Behavior Of Individual Investors Research Articles

Financial Literacy and other Factors Influencing Investment Behaviour of Individual Investor: A Review of Literature

Indian investor’s behavior has been changing drastically in the post-economic reforms era in investment activity, preferences in selecting various financial instruments, evaluating and in analyzing the investment avenues. In this paper the diverse literature available worldwide on individual investor behavior has been explored. Its main objective is to understand individual investor behavior.

Wealthy individual investors and stock markets' tail risk.

This paper employs a unique data set to analyze the trading behavior of wealthy individual investors across Mainland China and their impact on Chinese stock markets' tail risk. Results show that the wealthy individual investors' trading behavior can explain Chinese stock markets' tail risk, and the daily investment portfolios based on the network density of wealthy individual investors have significant excess returns. This paper also investigates the determinants of wealthy individual investors' trading behavior with the social network method and the spatial econometric model, and reveals that wealthy individuals benefit from the spillover effect of their trading behavior through the investor networks. The results of this paper not only reveal micro evidence for the formation mechanism of asset prices, but also provide insight into the behavior of wealthy individual investors.

Heterogeneous trading behaviors of individual investors: A deep clustering approach

While individual investors may have more diverse preferences and trading behavior than institutional investors due to their lack of professional education, many studies tend to lump individual investors together or classify them by socio-demographic characteristics. We conducted an empirical study using account-level trading data for over 300,000 investors in the Korean stock market from 2016 to 2020 to analyze the heterogeneity of individual investors. Our findings reveal notable disparities in profit distributions among the clusters formed based on investors' trading behavior. Therefore, this study emphasizes the importance of exploring the heterogeneity of individual investors to understand their behavior better.

Do you have a choice?: Implications for belief updating and the disposition effect

The present paper evaluates the importance of belief updating for the prevalence of the disposition effect – the reluctance to sell assets at losses as compared to gains. In particular, the present paper studies whether restricting choices in investment risk taking decisions motivates different learning from the decision outcomes and whether such differences in learning cause differences in the emergence of the disposition effect. The results show that investors learn from negative outcomes more like Bayesians if their risk-taking decisions are restricted. Causal mediation analysis reveals that such differences in learning increases the probability to sell after losses, which improves the overall investment performance. Compared to gains, the differences in learning after losses explain also why investors making active risk-taking choices are less likely to sell after losses as compared to gains, while the effect is reversed when choices are restricted. These findings suggest that restricting the discretion in decisions influences the way investors learn from decision outcomes and these differences in learning can explain puzzling differences in the risk-taking behavior of individual investors.

The effect of macroscopic herd inputs on individual investment behaviour

Decisions are rarely made in isolation and the role of others’ decisions in guiding our own has been observed in a diversity of contexts. This influence is often argued to result from an information cascade, where decisions in a sequential setting are influenced by the early decisions of others. However, the degree to which individuals modify behaviour through the integration of social information (i.e., other people’s decisions) varies considerably. While significant literature has been dedicated to understanding individual determinants for this variation, we propose that we should not ignore the aggregate characteristics of the herd itself. Specifically, we examine whether the scale and longevity of the herd itself at the time when an individual decides, defined as macroscopic herd inputs, influence whether individuals integrate social information. By employing data from a social trading platform, we find that macroscopic herd inputs exert a strong influence on individual investment decisions, showing that the influence of others’ behaviour on our own is in part dependent on the nature of the herd itself.

Navigating the Complexities of Individual Investor Behaviour: A study on employees of private sector bank and insurance companies

Navigating the Complexities of Individual Investor Behaviour: A study on employees of private sector bank and insurance companies

Investor’s Intention to Invest in the Stock Market Amidst the Economic Crisis in Sri Lanka: Using an Extended Theory of Planned Behavior

