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1 – 10 of over 2000Qingmei Tan, Muhammad Haroon Rasheed and Muhammad Shahid Rasheed
Despite its devastating nature, the COVID-19 pandemic has also catalyzed a substantial surge in the adoption and integration of technological tools within economies, exerting a…
Abstract
Purpose
Despite its devastating nature, the COVID-19 pandemic has also catalyzed a substantial surge in the adoption and integration of technological tools within economies, exerting a profound influence on the dissemination of information among participants in stock markets. Consequently, this present study delves into the ramifications of post-pandemic dynamics on stock market behavior. It also examines the relationship between investors' sentiments, underlying behavioral drivers and their collective impact on global stock markets.
Design/methodology/approach
Drawing upon data spanning from 2012 to 2023 and encompassing major world indices classified by Morgan Stanley Capital International’s (MSCI) market and regional taxonomy, this study employs a threshold regression model. This model effectively distinguishes the thresholds within these influential factors. To evaluate the statistical significance of variances across these thresholds, a Wald coefficient analysis was applied.
Findings
The empirical results highlighted the substantive role that investors' sentiments and behavioral determinants play in shaping the predictability of returns on a global scale. However, their influence on developed economies and the continents of America appears comparatively lower compared with the Asia–Pacific markets. Similarly, the regions characterized by a more pronounced influence of behavioral factors seem to reduce their reliance on these factors in the post-pandemic landscape and vice versa. Interestingly, the post COVID-19 technological advancements also appear to exert a lesser impact on developed nations.
Originality/value
This study pioneers the investigation of these contextual dissimilarities, thereby charting new avenues for subsequent research studies. These insights shed valuable light on the contextualized nexus between technology, societal dynamics, behavioral biases and their collective impact on stock markets. Furthermore, the study's revelations offer a unique vantage point for addressing market inefficiencies by pinpointing the pivotal factors driving such behavioral patterns.
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Pendo Shukrani Kasoga and Amani Gration Tegambwage
The purpose of the paper is to examine the financial management behavior (FMB) mediation mechanism in self-control, optimism, deliberative thinking and investment decisions in the…
Abstract
Purpose
The purpose of the paper is to examine the financial management behavior (FMB) mediation mechanism in self-control, optimism, deliberative thinking and investment decisions in the Tanzanian stock market.
Design/methodology/approach
A sample of 268 individual investors in the Tanzanian stock market was obtained through questionnaires. The data were analyzed using structural equation modeling.
Findings
The findings show that self-control, optimism and deliberative thinking are significantly and positively related to FMB and investment decisions. The findings also confirmed the mediating role of FMB in the influence of self-control, optimism and deliberative thinking on investment decisions among Tanzanian individual investors. These findings imply that people with good self-control, optimistic and deliberative thinking are more likely to save money, have better FMB and prefer to make investment decisions.
Research limitations/implications
The study deals with individual investors. Future research could examine the effects of psychological traits on investment decisions by adding or modifying the items of particular constructs and studying institutional investors.
Practical implications
Individual investors can use the information to study and evaluate their financial behavior and stock investment decisions. This research can be used by security firms to better understand investor behavior, forecast future market trends and advice investors. Individual investors require psychological features to manage their behavior in various aspects, ranging from affective behavior to cognition, which are relevant for investing decisions.
Originality/value
Few studies have examined the influence of self-control, optimism and deliberative thinking on the investment decisions of individual investors. The unique empirical analysis developed in this paper is that it examines the mediation mechanisms of FMB with respect to self-control, optimism and deliberative thinking and investment decisions among individual investors in the Tanzanian stock market.
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Abdollah Ah Mand, Hawati Janor, Ruzita Abdul Rahim and Tamat Sarmidi
The purpose of this paper is to investigate whether market conditions have an effect on investors’ propensity to herd in an emerging economy’s stock market. Additionally, given…
Abstract
Purpose
The purpose of this paper is to investigate whether market conditions have an effect on investors’ propensity to herd in an emerging economy’s stock market. Additionally, given the lack of research on Islamic behavioral finance, the authors further investigate if the herding phenomenon is distinct in Islamic versus conventional stocks.
Design/methodology/approach
The authors used daily data for the period of 1995–2016 according to the herding behavior model of Chang et al. (2000), which relies on cross-sectional absolute deviation of returns.
Findings
Findings reveal the herding behavior of investors among Shariah-compliant during up and down market exits with non-linear relationship to the market return, while for conventional stocks herding behavior does not exist with linear nor nonlinear relationships during the up and down market. Furthermore, for the whole market, herding behavior only exists during upmarket with a nonlinear relationship to the market return. However, this relationship is not significant. Moreover, the results of this study are robust with respect to the effect of the Asian and global financial crisis.
Practical implications
The findings are useful for investors to identify which market conditions are associated with rational and irrational behavior of investors.
