Abstract
This paper uses the theory of behavioral finance to examine the factors of individual investors’ psychology aswell as their effects on investment decisions in the Vietnam Stock Exchange (VSE). This is an empirical studywhich based on a survey of 422 investors. All of them have had the deep knowledge about finance investmentand worked many years in VSE. The final results show that five factors of psychology which are overconfidence,optimism, herd behavior, psychology of risk and pessimistic have influence on investment decisions. To be moredetailed, excessive optimism, psychology of risk and excessive pessimistic affect positively on long-terminvestment of investors while overconfidence and herd behavior have the negative impact. Based on the theoryof behavioral finance, this study explains factors of individual investors’ psychology. However, one of thelimited of this paper is that it does not mention about negative outcomes of psychology factors on investmentdecisions. This is considered as a new path to do research in the future for emerging markets like Vietnam.
Highlights
It should be noted that stock market is similar to humans’ emotions because it experiences the different feelings from sensitivity to ignorance
Exploratory factor analyses (EFA) to explore all observed variables reports that psychology factors exist as expected theory
Confirmatory Factor Analysis (CFA) confirms that the findings are totally suitable with: Chi-square/df = 2.962 > 3; p-value =.000 < .05; GFI = .923; CFI=.909; IFI=.910; TLI=.883; RMSEA=.068; RMR=.061 (As can see from Table 1 and Figure 1). This provided the evidence that psychology factors exist in the Vietnam Stock Exchange
Summary
It should be noted that stock market is similar to humans’ emotions because it experiences the different feelings from sensitivity to ignorance. Apart from macro economics as well as the profitability of listed companies, psychology plays a crucial role. After 13 years of operation since July 2000, the Vietnam Stock Exchange has had a rapid growth in scale and volume of listed stocks, value of transactions. The numbers of accounts of individual investors in Vietnam market made up a large proportion of total transaction accounts. Individual investors suffer from different feelings and are vulnerable .
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