The primary objective of this research is to investigate the behavior of individual investors in the context of stock market investments during Sri Lanka's economic crisis. The study employs an extended version of the Theory of Planned Behavior (TPB) to comprehensively understand the factors influencing individual investor decisions. Utilizing a quantitative approach, the research aims to determine the better prediction of this expanded TPB in predicting individual investor behavior amid economic challenges. Data was collected through a systematic self-administered questionnaire distributed to both existing and potential individual investors. The relationship between variables was analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results demonstrated that, amid the economic crisis, the subjective norms towards investing had the largest impact on individuals' intentions to participate in the stock market and Risk avoidance and Uncertainty avoidance had a highly significant influence on investor’s intentions. This research examined only current and prospective Colombo stock market investors' investment intentions during Sri Lanka's economic crisis. Few studies have attempted to include risk avoidance and uncertainty avoidance within a decision-making framework and future studies focus on these diverse market contexts. Owing to the economic downturn in Sri Lanka, the augmented TPB put forth in this study has contributed valuable insights for financial professionals, regulators, as well as existing and prospective investors. It furnishes a substantial knowledge base to aid in making informed investment decisions. Furthermore, it offers an expanded comprehension to existing and potential investors about the intricacies of the relationship between investment intentions, thereby widening their perspective.

AH Share Price Spread: Investors Sentiment Study

This paper develops a comprehensive index of sentiment differences that can accurately describe the differences in investor sentiment between mainland China and Hong Kong to explain the higher premium of A-shares more than H-shares in the long run from the perspective of market differences in individual investor behavior. The results show that the higher the level of optimism of the A-share market relative to the H-share market, the higher the level of A-H share premium; Research shows that investors are more susceptible to the hazards of emotional elements during the market downturn phase, that emotional differences have an amplifying effect on the explanatory power of AH share premiums, and the higher the institutional share of stocks differences emotional, the more substantial explanatory power on AH share premiums. We should take notice of the critical role of irrational factors in price fluctuations and have certain psychological expectations about the fluctuations of stock prices caused by irrational factors.

Relationship between Investment Experience and Welfare Attitudes in Korean Society: Focusing on the Insufficiency of Labor Income and the Importance of Investment Income

This study aims to examine the relationship between individual investment behavior in financial products, such as financial assets, real estate, and cryptocurrencies, and their perception of social risks in South Korean society. Additionally, the study analyzes the influence of investment experience in financial products on attitudes toward the expansion of public welfare. The analysis reveals that as individuals perceive a greater insufficiency in relying solely on labor income for maintaining a stable life, the likelihood of having investment experience in financial assets and cryptocurrencies increases. In contrast, as individuals perceive a greater insufficiency in relying solely on labor income for maintaining a stable life, the likelihood of having investment experience in real estate decreases. Furthermore, the study finds that these investment experiences in financial products have varying effects on attitudes toward welfare expenditure expansion, depending on the type of financial product.

Social media information diffusion and excess stock returns co-movement

This research investigates the dynamic interplay between information diffusion on social media platforms and the co-movement of excess stock returns through a comprehensive methodology encompassing the multilayer complex network analysis, panel vector autoregression (PVAR) modeling, and the thermal optimal path (TOP) approach. Utilizing weekly data spanning from January 1, 2016, to December 31, 2021, our research finds a significant interrelationship between information diffusion and excess co-movement, notably shaped by exogenous shocks, such as the COVID-19 outbreak. We investigate the microcosmic mechanism, revealing that variations in excess co-movement significantly impact the information interaction behaviors of individual investors within sub-forums, subsequently influencing their trading activities across related stocks. Moreover, stocks characterized by a heightened strength of information diffusion exhibit swifter responsiveness to new information and demonstrate superior performance in hedging strategies involving the IC500 stock index futures. These findings hold potential to aid regulators and investors in comprehending risk transmission within the stock market and refining portfolio management. A heightened understanding of the role played by information interaction among individual investors via social media in the co-movement of excess stock returns empowers informed decision-making and risk mitigation.

Financial Investment Behavior of Individual Investors in Indonesia After the Revocation of the Covid-19 Policy

This study explores the impact of psychological, social, and demographic aspects on individual stock investor decision-making after the revocation ofCOVID-19 in Indonesia. With the cooperation of local representatives of the Indonesian Stock Exchange, this study uses data collection approachessuch as sending questionnaires to participants. The questionnaires were sent out between the three weeks of January 2023 after President Joko Widodoannounced the lifting of social restrictions during the pandemic, and then at the end of 2022. In this way, 108 questionnaire responses were thuscollected for the study. The results showed that individual stock investor behavior gender, age, and marital status didn’t affect individual investor'sinvestment behavior. Work, education, and experience positively and significantly impact an individual investor's investment behavior. However, the revocation of social constraints negatively affects this behavior. A study finds education is the most important variable influencing equity investorbehavior.
 Keyword: Behavior; Covid-19; Investors; Individuals.