Originality/value
Most of the theoretical and empirical studies on herding behavior have focused on developed countries. Only a few studies have paid attention to the herding behavior in Islamic financial markets, particularly in the context of an emerging market such as Malaysia. This study fills this void.
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Nektarios Gavrilakis and Christos Floros
The purpose of this paper is to identify whether heuristic and herding biases influence portfolio construction and performance in Greece. The current research determines the…
Abstract
Purpose
The purpose of this paper is to identify whether heuristic and herding biases influence portfolio construction and performance in Greece. The current research determines the situation among investors in Greece, a country with several economic problems for the last decade.
Design/methodology/approach
A survey has been conducted covering a group of active private investors. The relationship between private investors' behavior and portfolio construction and performance was tested using a multiple regression.
Findings
The authors find that heuristic variable affects private investor's portfolio construction and performance satisfaction level positively. A robustness test on a second group, consisting of professional investors, reveals that heuristic and herding biases affect investment behavior when constructing a portfolio.
Practical implications
The authors recommend investors to select professional's investment portfolio tools in constructing investment portfolios and avoid excessive errors, which occur due to heuristic. The awareness and understanding of heuristic and herding could be helpful for professionals and decision-makers in financial institutions by improving their performance resulting in more efficient markets.
Originality/value
The main contribution of this paper lies in the fact that it is the first study on two major behavioral dimensions that affect the investor's portfolio construction and performance in Greece. The rationale of the current research is that the results are helpful for investors in order to take rational, reliable and profitable decisions.
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This study aims to examine that personality traits are associated with the investor’s ability to exhibit disposition effect, herding behavior and overconfidence. It also explores…
Abstract
Purpose
This study aims to examine that personality traits are associated with the investor’s ability to exhibit disposition effect, herding behavior and overconfidence. It also explores how risk-attitude can modify investor behavior by moderating the association between personality traits, disposition effect, herding and overconfidence.
Design/methodology/approach
Data were collected from 396 respondents by using personally administrated survey. Confirmatory factor analysis (CFA) was used to confirm the validity and reliability of data. Regression analysis was used to test the proposed hypotheses.
Findings
The results supported the proposed hypotheses and showed that extravert investors were more likely to exhibit disposition effect, herding and overconfidence. The conscientiousness trait was associated with disposition effect and overconfidence, while neuroticism was associated with herding behavior. The results confirmed the moderating effect of risk aversion on the association between personality traits, disposition effect, herding and overconfidence.
Originality/value
This study demonstrates how risk aversion modes the strength of association between psychological characteristics (represented by personality traits) and cognitive biases (disposition effect, herding and overconfidence). The results support the “auction” interpretation of investors' behavior by suggesting that personality traits are associated with investment decision-making and that investors are marginal price setters.
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Mohd Adil, Yogita Singh and Mohd. Shamim Ansari
The purpose of the study is to examine the impact of behavioural biases (i.e. overconfidence, risk-aversion, herding and disposition) on investment decisions amongst gender. The…
Abstract
Purpose
The purpose of the study is to examine the impact of behavioural biases (i.e. overconfidence, risk-aversion, herding and disposition) on investment decisions amongst gender. The authors further examine the moderation effect of financial literacy in the relationship between behaviour biases and investment decisions amongst gender.
Design/methodology/approach
The study considered a cross-sectional research design. For this survey, the data have been collected through a structured questionnaire from 253 individual investors of the Delhi-NCR region. To analyse the validity and reliability, the Pearson correlation and Cronbach's alpha test have been taken into account respectively. For testing the hypothesis, hierarchical regression analysis has been used in the study.
Findings
The results of the study reveal that amongst male investors, the influence of risk-aversion and herding on investment decision was negative and statistically significant, while the influence of overconfidence on investment decision was positive and significant. However, the influence of disposition was found statistically insignificant. The results stated that amongst female investors the effect of risk-aversion and herding on investment decision was negative and statistically significant. However, the effect of overconfidence and disposition was statistically insignificant influence the investment decision. It has been observed that financial literacy has significantly influenced investment decisions amongst male and female investors. The results of the interaction effect amongst male investors stated that the interaction between overconfidence and investment decision was significantly influenced by financial literacy. However, the interaction of financial literacy with the remaining three biases, i.e. risk-aversion, herding and disposition was found insignificant. The results for the interaction effect of financial literacy with overconfidence, risk-aversion, disposition and herding were found statistically significant amongst female investors.
Research limitations/implications
Based on this present research finding, the study is more productive for the portfolio manager and policymakers at the time of making an investment portfolio for the investors based on their behavioural biases. The study recommends that investors need training programmes, workshops and seminars that enhance financial literacy and financial knowledge of investors which helps them to overcome the behavioural biases while making an investment decision.
