Investment Behavior Research Articles

Investor Sentiment and Corporate Governance: The Role of Behavioral Biases in Stock Price Volatility and Managerial Decisions

Behavioural biases influence investor sentiment and behaviour, which in turn influence stock returns, stock price volatility and corporate governance structures. This paper focuses on the role of three common behavioural biases (overconfidence, herding and loss aversion) on investor behaviour, and how these biases drive inefficiencies in financial markets. Using worldwide market data from 1970 to 2019 and focusing on key events such as the 2008 financial crisis and the dot-com bubble, we investigate how these behavioural biases cause market volatility. This analysis further reinforces the importance of strong corporate governance structures such as independent boards, executive pay structures and risk management protocols that help reduce the impact of investor sentiment. The role of speculative bubbles, market overreaction and volatility clustering is also examined further, and corporate governance mechanisms are proposed to help mitigate the effects of behavioural biases on stock prices. The findings demonstrate the importance of adopting long-term corporate goals, transparency and strategies to help better manage market sentiment and safeguard shareholder value.

Crowdfunding for sustainability: How environmental activism moderates support for B2B and B2C campaigns

This study explores the influence of customer investors' perceptions on their willingness to invest in sustainable crowdfunding campaigns. Specifically, it examines whether emphasizing a product's direct impact on consumers (B2C) or its broader industrial impact (B2B) affects investment decisions. Using a between-subjects experiment with 304 participants, the research investigates how environmental sustainability activism moderates investment behavior. The study found that higher levels of environmental activism decrease support for B2C campaigns compared to B2B campaigns. These results suggest that sustainability-focused backers prefer projects due to perceived greater systemic impact.

Anticipation of reaction of stock markets to anticipated rating announcements by the market in a crisis context and investor behaviour: The case of MENA countries

Anticipation of reaction of stock markets to anticipated rating announcements by the market in a crisis context and investor behaviour: The case of MENA countries

Stock Market Participation Awareness among University Students in Nepal

Financial Literacy amongst students is very important aspects. Therefore, as part of Financial Literacy, a study was conducted amongst 120 students of various colleges and fields to explore the awareness level of stock market investments in the Kathmandu valley. With a growing number of young investors entering the financial market, this research seeks to understand the factors that influence students' engagement with the stock market, particularly in a developing economy like Nepal. The study employs both qualitative and quantitative methodologies, including surveys distributed to students across various colleges in Nepal. Findings reveal that while there is moderate awareness about the stock market among students, actual participation remains limited. The main barriers include a lack of financial literacy, limited disposable income, and perceived risks associated with stock investments. Furthermore, cultural attitudes towards saving and investing also play a significant role in shaping students' engagement with the stock market. The research underscores the importance of integrating financial education from the school level itself to equip students with the knowledge and confidence to participate in the stock market. This study contributes to the existing literature on financial literacy and investment behaviors, offering insights into the unique challenges faced by students in developing countries like Nepal. It emphasizes the need for targeted interventions to enhance financial literacy and foster a more inclusive financial ecosystem.

Influence and Inspiration of Asymmetric Information on Individual Investor Behavior

Information asymmetry is a pervasive phenomenon in the financial market. For individual investors, this imbalance usually results in making them vulnerable in the investment decision-making processes, thus raising the challenges as well as risks that characterize their participation in the market. Unlike financial institutions that have access to extensive resources and research capabilities, the lack of reliable sources of data and knowledge about how to interpret and analyze available information add layer of complexity for individual investors to acquire full and sufficiently accurate information, which increases risks for them during investment activities compared with financial institutions. Without proper understanding of financial concepts and analysis techniques, they may struggle to make informed decisions in an environment characterized by asymmetric information. Thus, according to the current literature on information asymmetry and individual investor behavior, this paper sorts out and summarizes the viewpoints and conclusions of each paper. On this basis, this paper provides a series of suggestions for individual investors to have better insight of this financial phenomenon and make reasonable investment in the financial market environment with asymmetric information.

