Young Investors Research Articles

PENGARUH HERDING BEHAVIOR DAN OVERCONFIDENCE TERHADAP KEPUTUSAN INVESTASI

The Covid-19 pandemic which began at the end of 2019 resulted in increased pu­blic awareness of investment. The increase in public awareness of investing in the capital mar­­ket occurs because people are starting to realize the importance of investing to protect their money. This study aims to analyze the effect of herding behavior and overconfidence on the investment decisions of young East Java investors in the Capital Market. This type of re­search is explanatory research with a quantitative approach. Explanatory research is research that explains the relationship between variables through hypothesis testing. This study has 113 young investors sample in East Java obtained through the distribution of google form questionnaires using the purposive sampling technique. This research uses multiple re­gression analysis methods with the SPSS application. The results of this study indicate that herd­ing behavior and overconfidence variables have a significant effect on the investment de­cisions of young investors in East Java. This research implies that investors must be more ca­reful in making their investment decisions to avoid herding and overconfidence behavior that can harm their investment.

RISK PROFILING OF SECONDARY EQUITY INVESTORS FROM THE CHENNAI CITY OF INDIA BASED ON THE BIG FIVE PERSONALITY MODEL

The risk taken by the investor depends on several independent variables like: personality, biological age, investment experience and income. The main aim of this article is to combine all these variables in order to build an exhaustive risk profile on the basis of the Big Five Personality dimensions. The research method applied is exploratory in nature and questionnaire survey method was employed to gather data from 436 secondary equity market investors residing in the Chennai city of India. ANOVA was employed to develop the risk profile. The outcome of the research was an exhaustive risk profile combining all the related variables and a regression model predicting the equity returns. The main conclusions of the study are that the investors with the more of the conscientiousness personality tend to take less risk. This finding was also consistent among the senior investors, high income investors and those with mediocre/ high investment experience. The study also concluded that the agreeable investors with high income/high investment experience, tend to take less risk. Only the young investors with more of the conscientiousness personality tend to take more risk and with more of the extraversion personality tend to take less risk. This study serves as a guidance for advisors to provide appropriate recommendations on the basis of the risk appetite and personality of the investors.

Equate Goals and Risks in the Convenience of Investing

During this uncertain pandemic situation, the number of investors is increasing all over the world. Nevertheless, this trend does not indicate the right investment decision, especially for young investors who have specific characteristics. Risk-based portfolio preference is expected to be a bridge or mediation that can contribute to investment decisions caused by goal-based investing. The objective of this study is to analyze the interrelation of goal-based investing, risk-based portfolio preference, and investment decision among young investors in Rumah Saham Indonesia/RSI (Indonesian Stock House). The population of this research was 935 young individual investors registered with RSI. Using a proportionate random sampling, 280 young investors participated as the respondents. The data were collected through questionnaire surveys, and the Structural Equation Model was employed to analyze the interrelationship among the construct variables. The results reveal that Goal-Based Investing has a positive influence on Risk-Based portfolio Preference and Investment Decision, Risk-based portfolio preference has a positive influence on Investment Decision. In the model, Risk-Based Portfolio Preference functions as a mediating variable.

