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Article
Publication date: 25 May 2022

Maqsood Ahmad and Qiang Wu

This article aims to clarify the mechanism by which herding behavior influences perceived market efficiency, investment decisions and the performance of individual…

Abstract

Purpose

This article aims to clarify the mechanism by which herding behavior influences perceived market efficiency, investment decisions and the performance of individual investors actively trading on the Pakistan Stock Exchange (PSX).

Design/methodology/approach

The deductive approach was used in this study, as the research is based on the theoretical framework of behavioral finance. A questionnaire and cross-sectional design were employed to collect data from the sample of 309 investors trading on the PSX. The collected data were analyzed using SPSS and AMOS graphics software. Hypotheses were tested using structural equation modeling (SEM).

Findings

The article provides further empirical insights into the relationship between herding behavior and investment management and perceived market efficiency. The results suggest that herding behavior has a markedly negative influence on perceived market efficiency and investment performance, while positively influencing the decision-making of individual investors.

Originality/value

The current study is the first to focus on links between herding behavior and investment management activities and perceived market efficiency. This article enhances the understanding of the role that herding behavior plays in investment management and, more importantly, it improves understanding of behavioral aspects and their influence on investment decision-making in an emerging market. It also adds to the literature in the area of behavioral finance, specifically the role of herding behavior in investment management; this field is in its initial stage, even in developed countries, while little work has been done in developing countries.

Details

Management Decision, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0025-1747

Keywords

Book part
Publication date: 4 July 2019

Çağatay Başarir and Özer Yilmaz

Starting in the 1980s, financial liberalization and technological developments have enabled individual investors to participate in financial markets and carry out easy…

Abstract

Starting in the 1980s, financial liberalization and technological developments have enabled individual investors to participate in financial markets and carry out easy transactions. With these developments, academics began to wonder how the individual investors decide to invest and what factors affect these decisions.

According to traditional finance theory, it is suggested that markets are efficient and investors show rational behaviors in their financial purchasing decisions. However, in many studies conducted in recent years, it was determined that investors included emotional elements as well as rational elements in their decision-making process and therefore exhibited irrational behaviors by believing rumors instead of real information. It is thought that many factors such as personal characteristics, psychological factors, demographic and socio-economic factors play a role in the behavior of investors in purchasing a financial product.

In this study, the importance of herd behavior, which is one of the psychological factors that play a very important role in financial markets, on financial product purchasing process is examined in the light of the behavioral finance theory. It is thought that information included in the study will be useful for researchers who want to study herd behavior and for those who are interested in the subject.

Article
Publication date: 30 July 2019

Wenjie Zhang, Yun Xu and Haichao Zheng

Based on the theory of customer citizenship behavior (CCB), the purpose of this paper is to explore the antecedents and consequences of investor citizenship behavior in…

Abstract

Purpose

Based on the theory of customer citizenship behavior (CCB), the purpose of this paper is to explore the antecedents and consequences of investor citizenship behavior in the field of crowdfunding and have an in-depth study of the interaction effect between investors’ perceptions of novelty and investors’ motivations.

Design/methodology/approach

Based on the CCB theory and self-determination theory, the authors develop hypotheses and collect questionnaire data (a sample of 226 crowdfunding investors) from crowdfunding websites to test models and get conclusions by SPSS and smartPLS 2.0.

Findings

The results indicate that internal and external motivations significantly influence investors’ citizenship behavior, which further affects investors’ stickiness intentions. Furthermore, results show that investors’ perceptions of novelty moderate the relationships between internal/external motivations and citizenship behaviors.

Originality/value

This paper offers an in-depth explanation of the citizenship behaviors in crowdfunding, which could be an example for studying the motivations of investors’ citizenship behaviors and could also serve as a starting point to introduce the stickiness intention theory of e-commerce and virtual community into crowdfunding area. In addition, this study also made an empirical analysis of how the perceived project novelty affects the relationships between investors’ motivations and citizenship behaviors.

Details

Online Information Review, vol. 43 no. 4
Type: Research Article
ISSN: 1468-4527

Keywords

Article
Publication date: 26 April 2019

Sharda Kumari, Bibhas Chandra and J.K. Pattanayak

The purpose of this paper is to investigate the relationships between personality, motivating factors and herding behaviour of individual investors. Investors’ personality…

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.