Neurofinance: The New Era of Finance Based on Behavioral Finance and Individual Investment Behavior

This paper highlights the effects of neurofinance, which is the study of the human brain and its impact on financial decision-making behavior. It explains why humans often deviate from the principles of conventional finance theory. The primary objective of this paper is to review the field of behavioral finance, including the emerging area of Neurofinance research conducted within this domain. In order to achieve this goal, behavioral finance, its characteristics and Neurofinance are briefly presented. Financial and investment decisions made by individuals are considered to be both cognitive and biased, as they are executed by neural processes. This study is largely based on secondary sources of data, making it research rooted in conceptual analysis. Keywords: Neurofinance, Behavioural Finance, Cognitive Psychology, Investment Decision.

INVESTMENT DECISION ON THE LEVEL OF GENDER RELIGIUSITY

This research aims to be able to examine differences in individual investment behavior when faced with various kinds of investment choices based on the level of religiosity that each individual has, as well as deeper research on whether individual religiosity influences the attitude of sharia/SRI investment choices. Then the results of this study are based on the first financial criteria. In financial criteria, besides the level of religiosity, gender level is also a determining factor, namely men tend to have a higher level of confidence in making investment decisions than women. higher risk while women prefer to allocate funds to invest with lower risk. The second is Information Criteria, that STAIN and UNWIDHA students actually consider decisions in determining investments based on accurate information, and where information criteria play an important role as the basis for investment decisions.

Role of perceived COVID-19 disruption, personality traits and risk perception in determining the investment behavior of retail investors: a hybrid regression-neural network approach

PurposeThis study aims to assess the impact of personality traits, risk perception and perceived coronavirus disease 2019 (COVID-19) disruption on the investment behavior of individual investors in the Indian stock market.Design/methodology/approachThis study adopts a survey approach. The sample comprises 315 active retail investors investing in the Indian stock exchange. Two-stage analysis technique regression and Artificial Neural Network (ANN) were used for data analysis. Study hypotheses were tested through regression and ANN was adopted to validate the regression results.FindingsTwo regression models were modeled to test the research hypotheses. Findings showed that risk perception and COVID-19 disruption have a significant positive and neuroticism has a significant negative impact on short-term investment decisions, while the role of conscientiousness in determining short-term investment decisions was not found significant. Results also showed a positive impact of neuroticism and conscientiousness and a negative impact of risk perception on long-term investment decisions. The role of COVID-19 disruption was found negative but insignificant in predicting long-term investment decisions.Practical implicationsThis study has practical implications for many parties like retail investors, financial advisors and policymakers. This study will assist the investors to realize that they do not always take rational financial decisions. This study will suggest the financial advisors to use the knowledge of behavioral finance in making the advisors' advisory and wealth management decisions. This study will also assist the policymakers to outline behaviorally well-informed policy decisions to protect the interests of investors.Originality/valueIndia is one of the fast-growing economies in the world. India has a vast population of active investors and determining investors' investment behavior adds novelty to this study as developed economies have remained the main focus of previous studies. The other novel feature of this study is that this study tries to assess the impact of COVID-19 disruption along with personality traits and risk perception on investment behavior. The other valuable factor of this study is the use of ANN to predict the relative importance of the exogenous variables.

ASSESSMENT OF INVESTORS' INVESTMENT BEHAVIOUR: MEDIATING EFFECT OF RISK TOLERANCE: A CASE OF PAKISTAN STOCK EXCHANGE

This study aims to investigate the role of risk tolerance as a mediator in the investment choices of retail investors on Pakistan Stock Exchange. Research addresses criticisms of the descriptive theories in behavioral economics and emphasizes the importance of understanding factors that impact consumers' financial decisions for a more efficient and stable financial system. The study analyzes organizational, personal, and market factors to determine relative significance. Sample for this study consists of individual investors actively trading on Pakistan Stock Exchange. The findings indicate that individual investors' investment behavior is mainly swayed by market factors, personal characteristics, and organizational context. Study findings hold value for various stakeholders, including investors, brokerage companies, managers, and government officials. By utilizing these findings to inform their decision-making processes, these stakeholders can make more informed choices. Thus, understanding the role of risk tolerance and the influence of different factors contributes to development of a stronger and more knowledgeable financial system.