Brouges footwear: launching a Ghanian shoe brand

Study level/applicability: This case is intended for use in undergraduate, MBA and Executive Education courses in Strategy, Business in Africa, Entrepreneurship and Investing in Emerging Markets. Subject area: Strategy, Business in Africa, Entrepreneurship and Investing in Emerging Markets. Case synopsis Eric Kyere founded Brouges in 2015, an African brand, with the objective of designing, manufacturing and selling great shoes. His original plan was to produce Brouges’ shoes in Africa, but had several problems with suppliers (e.g. poor quality, poor raw materials, etc.). Therefore, Brouges had to partner with a European manufacturer to produce its first batch of shoes. Shortly thereafter, Eric partnered with Michael Asare Bediako, a young Ghanaian investor and entrepreneur, who had advanced plans to build a shoemaking factory in Ghana. The factory was likely to open in early 2021, following major delays caused by the COVID-19 pandemic. This would be a major milestone for Brouges and a key step in Eric’s entrepreneurial journey. However, how can Eric and Brouges manage the challenge of growing and building a manufacturing and retail organization? How could they succeed where others had failed? Leaning objectives This case has five pedagogical objectives: strategic choices: evaluate the strategic choices that companies need to make (based on their predefined goals and aspirations) and show that they are effectively an integrated cascade of choices that need to be consistent and coherent; strategic planning: apply and analyze the key steps and key decision to be made as part of a high-level strategic plan; value proposition: apply and analyze the concept and key components of a company’s value proposition, leveraging Tovstiga’s framework; doing business in Africa: evaluate the specific generic challenges of doing business in Africa, particularly in the manufacturing sector; generalizability of frameworks: this case shows that the same frameworks that are used to analyze large firms and mature markets can be applied to smaller firms in less developed markets. Complexity academic level This case is intended for use in undergraduate, MBA and Executive Education courses in Strategy, Business in Africa, Entrepreneurship and Investing in Emerging Markets. Supplementary materials Teaching notes are available for educators only. Subject code CSS: 3 Entrepreneurship.

The Effect of Bad Reputation and Increasing Factor Towards Investment Decision: Experimental Study on Young Investor

The purpose of this research is to examine the effectiveness of clawback to increase the intention of young investors in companies that have a bad reputation. This research also examines the intention to invest between independent income groups and non-independent income groups in bad reputation companies. This study uses an experimental method with a 2x2 design between subjects. The subjects of this study amounted to 70 participants. The result showed that there was no difference in the investment interest of young investors, both those who already have income and those who do not have income in bad reputation companies. In addition, clawback could increase the investment interest of young investors to invest in companies that had a bad reputation because of their sense of security

The effect of perceptions of corporate identity and corporate social responsibility practices on investment intention

Orientation: Given the growing importance of sound corporate social responsibility (CSR) and considerable corporate investment in such activities, it is essential to understand the perceived impact thereof on stakeholder behaviour.Research purpose: As young individuals are particularly passionate about social responsibility, the effect of their perception of corporate identity (corporate values and corporate expertise) and CSR practices (relational, moral and discretionary actions) on their investment intention was investigated within an emerging market context.Motivation for the study: Previous researchers mainly focused on the effects of CSR on consumers’ intention to purchase products. Limited research has been conducted to understand the effect of CSR on decisions made by other key stakeholders, including investors.Research approach/design and method: Based on the theory of planned behaviour, a consumer behaviour-based dual-process model was adapted and tested in the investment context. An electronic questionnaire was distributed to potential young investors in the country to determine the effect of their perceptions of the CSR practices of a well-known South African financial company (Nedbank) on their intention to invest. The 1 649 responses were assessed through partial least squares structural equation modelling.Main findings: The adapted model was deemed reliable and valid in the investment context. Discretionary and relational CSR practices had more predictive relevance towards the corporate values dimension than the corporate expertise dimension of corporate identity. Moral CSR practices predicted the perception of both dimensions, which, in turn, influenced investment intention.Practical/managerial implications: Focus should be placed on communicating moral CSR practices, as it had a stronger prediction value (than discretionary and relational CSR practices) towards potential investors’ perceptions of the corporate expertise and values dimension of corporate identity which, in turn, strongly predicted investment intention.Contribution/value-add: This study makes a methodological contribution, as a dual-process model accounting for corporate identity and a range of CSR practices, based on consumer behavioural constructs, was applied in the context of investment decision-making within an emerging market.