Details

Kybernetes, vol. 49 no. 2
Type: Research Article
ISSN: 0368-492X

Keywords

Article
Publication date: 17 June 2020

Luminița Nicolescu and Florentin Gabriel Tudorache

This paper aims to make an analysis of investment behaviour in mutual funds, by looking at different investment decision influencers and trying to identify the extent to…

Abstract

Purpose

This paper aims to make an analysis of investment behaviour in mutual funds, by looking at different investment decision influencers and trying to identify the extent to which the investment decision is knowledge-based. The paper has three main purposes, namely, to assess the degree to which the considered factors influence investment decision-making in young capital markets from Central and Eastern Europe (CEE); to compare the investment behaviour in the three considered countries; and to characterise investment behaviour in periods of economic turbulence.

Design/methodology/approach

The researchers considered a model of investment behaviour comprising six influencing factors. Inferential statistics through multiple linear regression was applied using the MATLAB R2014a software. The decision to invest was measured by the flow of new capital attracted by the fund (dependent variable) and the considered influencing factors (independent variables) were: the size of the fund, the risk associated to the fund, the growth of the fund, the growth of the fund category, the performance of the fund in its category. The research was conducted in Romania, Slovakia and Hungary. The period of study included the global economic crisis of 2007-2008.

Findings

The results illustrated that all considered factors do have an influence on the investment behaviour of investors in CEE, but with different levels of impact. The study concludes that the investment decision is partially knowledge-based, as investors in the region consider only some of the available information when making the decision to invest. Investment behaviour of investors in CEE is rather similar than dissimilar when deciding to invest in mutual funds. However, based on the differences between countries, it can be stated that the Hungarian investor is more mature and more informed than the others, when making investment decisions.

Originality/value

The study contributes to the exiting literature through the analysis of investment behaviour in young capital markets that are less studied in the literature. The limited number of studies considering mutual funds, usually comprise one fund category, while the present research considers all five most prevalent mutual funds categories for the studied period. It also contributed by collecting data from a less studied geographical region, CEE with three specific case studies, namely, Romania, Slovakia and Hungary that are looked at in a comparative manner.

Details

Kybernetes, vol. 50 no. 10
Type: Research Article
ISSN: 0368-492X

Keywords

Article
Publication date: 14 June 2022

Parvathy S. Nair, Atul Shiva, Nikhil Yadav and Priyanka Tandon

The purpose of this study is to investigate the influence of mobile applications on investment decisions by retail investors in stocks and mutual funds. This study focuses…

Abstract

Purpose

The purpose of this study is to investigate the influence of mobile applications on investment decisions by retail investors in stocks and mutual funds. This study focuses on how mobile technologies are applied on mobile apps by retail investors for e-trading in emerging financial markets.

Design/methodology/approach

The study explored predictive relevance for the adoption behavior of retail investors under the Unified Theory of Acceptance and Use of Technology (UTAUT) framework. Further, goal contagion theory was applied to investigate the adoption behavior of investors towards e-trading. An adapted questionnaire was used to collect the date from April to June 2021 and data analysis was performed on 507 usable responses. The methodology adopted in this study is variance based partial least square structural equational modelling (PLS-SEM). Additionally, the study explains important and performing constructs based on the response of retail investors towards mobile app usage for investment decisions.

Findings

The study shows that effort expectancy, performance expectancy followed by perceived return were the primary determinants of behavioral intentions to use mobile applications by retail investors for e-trading. Further, habit of investors determined the adoption behavior of investors towards mobile apps. Additionally, the study revealed that perceived risk is not an important aspect for retail investors in comparison to perceived return.

Research limitations/implications

The study in future can address to the aspect of personality traits of retail investors for technology adoption for investment decisions. Further investigation is required on addressing unobserved heterogeneity of retail investors towards technology adoption process in emerging financial markets.

Practical implications

The study provides theoretical and practical implications for retail investors, financial advisors and technology companies to understand the behavioral pattern and mobile apps adoption behavior of retail investors in emerging financial market. The findings in the study will help broking firms to sensitize their clients for effective use of their respective mobile apps for e-trading purposes. The study will strengthen the knowledge of financial advisors to understand investment behavior of retail investors in emerging financial markets.

Originality/value

This study unfolds a novel framework of research to understand the technology adoption pattern of retail investors for e-trading by mobile applications in emerging financial markets. The present study provides significant understanding in the domain of technology adoption by retail investors under behavioral finance environment.

Details

Benchmarking: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1463-5771

Keywords

Article
Publication date: 25 April 2022

Khemaies Bougatef and Imen Nejah

This paper aims to investigate whether the COVID-19 pandemic leads to the formation of herding behaviour among investors in Shariah-compliant stocks.

Abstract

Purpose

This paper aims to investigate whether the COVID-19 pandemic leads to the formation of herding behaviour among investors in Shariah-compliant stocks.

Design/methodology/approach

This study uses a sample of the stocks that constitute the Dow Jones Islamic Market Malaysia Titans 25 Index, over the period from 6 December 2017 to 12 March 2021.

