Behavioral factors influencing individual investors' decision making in Vietnam market

Abstract

Using behavioral factors (mood, overconfidence, underreaction, overreaction, and herding behavior) as proxy variables in the Vietnamese stock market, this article tries to explore the link between investor demographics (gender, age, experience, and educational ability) and their investment decisions. This study compiles information from a structured questionnaire survey of 400 local, international, institutional, and individual investors in Vietnam. It employed partial multiple regression to examine how investors' demographic variables affected their investment choices using behavioral traits as mediator variables. According to the results, investor emotion, overconfidence, over/underreaction, and herd behavior all have a large impact on investing decisions. Additionally, investors' investing selections are significantly and favorably influenced by their age, gender, and degree of education. Although experience does not have a significant effect on financial decisions, investors start to ignore emotional aspects as they become more experienced.

Identifying Factors Influencing Investor Behavior in the Stock Market

“…Specifically, anchoring bias has a strong effect on investor behavior in that investors depend on prior market experience to help choose their next investment. Similar to what was found in Sri Lanka, Luong & Ha (2011) in Vietnam count anchoring among the factors moderately influencing investor behavior. However, Babajide & Adetiloye (2012) claim Nigerian investors do not exhibit anchoring bias.…”

“…Hence, judging solely based on the fact that men tend to be more overconfident than women, one would expect to see overconfidence play a diminished role, which it arguably does. On a scale Volume 11 Issue 3 (2022) ISSN: 2167-1907 www.JSR.org ranging from very low, low, moderate, high, and very high, overconfidence only has a moderate impact on investors in Vietnam (Luong & Ha, 2011). A moderate impact would be consistent with a factor that still sees a measurable influence, but would have likely been higher if the group had been skewed towards comprising more males.…”

“…Study 3 -Behavioral factors influencing individual investors' decision-making and performance: A survey at the Ho Chi Minh Stock Exchange Luong & Ha (2011) surveyed Vietnamese investors, aiming to identify factors influencing investors and to what extent those factors affect investing behavior. They describe how behavioral biases tend to have an outsized impact on Asians compared to those in the rest of the world.…”

“…In Sri Lanka, Kengatharan & Kengatharan (2014) find that "overconfidence has a moderate impact on individual decision making" (p. 16), in addition to a significant negative impact on investment performance. In Vietnam, overconfidence moderately impacts investors (Luong & Ha, 2011). And in Pakistan, "overconfidence bias… is positively significant with the investment decision" (Katper et al, 2019, p. 8).…”

“…Interestingly, in the study of Vietnamese investors, the researchers chose a group that was 50% male and 50% female (Luong & Ha, 2011). Hence, judging solely based on the fact that men tend to be more overconfident than women, one would expect to see overconfidence play a diminished role, which it arguably does.…”