PENGARUH PLATFORM MEDIA SOSIAL TERHADAP MINAT GENERASI MILENIAL DALAM BERINVESTASI DI PASAR MODAL

Technology is a symbol of technological development progress. Millennials are considered technologically literate who currently provide facilities for investors to freely choose how to invest. Information about the types and ways of investment is available so abundant, especially with the internet media, potential investors can search for as much information as possible. Library Research studies libraries and other scientific works related to the problems studied, Normative legal research in the form of data obtained from literature studies. Nowadays millennials are starting to be interested in investing in the stock exchange. According to Indonesia Stock Exchange data about 60-70% of young investors aged up to 40 years invest in the stock exchange. The increase in millennial retail investors is also happening because the ordering system can be done online making transactions easier. Investment interest in Indonesia has continued to grow in recent times.
 Keywords: Technology, Millennials, Investments.

Young Investors’ Instagram Usage Behavior and Investment Risk Appetite

Online Social Network Sites (SNSs) provides a lot of information to understanding young investor behavior. As the interest of financial practitioners, the young investor has their own risk tolerance. So, this study aims to predict the investment risk appetite through the social networking sites (SNSs) as one of huge informations exchange platforms by using young investors’ Instagram usage behavior. This research uses investment risk appetite and extroversion personality as the dependent variables. Moreover, number of followers on Instagram, time spent on Instagram, frequency of log on to Instagram, the use of Instagram for self-expression, and the use of Instagram for social connection as the independent variables. The researchers use 300 young stock investors through online questionnaire. The results study show that number of followers on Instagram and the use of Instagram for social connection significantly affect the extroversion personality, the extroversion personality significantly affect the investment risk appetite. Otherwise, time spent on Instagram, frequency of log on to Instagram, the use of Instagram for self-expression do not significantly affect the extroversion personality. This result obtains the probability of understanding the young investor’s risk appetite through their Instagram usage behavior, so the financial consultant can gather the information to understand their current social network activities.

Gamification of financial applications and financial behavior of young investors

PurposeThis study aims to investigate the moderating role of gamification on the relationship of financial attitude (FA), financial self-efficacy (FSE) and financial planning activity (FPA) of individuals on the financial behavior of individuals and also provides a conceptual background on financial management behavior (FMB), FA, FSE and FPA of individuals.Design/methodology/approachA preliminary study with the help of a structured questionnaire was conducted by administering the questionnaire to individuals who are exposed to financial apps on their smart phones or personal computers for various money-saving and investment activities. Help of various financial planners and financial consultants led to successful circulation of the questionnaire to respondents. The research model was tested through structural equation modeling using AMOS-21 software. Firstly, a measurement model was evaluated that comprised five latent constructs, i.e. gamifying features (GF), FA, FSE, FPA and FMB. Subsequently, the structural model consisting of the hypothesized relationships was evaluated.FindingsThe role of GF in financial apps and applications in moderating the influence of FA, FSE and FPA on FMB has not been thoroughly studied in the past literature, and the results of this study show that GF significantly moderate the influence of FA and FPA on the FMB of individuals. However, according to the results GF in financial apps do not have a significant moderating role on the influence of FSE on FMB of individuals.Originality/valueThe studies in the past have not investigated the role of gamification in the area of personal finance of individual investors, specifically their financial behavior in both developed and developing countries. This study addresses this gap by examining the role of gamification in moderating the relationship that exists between FA, FSE, FPA and financial behavior.

Life-cycle asset allocation and the peso problem: does ambiguity aversion matter?

PurposeThe study aims to show that ambiguity aversion exerts a non-negligible effect on the investors' decisions, especially due to the possibility of sharp declines in stock prices.Design/methodology/approachThe vast majority of previous studies on life-cycle consumption and asset allocation assume that the equity premium is constant. This study evaluates the impact of rare disasters that shift the stock market to a low return state on investors' consumption and portfolio decisions. The author assumes that investors are averse to ambiguity relative to the current state of the economy and must incur a per period cost to participate in the stock market and solve their optimal consumption and asset allocation problem using dynamic programming.FindingsThe results show that most young investors choose not to invest in stocks because they have low accumulated wealth and the potential return from their stock market investments would not cover the participation costs. Furthermore, ambiguity-averse investors hold considerably fewer stocks throughout their lifetime than ambiguity-neutral ones. The fraction of wealth invested in stocks over the typical consumer's life is hump-shaped: it is low for a young individual, peaks at his early 30s and then decreases until his retirement age.Originality/valueTo the best of the author’s knowledge, this is the first study that assesses the impact of negative stock price jumps on the optimal portfolio of an ambiguity-averse investor.

