Determinants of Jordanian Investors Decisions in the Context of the 2007/2008 Financial Crisis

Abstract

Due to the importance of interest rates and the ratio of market-to-book value; the review of literature has shown researcher have drawn massive attention to examine the role of such these ratios in shaping investors decisions. For instance, since investors always aim to maximize their wealth, it seems to be logically that the higher rates of interest encourage them to deposit their funds into the banks, otherwise in the stock markets as they assumed to be more profitable investment opportunities. On the other hand since the ratio of market-to-book value was recommended by literature as a good indicator for valuing the value of securities; rational investors are supposed to invest in stock markets when the prices are undervalued or to deposit into the banks when the prices are overvalued, whereas the latter opportunity is assumed to be more profitable. However, since the previous studies acknowledge that there is a highly ignorance to measure the role of these ratios in shaping the decisions of Jordanian investors; this current study employs the technique of multiple regression to investigate the effect of the fluctuations in time deposit interest rates and the average ratio of Market-to-book value on the decisions of Jordanian investors as measured by the liquidity of both the Jordanian commercial banks and the Amman stock exchange. In addition, since the economy of Jordanian such as other economies it is affected by the impact of the latest global financial crisis, the study period split into three stages to compare the effect of these independent factors on the decisions of Jordanian investors.