Investment Behavior Research Articles

The Lack of Lewis Turning Point in India: Conceptualizing the Roles of Capital Intensity, Employment Opportunities, and Keynesian Investments

This research study aims to explain why the higher-growth phase in India, witnessed in the post-reform period of 1991–2011, failed to have the impact of significant increases in formal, modern sector employment or a transition toward the Lewis turning point. The article illustrates that it is more realistic to view a transition toward the Lewis turning point as involving increases in capital intensity. A desired increase in demand for labor will follow if the increases in capital intensity are associated with productivity growth in terms of increases in the share of intermediate goods specializations as output is increased. Autoregressive distributed lagged regression has been used to analyze whether investment behavior captures Young–Kaldor investments that can indicate growth in intermediate goods specialization. This is key to a higher pace of investment and specialized employment outcomes. The findings support existing literature, highlighting that increases in capital intensity constitute a significant factor explaining the lack of proper employment growth and the Lewis turning point. However, they also show that the problem is not with increases in capital intensity per se. Rather, the increases do not indicate dynamism regarding investments associated with intermediate goods specializations. JEL Classification O11, O14, O31

Horizontal and vertical foreign direct investment linkages, absorptive capacity and domestic investment: evidence from Indonesian plant-level data

PurposeThis study examines the effect of horizontal and vertical foreign direct investment (FDI) linkages on the investment decisions of domestic plants. It explores this link for plants in a developing country, where the dynamics of FDI spillovers on domestic investment choices are distinct from those in developed countries. It also adds to the literature by examining the role the absorptive capacity of plants plays in this nexus, enriching our understanding of the interaction between FDI and the investment choices of domestic plants and providing insights for policymakers and managers seeking to maximize the positive effects of FDI spillovers.Design/methodology/approachThis study specifies the dynamic investment equation using the Euler and Q models. This equation is estimated using the first-difference and system generalized method of moments GMM estimators, which allow us to address persistency, endogeneity and unobserved plant-specific effects. FDI exposure proxy, calculated by weighing the FDI engagement variable by firm size, captures the strength of foreign equity participation in an industry and time. Input–output (IO) tables are used to calculate the proxies for horizontal and vertical (backward and forward) FDI. Total factor productivity is calculated using a method advocated by Olley and Pakes (1996) that allows us to control for selection and simultaneity.FindingsWe find that FDI inflows into both the domestic plants’ own industry and the input-supplying industry significantly boost the capital accumulation of the average domestic plants. Differentiating plants based on their absorptive capacities reveals that the presence of foreign firms significantly increases capital deepening for domestic plants with high absorptive capacity within their own industry (horizontal linkage) and in industries that supply inputs to the FDI-exposed industry (backward linkage). However, it leads to a decrease in capital deepening for high absorptive capacity domestic plants in industries using inputs produced by the industry exposed to FDI (forward linkage).Research limitations/implicationsThese findings have implications for policymakers and managers who aim to design incentives to maximize the positive spillover effect of horizontal and vertical FDI linkages on the capital deepening of domestic plants. Exploring additional mechanisms that could play a role in this nexus, separately for plants in different industries (such as the industries in which the country has a comparative advantage), may be fruitful.Originality/valueTo our knowledge, the relationship between the investment behavior of the domestic plants and FDI linkages has not been examined for a developing country. It is useful to explore this link in developing countries, as the investment choices of plants in these nations may be impacted differently by FDI spillovers than those in advanced nations. This study further contributes to the literature by investigating whether the plants’ absorptive capacity affects the nexus between FDI linkages and investment decisions of the domestic plants. The findings are valuable for policymakers and managers who aim to increase plants’ capital accumulation in developing countries.