Impact of education, age and gender on investor's sentiment: A survey of practitioners

The field of behavioral finance lacks a homogeneous and structured theoretical framework. The purpose of this paper is to contribute to further systematization in the field by analyzing the impacts of education, gender and age on investor behavior and sentiment.The study is based on online anonymous surveys given to 106 professional investors active in the Spanish market during February 2017. The survey includes control questions, seven questions regarding investors' sentiment to elaborate a confidence index and twenty questions concerning the practitioner's view of behavioral finance.We first identify a gap between the relevance of behavioral finance and the lack of education in the field. We also find a clear misalignment between the investors and their clients' profiles related to their level of confidence. In that regard, the use of the institutional investor confidence index mitigates self-perception bias and is a key element in determining investors’ real profiles.Consistent with prior research, we find that female investors view themselves as more driven by rational analysis and are more risk averse while younger investors are more influenced by cognitive and emotional biases. As a key contribution, we establish a model to determine investors’ sentiment, which shows that female and more experienced practitioners exhibit higher levels of optimism and confidence.

Acceptability of mobile stock trading application: A study of young investors in Malaysia

Mobile financial services have been adopted rapidly during the digitisation era. This study therefore aims to investigate the antecedents of mobile stock trading adoption among young investors. Using the structural equation modelling technique, this study develops an integrated theoretical framework from both the Technology Acceptance Model and Theory of Planned Behaviour using survey data from 373 young retail investors. The suggested model incorporates the six constructs of perceived risk, perceived benefits, perceived usefulness, attitude, perceived behavioural control and social influence and assesses how they affect the intention to adopt mobile stock trading. The results show a strong positive connection among attitude, perceived behavioural control, perceived benefits and intention towards mobile stock trading. We find that trust adds great explanatory power to perceived behavioural control, attitude and social influence in explaining investors’ adoption intention. Surprisingly, perceived risk is not significantly correlated with adoption intention. This study has employed a comprehensive framework to understand the acceptance level of mobile stock trading.

What Drives Investors to Chase Returns?

We use data on one-participant retirement savings plans to identify a behavioral bias in savings decisions. Investors who earn top-decile returns increase contributions to their accounts more than other investors. Using characteristics of the investors, characteristics of their retirement savings accounts, and multivariate regression analysis, we first show that such ``return chasing'' behavior is robust to controls for financial illiteracy, macroeconomic conditions, learning, transaction costs, housing prices, and informational frictions. We then use a structural two-asset model with tax-deferred and taxable assets to show that a permanent increase in expected returns produces investment responses for younger or liquidity-constrained investors that are consistent with our data. Our results provide evidence that younger investors' recent portfolio experiences have highly persistent effects on their expectations.

Generation Stupid or Generation Smart? An Analysis of Young Investors in Germany and Austria

Using data from a European app-based investment funds aiming at younger and first-time investors, we find that this group acts surprisingly “smart” when it comes to investing: The analyzed group of mostly under-30 German and Austrian investors clearly prefers a long-term continuous buy-and-hold approach paired with relatively high monthly savings contributions; the market downturn in 2020 was used to even increase investments, which led to a significant outperformance (13.7% p.a. from 2017-2021) compared to the underlying funds (4.6% p.a.). At the same time these investors seem to prefer a high frequency of almost daily interaction with their investments through small-sized news, which seems however to be used rather for entertainment or long-term evaluations rather than short-term trading.