Risk and Return Analysis of Stocks of Nepalese Commercial Banks

This research article analyzes the impact of risk and return of Nepalese commercial bank stocks on portfolio returns to assist investors in making informed investment decisions. It aims to examine the effects of individual bank stock returns, risks, market return, and market risk (beta) on overall portfolio performance. The study utilizes a quantitative approach, employing descriptive statistics, comparative (trend) analysis, correlation analysis, and hypothesis testing. Secondary data was collected from 18 commercial banks in Nepal, including post-merger banks, covering the fiscal years from 2015/16 to 2021/22. Statistical tools such as SPSS and EViews were used for analysis. The findings indicate that investors seeking higher returns might consider Prabhu Bank, which offers high mean returns but also comes with higher volatility. In contrast, risk-averse investors may prefer banks like NMB and Nabil, which provide lower mean returns but more stable performance. Notably, this research contributes to the understanding of the risk-return relationship in the context of 18 Nepalese commercial banks post-merger, providing new insights for investors. This study highlights the importance of analyzing individual bank stocks and their associated risks for portfolio construction. By understanding the dynamics of risk and return, investors can optimize their investment strategies and enhance portfolio performance. Overall, this research fills a gap in existing literature by focusing on the Nepalese commercial banking sector and its implications for investor decision-making. The insights gained from this study can guide investors in navigating the complexities of the stock market, ultimately leading to more informed and strategic investment choices. Future research could expand on this work by exploring additional factors influencing stock performance and investor behavior in the Nepalese context.

Can altruistic factors motivate residents’ energy-saving behavior? An application of stimulus-organism-response theory in China

As China increasingly focuses on sustainable development, understanding and influencing urban residents’ energy-saving behaviors becomes vital for addressing high energy consumption issues. Thus, this research chooses the residents in China as its object, and studies the factors influencing residents’ habitual energy-saving behaviors. We establish a comprehensive theoretical model suitable for this study based on the Stimulus-Organism-Response (SOR) theory. Utilizing on-the-spot investigations, extensive data collection and model establishment, our research reveals that “altruism” – defined here as actions driven by concern for societal expectations – predominantly motivates daily energy-saving behaviors. In addition, external factors (cost of energy-saving measures) have a significant impact on residents’ energy-saving investment behaviors. Based on our findings, we propose specific policy recommendations focusing on publicity on environmental pollution, the platform for sharing energy conservation experiences and formulation of group-differentiated energy conservation policies. Therefore, this study provides policy implications for motivating residents to take energy-saving actions.

Expansion or retrenchment: Corporate investment reactions to external security risks

Intensifying power competition has raised the need to understand how corporations react to international security dynamic challenges. Using data on Chinese A-share listed companies from 2012 to 2022, we developed an index to measure external security risk and empirically study the influence of external security risks on corporate investment behavior. These findings indicate that corporations reduce real investment and increase financial asset allocation when external security risk is high. Meanwhile, corporations tend to expand overseas investments to enhance international diversification and turn toward low-risk regions. The technology and strategic emerging sectors exhibit a higher preference for real investment during periods of high external security risk. Furthermore, entrepreneurs’ family-nation sentiment can inhibit corporate financial investment and promote real investment. This study contributes to understanding how the external security environment shapes corporate investment strategies. It also demonstrates how entrepreneurial spirit can influence corporate investment decisions during periods of high security risk.

Tax Policy Expectations and Investment

ABSTRACTThis paper examines how firms’ tax policy expectations (TPE) evolve around and relate to their investment responses to changes in tax policy. Using a text‐based approach to measuring TPE, we find that two recent tax policy–changing events—namely, the 2016 U.S. presidential election and the enactment of the Tax Cuts and Jobs Act (TCJA)—spawned considerable between‐ and within‐firm variation in TPE, with aggregate time‐series patterns in TPE occasionally challenging prevailing assumptions in previous research. Further, we observe that event‐induced TPE relate to investment both before and in response to the TCJA's passage in 2017, with offsetting associations between its first and second moments, and that these TPE moderate the TCJA's intended investment‐stimulating effect. Furthermore, we document a difference between domestic and multinational firms in their TPE‐investment response, with the former (latter) more likely to adjust the level (shift the country location) of their investment. Overall, our findings support the idea that TPE can impact investment behavior in the face of a tax policy change and suggest that our methodology can be used by future research to incorporate TPE into analyses of tax policy effects.

European football club market value and sporting performance: the moderating effect of player transfers, fans engagement and coaching changes

PurposeThis paper investigates the relationship between sporting performance and the market value of European football clubs, with a particular focus on the moderating effect of player transfers, fan engagement and coaching changes.Design/methodology/approachUsing a Cross-Sectional Augmented Auto Regressive Distributed Lagged Model (CS-ARDL), we analyze a decade of data (2013–2023) from fourteen prominent clubs across ten European leagues.FindingsOur findings confirm a strong positive correlation between sporting performance and market value in European football clubs. Furthermore, the research reveals that strategic player transfers and high fan engagement significantly amplify the positive impact of on-field success on a club's valuation. Interestingly, coaching changes do not exhibit a significant moderating effect on this relationship.Research limitations/implicationsThese findings carry significant economic implications for the football industry, underscoring sporting success as not only a driver of economic growth and social development but also a vital source of funding for clubs seeking to further invest in talent, infrastructure and fan engagement initiatives.Originality/valueThis study makes a novel contribution to the existing literature by providing a comprehensive analysis of the intricate relationship between sporting performance, market value and the moderating roles of player transfers, fan engagement and coaching changes within the European football landscape. Moreover, the research offers unique insights into investor behavior and the factors influencing investment decisions, enriching our understanding of the complex dynamics driving the football market.