A Comparative Study of the Investment Behavior of Financial Asset Investors

In China's capital market, investors can be divided into two categories: individual investors and institutional investors. Different from foreign capital markets, in China's capital market, individual investors account for a relatively high proportion of investors, China's market is basically dominated by individual investors, retail characteristics are obvious. Due to the short establishment of China's capital market, it is not a completely effective market, the entry threshold is low, the education of investors is not perfect, the investment literacy and investment knowledge accumulation of individual investors is not high enough, and due to the existence of investor cognitive bias, individual investors are often in a weak position in the capital market, and the investment returns of individual investors are often lower than those of institutional investors. Therefore, the research in this paper is aimed at the investment behavior of individual investors. The research includes the influence of individual characteristics of investors on investment decision-making behavior, the effect of Internet media use on urban and rural households' financial investment behavior, the regional heterogeneity of residents' choice of financial assets, the role of risk aversion and subjective well-being on family participation in risk financial markets, and the influence of family age structure, health status, financial experience, financial literacy and trust on household financial asset allocation.

Subjective and Objective Financial Knowledge and Their Associations with Financial Risk Tolerance

This article examines the relationship between the financial risk-taking behavior of individual investors and their subjective and objective knowledge. The data come from multiple waves of surveys conducted by the National Financial Capability Study between 2009 and 2018. We hypothesize that subjective knowledge will have a greater association with risk tolerance than objective knowledge of individual investors. Regression models are estimated with least squares as well as with the ordered logit method. Estimation results show that individual investors’ risk tolerance behavior is associated more with their subjective knowledge than their objective knowledge. This is true in all four surveys separately and in the combined sample. Additionally, as hypothesized, the relative influence of subjective knowledge on risk tolerance, compared to objective knowledge, increases as the survey periods move further away from the financial recession of 2007–2008. This article has important implications for behavioral and personal finance researchers, financial advisors, and regulators.

Can Investors Gain Incremental Information Through Online Searching? Evidence from China

ABSTRACT This study investigates the impact of investors’ online searching on the pricing efficiency of the capital market from the perspective of stock price synchronization. Using the Chinese firms listed in the Shanghai and Shenzhen Stock Exchanges from 2013 to 2019, we find that the more investors’ online searches there are, the less serious the stock price synchronization issue is. Consistent with the notion that online search facilitates the inclusion of more company-specific information in stock prices, we find that the effect of investors’ online searching on weakening the company’s stock price synchronization is more pronounced for companies with worse stock liquidity and higher separation of control rights and cash flow rights. Moreover, we demonstrate that investors’ online searching can weaken stock price synchronization by reducing irrational herding behavior. A further examination of the herding behavior of different investors reveals that online searching mainly plays a role in reducing the herding behavior of individual investors. Collectively, these results indicate that online searching is important for investors to gain greater access to valuable information.

Determinants of individual sustainable investment behavior - A framed field experiment

This paper empirically analyzes which different pecuniary and non-pecuniary motives are relevant for sustainable investments at the individual level. We examine data from an incentivized framed field experiment that was part of an online survey among a broad sample of financial decision makers in Germany. We find strong preferences for sustainable funds. These preferences are driven by both pecuniary and non-pecuniary motives. We can largely confirm the results of previous studies showing that social preferences are key to explain individual sustainable investing. In addition, we identify feelings of warm glow, financial literacy, and environmental values as further key factors. Feelings of warm glow are most relevant of these factors. Our results are thus consistent with other recent results by Heeb et al. (2022), suggesting that positive emotions play an important role in sustainable investment behavior. Our findings provide useful implications for mobilizing individual investors for sustainable development.

Does financial education help to improve the return on stock investment? Evidence from China

Individual investors are important capital market participants, and improving their financial welfare has been a long-standing objective for policymakers and researchers. Using the data from a national survey on individual investor behavior in China, we explore the relationship between individual investors' financial education attainment and the performance of their stock portfolios. The results show that individual investors who receive financial education are more likely to increase their profits in the stock market because they have good investment habits and elevate theirare more risk tolerant. Further, financial education demonstrates a greater effect on stock market profit making among investors with less experienced and from areas with lower levels of investor protection.