Life-cycle welfare losses from rules-of-thumb asset allocation

How should workers invest over the life-cycle? Should they follow some typical prescriptions (“rules of thumb”) in personal finance implying higher equity investments when young? We show that the answer hinges on the risk of long-term unemployment spells, entailing permanent declines in workers’ future earnings prospects. Absent unemployment risk, extant prescriptions deliver portfolios that are close to optimal, implying negligible welfare losses. They instead lead to sizeable welfare losses (3%–9% of annual consumption) when the risk of human capital depreciation following long-term unemployment is considered and realistically calibrated to the U.S. labor market. These losses stem from excess risk taking when young investors face uncertainty about future labor and pension incomes. This result points to a new design for pension plans offered by long-term institutional investors.

Modeling retirees’ investment behaviors in the presence of health expenditure risk and financial crisis risk

This paper examines the impact of both health risks and financial market turmoil on individual investment decisions during retirement. Using a panel data set compiled from the U.S. Health and Retirement Survey, we find that health shocks increase retirees’ disposable income uncertainty and compromise their risk-taking capacity. This is especially the case for those with moderate levels of wealth. However, we find that health risk alone cannot explain the empirically observed lower level of risky asset investment behaviors. It is the presence of extreme events in the financial markets, in combination with health risks, that significantly reduce retirees’ incentives to invest in risky assets. Compared with younger investors, retirees’ shorter investment horizon and higher health risks render them more vulnerable to the detrimental consequences of wealth evaporation caused by financial crises. Our results indicate that effective portfolio management for retirees must take into account both their health risks and the occurrence of financial market tail risks.

PENGARUH KEMAJUAN TEKNOLOGI INFORMASI DAN PENGETAHUAN INVESTASI TERHADAP MINAT INVESTASI GENERASI MILENIAL DI PASAR MODAL

The number of millennial or forces born between 1981-2000 according to the 2017 National Socioeconomic Survey (Susenas) counts 88 million people or 33.75 per cent of Indonesia's population (BPS). PT Indonesian Central Securities Depository (KSEI) noted that young people or millennial generation still count the number of investors in the Indonesian capital market. Throughout 2018 the number of young investors reaching 21-30 years won 39.72% of the number of investors. Therefore BEI participated in using the Indonesian Central Securities Depository (KSEI) & securities companies began to hold a variety of lessons ranging from talk shows, seminars to workshops & capital market schools (SPM) information technology and investment knowledge. This research method is a causal relationship research with quantitative data with SPSS tools. contributing to this research were students of the faculty of economics and business at the University of Muhammadiyah Tangerang with a sample of 92 respondents. the results of this study indicate the fact that the development of information technology is significant to the investment interests of millennial. While investment knowledge has a positive and significant impact on investment interests in millennial.

Influence of the biological age of the investor on decision-making in the secondary equity market

PurposeDecision-making in the equity market has been a challenging task for investors belonging to all age groups. This study aims to find linkages between the decision-making techniques in the equity market and the biological age of the investor.Design/methodology/approachThis is an exploratory study and by surveying a sample of 436 secondary equity investors residing in the Chennai region of India, the study measured the decision-making techniques. Using the ANOVA test, the decision-making technique mostly used by investors belonging to an age category was determined. Further, the linkages were investigated in isolation for the male and female investors. By using regression analysis, a model was developed to predict the actual equity return. The financial characteristics of the various age groups were also analyzed using cross-tabulation.FindingsThe results of the study show that the age of the investor plays an important role in the choice of decision-making technique used. The younger investors, who earn the lowest returns were less likely to use industry analysis but more likely to use technical analysis and advocate’s recommendation. Specifically, the younger male investors were less likely to use industry analysis and more likely to use the advocate’s recommendation. The younger female investors were also less likely to use industry analysis. The middle-aged respondents, who earn the highest return were less likely to use technical analysis and advocate’s recommendation owing to lower means. Specifically, the middle-aged male investors were less likely to use the advocate’s recommendation and technical analysis. Then, middle-aged female investors were more likely to use industry analysis.Originality/valueThe findings would be beneficial for financial advisors and wealth managers to suggest age-appropriate strategies for the various investor groups. This age-based profiling of investors would make investors aware of their decision-making techniques and encourage them to make more rational decisions.

