The Impact of Psychological Factors on Investors’ Decision Making in Malaysian Stock Market: A Case of Klang Valley and Pahang

Bakar, Suzaida; Yi, Amelia Ng Chui

doi:10.1016/s2212-5671(16)00040-x

Cited by 167 publications

(182 citation statements)

References 8 publications

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“…(see Tables 1 to 14 in the Appendix). This finding was unexpected and conflicted with other studies on emerging markets, such as Lim (2012), Bashir et al (2013), Tariq and Ullah (2013), and Bakar and Yi (2016). The same table shows that 43.2% of the participants in this survey make their investment decisions by following the market trends (other investors).…”

Section: Resultscontrasting

confidence: 80%

“…Recent studies, such as Bakar and Yi, (2016), show that investors in the markets are not necessarily rational in their decisions and that other factors might affect them when they make their investment decisions. Behavioural finance studies the impact of psychological factors on the stock markets.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Mitroi and Oproiu (2014) pointed out that behaviour bias affects the relationship between risk and returns and so concluded that high risk is not correlated with high returns, which conflicts with finance theory. Bakar and Yi (2016) argue that behavioural finance studies have proved that individual investors do not behave rationally, but their decisions are affected by their psychological feelings. Numerous studies from ASEAN and Western countries have, in fact, established that psychological factors do have a relationship with an impact on the decision-making of investors with regard to the markets; for example, Akhtar and Batool (2012) regarding the Karachi, Lahore, and Islamabad Stock Exchanges; Phan and Zhou (2014) regarding the Vietnamese Stock Market; Riaz and Hunjra (2015) and Farooq, Afzal, Sohil & Sajid (2015) regarding the Pakistani Stock Market; Dhaoui (2015) regarding the Japanese, U.S., French, U.K., and Swiss Stock Markets; Shabgou and Mousavis (2016) regarding the stock exchange in Tabriz, Iran; and, finally, Gupta and Ahmed (2016) regarding the Indian Stock Market.…”

Section: Literature Reviewmentioning

confidence: 99%

“…argues that overconfident investors believe that they are smarter than other investors with regard to selecting the best time to buy shares at the best price. Lim (2012), Bakar and Yi (2016) find that investors' decisions are significantly affected by overconfidence. Moreover, Hon (2012) concluded that small investors in the Hong Kong Stock Market were overconfident.…”

Section: Literature Reviewmentioning

confidence: 99%

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Factors influencing Individual Investor Behaviour: Evidence from the Kuwait Stock Exchange

Abul¹

2019

ASS

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This study investigates the effects of psychological factors on investor behaviour regarding the Kuwait Stock Exchange (KSE). These psychological factors are, namely: excessive optimism vs pessimism, herd behaviour and risk appetite. The data for this study obtained from KSE and a survey of a random sample of 398 individual investors. By using qualitative analysis and based on the theory of behavioural finance, the study findings show that herd behaviour, optimism and psychology risk have an impact on the individual investors’ decisions. However, we did not find any evidence of overconfidence behaviour’s effects on investors’ decisions. To our knowledge, KSE has been examined by several researchers without taking into consideration the effects of psychological factors on individual investor decisions. This study finds that psychological factors play a significant role in individual investors’ decisions regarding KSE. This study might contribute positively to the development of this field of research in (KSE).

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Section: Resultscontrasting

confidence: 80%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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Factors influencing Individual Investor Behaviour: Evidence from the Kuwait Stock Exchange

Abul¹

2019

ASS

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“…Supporters of financial behavior knowledge firmly believe that awareness of psychological tendencies is absolutely essential in the area of investment. Bakar and Ng Chui Yi (2016) examined the impact of psychological factors on investors' decisions in the Stock Exchange of Malaysia. According to the findings, overconfidence, conservatism and willingness to be available had significant effects on investors' decisions, while mass behavior had no effect on it.…”

Section: Introductionmentioning

confidence: 99%

Empirical Analysis of the Financial Behavior of Investors with Brand Approach (Case Study: Tehran Stock Exchange)

Nouri

Motamedi

Soltani

2017

Annals of the Alexandru Ioan Cuza University - Economics

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Behavioral science in the field of finance and investment is among new topics raised in recent years. The relationship between financial sciences and other fields of social sciences such as financial psychology has caused researchers to do many researches regarding the behavior of investors in the financial markets and their reactions to different situations. Based on the theories of financial behavior, shareholders' decision to buy and sell stocks is under the influence of internal and external psychological factors. Through designing and experimental testing of the model of investors' financial behavior in the Tehran Stock Exchange with an emphasis on brand, this study was an attempt to investigate the influence of these factors. To this end, financial, psychological and social factors were considered as the most important external factors influencing the behavior of investors and, considering the mediating role of brand awareness, their impact on perceived risk and perceived return as well as investment intention was tested. The research population consisted of all individual investors in the Tehran Stock Exchange. In order to determine the sample size, considering unlimited population, Cochran formula was used and hence the sample size was determined to be 145. For data collection, standard questionnaire was used. Confirmatory factor analysis was used to test the reliability of the questionnaire and the research hypotheses were tested using path analysis. The results showed that psychological factors have a positive impact on perceived risk and returns. Financial factors had a positive impact on perceived risk but no impact on perceived return. The impact of social factors on perceived risk and perceived return was not confirmed. Moreover, the results showed that brand awareness has a moderating role in the relationship between social factors and perceived risk and return. However, its moderating role was not confirmed in the relationship between the psychological and financial factors and perceived risk and return. Perceived risk had a positive effect on attitude toward the brand. However, the impact of perceived return on attitude toward the brand was not significant. Finally, the attitude toward the brand had a positive effect on shareholders' investment intention.

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Can sentiments on macroeconomic news explain stock returns? Evidence form social network data

Zhao

2020

Int. J Fin Econ

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Macroeconomic factors and sentiments affect investors' decisions and thus stock returns. However, do sentiments on macro-economic news explain stock returns? This article proposes a theoretical model to explain the relationship between stock returns and the market misperception which is driven by investors' sentiments. Then, microblogs regarding the macro-economy posted on Sina Weibo, a mainstream Chinese Social Network Site, are extracted to measure investors' macroeconomic sentiments (IMSs) through machine learning approaches. A preliminary event study suggests that IMSs capture the development of influential macroeconomic events. Empirical results demonstrate that orthogonalized IMSs including anger, disgust, fear, joy and sadness exert heterogeneously significant effects on the Shanghai Composite Index (SHCI), and no reverse effect is found. Thus, the IMS contains additional information related to the macro-economy; but cannot be explained by macroeconomic factors. IMSs improve the in-and out-of-sample predictabilities of SHCI returns. Thereby, investors' sentiment can be an important channel through which the macro-economy affects the stock market.

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The Impact of Psychological Factors on Investors’ Decision Making in Malaysian Stock Market: A Case of Klang Valley and Pahang

Cited by 167 publications

References 8 publications

Factors influencing Individual Investor Behaviour: Evidence from the Kuwait Stock Exchange

Factors influencing Individual Investor Behaviour: Evidence from the Kuwait Stock Exchange

Empirical Analysis of the Financial Behavior of Investors with Brand Approach (Case Study: Tehran Stock Exchange)

Can sentiments on macroeconomic news explain stock returns? Evidence form social network data

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