Personality traits and motivation of individual investors towards herding behaviour in Indian stock market

Abstract

Purpose

The purpose of this paper is to investigate the relationships between personality, motivating factors and herding behaviour of individual investors. Investors’ personality has been classified consonant to the personality traits (compliant, aggressive and detached) encapsulated in Horney’s tripartite model.

Design/methodology/approach

To carry out this study, the author surveyed 363 individual investors of the Indian stock market using a structured questionnaire. Structural equation modelling is used to empirically test the relationships between personality, three motivating factors (cognitive capability, emotional factors and social factors) and herding behaviour.

Findings

The result reveals that, expect compliant personality, none shows proclivity towards herding behaviour. Investors possessing compliant personality are more influenced by social motivating factors; however, cognitive factor motivates aggressive personality, inhibiting herding behaviour. Furthermore, investors having detached personality are not influenced by any motivating factors of herding.

Research limitations/implications

The limitation is the difficulty in generalizing the results to overall country populations as the Indian stock market has a huge turnover every day, and the author’s survey consisted of only small sample of individual investors.

Practical implications

The outcomes of this study could possibly unveil a new insight to discern the behaviour of individual investors in the Indian stock market.

Originality/value

The influences of personality on investment choices have been investigated before, but the influence of personality specifically on herding behaviour has not being adequately investigated in an emerging economy like India, as very scanty literature is available on the influence of personality on herding behaviour. The study addresses this gap and further explores the association of personality with different motivating factors that cause herding bias.

Citation

Kumari, S., Chandra, B. and Pattanayak, J.K. (2020), "Personality traits and motivation of individual investors towards herding behaviour in Indian stock market", Kybernetes, Vol. 49 No. 2, pp. 384-405. https://doi.org/10.1108/K-11-2018-0635