How fund manager speaks values: evidence from China

ABSTRACT Confidence, especially in the form of overconfidence, is a crucial psychological factor that influences fund managers’ investment behaviours. However, how to reliably quantify it remains an open question. The self-marketing endeavours via video-sharing platforms of mutual fund companies in China have unexpectedly provided persuasive avenue to gauge confidence through video appearances. This paper proposes a novel data integration framework, combining with multimodal content understanding techniques, and offers calculations of nonverbal personal traits from videos circulated in social media. In particular, we focus on managers’ vocal cues and construct a confidence measure from vocal pitch. Our findings reveal a substantial relation between vocal confidence and fund managers’ investment decisions. Our work also underscores the potential of multimodal data from social media in disclosing nuanced findings in the interdisciplinary studies of finance and psychology.

The economic consequences of misinformation an analysis of the impact of fake news on stock market volatility during the covid19 pandemic| International Journal of Innovative Science and Research Technology

This paper examines the economic consequences of misinformation on stock market volatility during the COVID-19 pandemic, highlighting how false information significantly disrupted financial markets. The analysis explores specific high-profile cases where misinformation about vaccines, lockdowns, and treatments led to increased market volatility, panic selling, and shifts in investor behaviour. The study delves into the effects on major indices such as the S&P 500 and Dow Jones, revealing the substantial financial losses experienced by retail and institutional investors. It also discusses the regulatory and institutional responses from financial authorities and social media platforms, as well as the challenges they face in curbing misinformation’s rapid spread. The paper concludes with recommendations for enhancing market resilience, emphasising the importance of media literacy, robust fact-checking, and proactive regulatory frameworks to mitigate the impact of misinformation in future crises. This study underscores the ongoing need for vigilant market practices and improved information governance to maintain economic stability.

Geopolitical risk, digital transformation, and corporate outward foreign direct investment

This study uses data from A-share listed companies from 2012 to 2022 as the research sample to assess the impact of geopolitical risk and digital transformation on enterprises’ outward foreign direct investment (OFDI) behavior. Geopolitical risk is detrimental to OFDI, digital transformation can significantly promote OFDI, and financing constraints mediate the relationship between digital transformation and OFDI. The impact of digital transformation on OFDI varies between state-owned and non- state-owned enterprises.

When echoes surpass voices: Market reaction to forwarded news

We examine the impacts of two types of news, forwarded news and novel news, on market reactions and investor attention in the Chinese stock market. Surprisingly, we find that forwarded news evokes a stronger market reaction than novel news. To understand this phenomenon, we investigate and find three mechanisms through which forwarded news influences investor behavior: filtering, verification, and amplification effects. The filtering effect shows that forwarded news, having been selected for resharing, contains information content that has persistent effects on stock return. The verification effect indicates that forwarded news, particularly following scandals involving news platforms, is perceived as more credible, thus eliciting a stronger market reaction. The amplification effect shows that the redistribution of news magnifies its reach and captures investor attention, leading to increased investor search and trading on the stocks. Moreover, the impact of forwarded news on investor attention is more pronounced for firms with greater information opacity. Our results show the distinctive roles of forwarded news and novel news in the financial market, highlighting the importance of considering the heterogeneity of news information.

Dynamic spillover effects and interconnectedness of DeFi assets, commodities, and Islamic stock markets during crises

Decentralized Finance (DeFi) assets, commodities, and Islamic stock market cointegration are affected by technological innovations, market dynamics, investor behavior, and crises. This study investigates the dynamics of returns and volatility for three DeFi assets, six commodities, and three Islamic stock markets from December 2019, to March, 2023, and identifies higher spillover effects during crises. Links among the Cross-DeFi, commodity, and Islamic markets significantly influence returns and volatility during crises. Notably, the commodities index emerged as a pivotal and substantial transmitter of risk during the Russian-Ukraine war crisis, with Emerging Markets (EM) being a key recipient. However, during the COVID-19 pandemic, livestock indices assume the role of prominent risk-return spillover receivers. The findings indicate robust returns and volatility interconnected between DeFi assets and Islamic markets with a moderate level of connectivity among commodity groups. WDI, ACWI, and EM explained 75 % of the variance observed during crisis episodes. This study formulates strategic portfolio management within and between connectedness among return volatilities by highlighting the stability of DeFi assets, the diversification potential in commodities, and a balanced option in Islamic markets. Our study provides a deep and insightful understanding of the stakeholders across markets during crises.