AN ANALYSIS OF BEHAVIOURAL FINANCE AND ITS INFLUENCE ON INVESTMENT DECISION

This research delves into the fascinating realm of Behavioural Finance, exploring its significant influence on investment decision-making among residents in India's National Capital Region (NCR). By drawing on insights from relevant studies, this work seeks to uncover the intricate link between human behaviour and financial decision-making within this demographic. The study begins by examining the unique financial behaviours of investors in the region, aiming to identify the key investor profiles that shape the investment environment. As a multidisciplinary field combining elements of psychology, sociology, and finance, Behavioural Finance provides the primary framework for this exploration. The research distinguishes between its micro and macro perspectives: the detailed analysis of individual behavioural traits of investors and the broader identification of inefficiencies in the market. Recognizing the pervasive impact of behavioural biases on investment behaviours and decisions, this study offers an in-depth review of diverse research within the Behavioural Finance domain. It sheds light on how human psychology and social dynamics interact with financial decision-making, highlighting the crucial role of Behavioural Finance in contemporary financial practices. In an era where financial markets are not merely governed by rationality but are also shaped by complex human behaviours, this research offers valuable insights into the dynamics of Behavioural Finance. By illuminating the distinct investment choices, the study aims to deepen our understanding of the factors influencing these decisions, ultimately equipping investors and financial professionals with more informed decision-making strategies.

The Causality Relationship between Credit Default Swaps (CDS) and Portfolio Investments: The Case of Türkiye

This study examines the causality relationship between portfolio investments and credit default swaps (CDS) in Türkiye. Analysing the dynamics between portfolio investments and CDS premiums, two important variables for financial markets is critical to understanding how risk perception and investment decisions are affected. While portfolio investments are generally considered an indicator of the confidence of foreign investors in the country's economy, CDS premiums are an important risk measure that reflects the country's debt risk and the risk perception of market participants. In this context, examining the relationships between the two variables contributes to the understanding of the effects of investor behavior and risk perception on macroeconomic indicators in financial markets. In the study, the Granger causality test was applied using data from the period 2014Q1-2024Q1. The results obtained show that CDS premiums have a significant and unidirectional causal effect on portfolio investments. Increases in CDS premiums increase investors' risk perception and lead to a decrease in portfolio investments. On the other hand, no causal effect of portfolio investments on CDS premiums was found. These findings emphasize the importance of risk management in terms of portfolio investments in Türkiye and reveal that CDS premiums play a role in investor decisions.

Economic Development and the Development of the Securities Market: A Study of China's CSI 300 Index

The Chinese securities market has experienced over two decades of development and has emerged as a significant global investment market. However, compared to other developed securities markets, it still faces issues such as an inadequate institutional framework, irrational investor behavior, and imperfect mechanisms. To explore the relationship between China's economic development and its securities market, this paper employs Eviews time series analysis and VAR modeling for empirical research, aiming to uncover the relationship and operational mechanisms between the two. The findings indicate a certain correlation between economic development and securities market development in China. The variance decomposition reveals that the contribution of economic development to the securities market is relatively low, highlighting a major issue within the Chinese securities market. Consequently, this paper proposes reform suggestions from various perspectives, including institutional, investor, and listed company aspects, to guide the healthy growth of the Chinese securities market and create a favorable environment for economic development.

EFFICIENT MARKET HYPOTHESIS DURING COVID-19 PANDEMIC: BRICS-T COUNTRIES

The impact of COVID-19 on financial markets has become a significant topic of research in the literature. Particularly, the declaration of the outbreak as a global pandemic by the World Health Organization on March 11, 2020, altered investors' risk perceptions and led to major fluctuations in stock markets. In this study, the response of stock indices in BRICS-T countries (Brazil, Russia, India, China, South Africa, and Türkiye) to the pandemic declaration was analyzed using the Event Study method. The event window was set as -5 to +5 days, and the estimation window was selected as the 90 days preceding the event. As a result of the analysis based on the comparison of normal and abnormal returns, it was found that all BRICS-T stock markets, except China, were not semi-strong form efficient. In addition, the results of the paired sample t-test applied to all stock markets demonstrated that the difference between abnormal returns calculated before and after COVID-19 was statistically significant. In this context, it was concluded that, unlike previous outbreaks, the COVID-19 pandemic led to significant fluctuations in financial markets. This study provides an important contribution to understanding the effects of the pandemic on emerging markets and examining investor behavior.

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.