The behaviour of US investors during presidential elections

PurposeThis study examines the influence of the presidential elections on the behaviour of US investors according to the trading activity of two of the most popular investment vehicles: exchange-traded funds and close-ended funds.Design/methodology/approachBased on the fact that investors in these two investment vehicles differ by, at least, two demographic factors that influence investment decisions, age and labour status, inferences are made about the degree of interest and the amount of trading activity that presidential elections provoke.FindingsThe evidence demonstrates that, during the last four US presidential elections, exchange-traded funds' investors trade significantly more than close-ended funds' investors during several event windows centred on the day of an election in which a republican candidate is elected. Close-ended funds' investors are more active during the election of a democratic candidate, although the statistical evidence in that regard is weak. Thus, it appears reasonable to conclude that younger investors who are gainfully employed are induced to trade by a presidential election in which a republican candidate prevails. Apparently, a democratic victory does not provoke the same behaviour.Originality/valueAlthough the relation between politics and economics is not an unexplored topic, it is not clear whether the presidential elections themselves constitute an event that triggers the trading behaviour of investors.

Do Investors Rely on Robots? Evidence from an Experimental Study

Robo advice has moved its first steps in the Anglo-Saxon countries and is now rapidly gaining market share at a global level. The phenomenon fueled a growing and still not conclusive institutional debate about potential benefits and risks to financial consumers, based also on investors’ biases and behaviours that online platforms could trigger to the detriment of robo advisees. The present paper provides some insights into attitudes and behaviours that might prevail in a digital environment among young investors, representing the category of users potentially more involved by the development of the automated advice. In detail, the study investigates whether individuals’ propensity to follow the recommendation received from an advisor changes depending on whether the advisor is a human or a robot. The analysis is based on data collected through an ad hoc developed laboratory experiment run in the Cesare Lab of LUISS University with a sample of 180 students. Students were given an initial monetary endowment and were asked to choose between six different portfolios of financial activities; after being profiled through a questionnaire aimed at eliciting their risk tolerance (Grable and Lytton’s Risk Tolerance Quiz; 2003), they received the advice, either from a human advisor or from a robo advisor (i.e. via a computer platform) depending on the treatment they had randomly assigned before entering the experimental session. Then, they were asked again to choose among the six portfolios in order to capture whether the propensity to follow the recommendation depends on its source (human versus robo). Finally, participants were asked to answer several questions eliciting risk preferences, financial literacy (actual and perceived) and digital literacy, serving as control variables when modelling the probability to follow the advice. Our results show that the probability to follow the advice does not depend on the source of the recommendation but rather on the alignment between the self-directed choice made before receiving the advice and the recommendation subsequently received: the propensity to follow the advisor (either human or robo) increases if the advice confirms individual’s own beliefs about her/his investor profile. This result might be explained by referring to individuals’ attitude towards the so called ‘confirmation bias’. However, when the self-directed choice differs from the recommendation received, participants may be more likely to follow the advice given by a human advisor and less likely to follow the advice formulated by an algorithm. Also the gender of the advisor seems to matter: women tend to follow the advice provided by a female advisor more frequently compared to the case of the recommendation given by a male advisor. This work is part of a wider research on FinTech that CONSOB started in 2016, in collaboration with several Italian universities, with the aim of exploring opportunities and risks for investor protection and the financial system as a whole, related to the application of technological innovation to the provision of financial services. In particular, supplementing Lener, Linciano and Soccorso (2019, edited by) and Caratelli et al. (2019), this document widens the field of investigation by referring to a specific target of the population - the so called millennials and post-millennials – and using complementary and innovative methods. According to an evidence-based approach, insights from the present study may suggest specific investor protection initiatives, also in terms of financial education activities designed for a clearly-identified segment of the population (the so called millennials and post-millennials, in this case). Evidence from the present work might be extended further with respect to the consumers’ perception of the fairness of algorithms used to provide financial services, the cognitive heuristics and biases underlying decision making process and investments in the digital environment and nudges which may be used to enhance investor protection.