Findings

This paper provides robust evidence on the contribution of the COVID-19 pandemic to the formation of herding behaviour in Shariah-compliant stocks. The findings also reveal that herding behaviour occurs only during falling market.

Research limitations/implications

The findings provide useful implications for policymakers and portfolio managers seeking to understand the behaviour of investors in Shariah-compliant stocks during turbulent periods. The presence of herding behaviour begs the question on the market efficiency and limits its potential to offer diversification benefits to investors. The findings suggest that policymakers and investors should mitigate misvaluations that occurred during the COVID-19 outbreak because the herding behaviour can drive stock prices away from their equilibrium values. Thus, regulators should adopt appropriate policies to enable the market to reach a more efficient level by monitoring and improving the quality of information and facilitate their transmission to the market. The misevaluation opportunity enables market timers to sell overpriced stocks and purchase underpriced stocks. The findings also imply that investors should implement effective hedging strategies to mitigate the downside risk. In addition, the results suggest that investors should devise their trading strategies in falling and rising markets during the COVID-19 pandemic.

Originality/value

There is meagre literature on the effect of the COVID-19 outbreak on the formation of herding behaviour among investors. Studies conducted on herd behaviour are widely focused on Shariah non-compliant stocks, only a few ones deal with Shariah-compliant stocks. The novelty of this paper consists in addressing this gap in the literature through examining the presence of herding behaviour on the part of investors in Shariah-compliant stocks in Malaysia before and after the COVID-19 outbreak.

Details

Journal of Islamic Accounting and Business Research, vol. 13 no. 5
Type: Research Article
ISSN: 1759-0817

Keywords

Abstract

Details

Investment Behaviour
Type: Book
ISBN: 978-1-78756-280-6

Book part
Publication date: 21 November 2018

Caroline O. Ford, Bradley E. Lail and Velina Popova

Earnings management is a common term in the academic community and is likely understood by managers and professional investors, but how the large community of…

Abstract

Earnings management is a common term in the academic community and is likely understood by managers and professional investors, but how the large community of non-professional investors interprets this term is less clear. We examine non-professional investors’ attitudes toward earnings management and their resulting investing behaviors using a 2 × 2 mixed design. We manipulate investor role (prospective vs current) between participants and the method of earnings management within participants. We believe that different investment goals (prevention vs promotion) between current and prospective investors should lead to different investing behaviors. Consistent with our expectations, we find that current investors are more likely to maintain an equity than prospective investors are to invest in the same opportunity. Further, the consistent link between investors’ attitudes and actual investment behavior is only present for prospective investors. The prevention goal drives the current investors to maintain their investment, while the prospective investors remain more objective and focus on a goal of promotion. Importantly, prior research examining investor attitude toward earnings management has failed to link investors’ attitudes with actual investing decisions; our study attempts to fill this void by examining attitudes toward earnings management as well as subsequent investment behavior.

Article
Publication date: 8 May 2017

Abhijeet Chandra, Kantesha Sanningammanavara and A. Satya Nandini

The purpose of this paper is to survey retail investors to study the determinants of their investment behaviour and show that individual heterogeneity and financial…

1343

Abstract

Purpose

The purpose of this paper is to survey retail investors to study the determinants of their investment behaviour and show that individual heterogeneity and financial factors such as gender, age, educational status, income, and investment levels determine their trading behaviour across three domains; however, features such as marital status and occupation do not play any significant role in shaping their trading behaviour.

Design/methodology/approach

Structured surveys are conducted on retail and small investors using the brokerage services of a firm. Data collected from primary methods are used for statistical analysis in ANOVA and multiple regression frameworks.

Findings

The authors also report that retail investors’ self-perceived confidence as a function of both expected and unexpected changes in the market and personal factors largely determines trading behaviour of retail investors and that self-perceived confidence level and self-reported portfolio size are positively associated implying that (over-)confident retail investors tend to believe that their investment skills being superior are bound to perform better and thus they typically hold larger than average investment portfolios.

Practical implications

These findings are significant because research on cross-sectional variance of individual investment behaviour explains how investor heterogeneity plays a critical role in investment and asset allocation decisions. Investors, researchers, and practitioners would use the results for financial decision making specifically related to personal finance, behavioural portfolio management, and investment advisory.

Originality/value

This paper is an empirical approach to explore the retail investor behaviour using psychometric approach with respect to self-perceived confidence and other perceived measures of investor behaviour. The authors contribute to the emerging set of literature on investor behaviour and behavioural finance.

Details

International Journal of Social Economics, vol. 44 no. 5
Type: Research Article
ISSN: 0306-8293

Keywords

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