bias and cognitive dissonance bias, overconfidence bias and optimism bias. An overconfident trader trades too aggressively, thereby increasing trading volume and market volatility while lowering his own expected profits

METHODOLOGY Research Framework

Findings

CONCLUSIONS AND SUGGESTIONS FOR