Corporate resilience during crises and the role of ESG factors: Evidence from the COVID-19 pandemic

This study explores the relationship between environmental, social, and governance (ESG) factors and investor behavior during the COVID-19 crisis, utilizing a sample of S&P 500 companies. Findings suggest that these factors may not have had a significant influence on investment decisions during this period. Despite a notable overall market response to major COVID-19 related events, our findings reveal that ESG factors provide minimal explanatory power for individual stock price returns. This observation invites further investigation into the conditions under which ESG considerations are prioritized by investors.

Unveiling investor behavior: An investigation into India’s pharmaceutical sector during COVID-19

This study examines the factors influencing retail investors’ decision to invest into the Indian pharmaceutical sector amidst the COVID-19 global health crisis. Confronting the obstacles introduced by the pandemic has helped create a robust foundation for the Indian pharma sector to grow rapidly in the future. As the industry demonstrated signs of considerable future growth, investors favored pharmaceutical investments during COVID-19. Retail investors were mainly the ones who went on a shopping spree during the pandemic. This backdrop provides a unique context to explore the retail investors’ behavior in the Indian pharmaceutical landscape. Leveraging the Theory of Planned Behavior (TPB), this study marks the first attempt to introduce behavior toward market fundamentals as a mediating factor into the TPB framework. To conduct the study, data were collected from 305 retail investors located in Karnataka’s South Canara region, who invested into the Indian pharmaceutical industry during the pandemic, using snowball sampling. The e-survey was employed for data collection. The results reveal that attitudes toward pharmaceutical investments, subjective norms, Perceived Behavioral Control (PBC), and behavior toward market fundamentals have significantly influenced investor decisions. Notably, behavior toward market fundamentals has partially mediated the relationship between attitude toward pharma investment and investment decision and PBC and investment decision. However, the mediation effect of behavior toward market fundamentals was not evident between the subject norm and the investment decision. The study holds pivotal implications for policymakers, government bodies, and industry stakeholders to promote pharmaceutical investments.

Understanding Behavioural Biases Driving Equity Investors in India: A Factor Analysis Approach

In the dynamic realm of equity investment decisions, this study challenges the traditional assumption of investor impartiality and rationality, arguing that investors’ choices are often shaped more by beliefs and psychological inclinations than by objective reasoning alone. Drawing from behavioural finance theory, which contests the adequacy of the standard finance model in capturing the nuances of decision-making, this research delves into the psychological forces influencing private investors. Recognizing the prevalent biases coloring their decisions, the study investigates common prejudices impacting investor choices. Leveraging survey data from 375 equity investors, the research employs exploratory factor analysis and regression models to disentangle the effects of cognitive biases, such as the gambler’s fallacy, overconfidence, aversion to ambiguity, lack of representativeness, aversion to loss, and anchoring. The findings challenge the assumption of investor rationality, offering valuable insights into the complexities of financial decision-making. Notably, the study underscores a robust and positive association between these biases and equity investment decisions, shedding light on the intricate interplay between psychological factors and investment behaviour.

BEHAVIOUR BIAS IN INVESTMENT DECISIONS: EMPIRICAL STUDY OF INVESTOR PSYCHOLOGY IN INDONESIA

Investing involves putting money into a variety of asset classes for a predetermined amount of time in the hopes of increasing total value and producing more income. The goals of investments and economics, such as value creation, profit generation, and other related goals, are strongly correlated. It is critical to recognize that investments may include additional financial, social, and spiritual goals. This research aims to assess investor behavior from internal and external perspectives concerning investing decisions. This study employs the Structural Equation Model (SEM) methodology utilizing the Smart-PLS software. This study's findings demonstrate that qualities including anger, anxiety, overconfidence, and self-monitoring positively influence investment decisions. Herding mitigates the adverse impacts of anger, anxiety, overconfidence, and self-monitoring on investment decisions. This research's consequences can assist investors in circumventing irrational risks and yield more objective findings grounded in thorough study. This tendency can result in inefficient market transactions, asset bubbles, and significant volatility. This study arose as a counter to the conventional understanding of exchange markets predicated on the premise of trader rationality. This research identifies that emotional emotions, risk perception, and cognitive biases frequently affect investment decisions by comprehending human nature.

Gender(ed) equity: The growth of female shareholding in Australia, 1857–1937

AbstractLittle is known about the history of female investing in Australia. We develop a new dataset of company shareholders between 1857 and 1937, covering all major sectors of the economy. We calculate the female fraction of shareowners, their occupational and geographic backgrounds, and we analyse their investment patterns and behaviours including their risk profiles and portfolio construction decisions. Our findings suggest that ‘gender equity’—and more—had been reached, for some companies, by the interwar period. Women investors came from many walks of life, had various motives, and appear to have largely acted independently of other women and of men.