Originality/value
The current study aims to explore whether several behavioural biases can affect investment decisions amongst gender. Moreover, the authors would like to examine whether these associations are moderated by financial literacy. In this sense, financial literacy might also show a substantial part in the prediction of investments. The current study might be of the first study that examines the moderation effect financial literacy amongst male and female investors.
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The purpose of this paper is to examine whether Fama–French common risk-factor portfolio investors herd on a daily basis for five developed markets, namely, Europe, Japan, Asia…
Abstract
Purpose
The purpose of this paper is to examine whether Fama–French common risk-factor portfolio investors herd on a daily basis for five developed markets, namely, Europe, Japan, Asia Pacific ex Japan, North America and Globe.
Design/methodology/approach
To examine the herd behavior of common risk-factor portfolio investors, this paper utilizes the cross-sectional absolute deviations (CSAD) methodology, covering a daily data sampling period of July 1990 to January 2019 from Kenneth R. French-Data Library. CSAD driven by fundamental and non-fundamental information is assessed using Fama–French five-factor model.
Findings
The results do not provide evidence for herding under normal market conditions, either when reacting to fundamental information or non-fundamental information, for any region under consideration. However, Fama–French common risk-factor portfolio investors mimic the underlying risk factors in returns related to size and book-to-market value, size and operating profitability, size and investment and size and momentum of the equity stocks in European and Japanese markets during crisis period. Also, no considerable evidence is found for herding (on fundamental information) under crisis and up-market conditions except for Japan. Ancillary findings are discussed under conclusion.
Research limitations/implications
Further research on new risk factors explaining stock return variation may help improve the model performance. The performance can be improved by adding new risk factors that are free from behavioral bias but significant in explaining common stock return variation. Also, it is necessary to revisit the existing common risk factors in order to understand behavioral aspects that may affect cost of capital calculations (e.g. pricing errors) and valuation of investment portfolios.
Originality/value
This is the first paper that examines the herd behavior (fundamental and non-fundamental) of Fama–French common risk-factor investors using five-factor model.
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Kashif Rashid, Yasir Bin Tariq and Mamoon Ur Rehman
This study examines the role of behavioural factors, such as confidence, optimism, pessimism and rational expectation, in affecting investment decisions in the Pakistani stock…
Abstract
Purpose
This study examines the role of behavioural factors, such as confidence, optimism, pessimism and rational expectation, in affecting investment decisions in the Pakistani stock market.
Design/methodology/approach
Using daily trading data of Karachi Stock Exchange-100 index from January 2012 to December 2015, different regression models, including descriptive statistics and stationarity tests, are performed.
Findings
Results indicate that stock market trading has suffered from pessimistic behaviour of investors. In the first model, the authors find a positive sign of confidence and negative sign of optimism with the trading volume. The second model shows a positive role of confidence and rational expectations in affecting the trading volume in daily, Monday and Friday samples. The results of the third model show a negative sign of both optimism and rational expectation with the trading volume. Furthermore, the next model shows a negative sign of confidence combined with pessimism while testing their relationship with the trading volume. Finally, results of the final model suggest that optimism negatively affects the trading volume, and on the other hand, pessimism has a positive impact on the trading volume.
Research limitations/implications
The method and empirical testing of behavioural biases and their relationship with economic variable used in this study seem to be a promising way to better understand the role of psychology in deriving financial decisions for academics and policymakers.
Originality/value
This study uses secondary data for measuring behavioural biases and decomposes the effect between rational expectation and behavioural biases.
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Sarah Louise Carroux, Timo Busch and Falko Paetzold
This paper aims to empirically describe the general characteristics and the investment behavior of high-net-worth individuals (HNWIs) who pursue impact investing.
Abstract
Purpose
This paper aims to empirically describe the general characteristics and the investment behavior of high-net-worth individuals (HNWIs) who pursue impact investing.
Design/methodology/approach
Data was collected from members of a global impact investor network, using an online questionnaire, a portfolio-data collection tool and semi-structured interviews.
Findings
Wealthy private impact investors are largely similar in terms of their general characteristics and investment behavior, but they diverge in their interest in specific Sustainable Development Goals (SDGs). They tend to be strongly values-driven and to adopt an investment time horizon of 7+ years for their impact investments, which they expect to yield financial returns that are no different from those of traditional investments. Interestingly, these investors perceive the well-established sustainable investing strategies of exclusion, environmental, social and governance (ESG) integration and best-in-class as not having high impact-generating potential.
Practical implications
Suggestions are provided about how wealthy private investors could use the findings to improve their impact investment decisions. Advice is offered to investment professionals on how to optimize impact investment products and services for this economically and societally highly relevant target group.
Originality/value
To the best of the authors’ knowledge, this is the first scientific study to investigate the general characteristics and investment behavior of HNWIs who pursue impact investing. HNWIs have great relevance for financial markets yet they are out of reach for most researchers. As a result, they are poorly understood, and apparently also often misunderstood, which has substantial economic and social implications that this paper helps mitigate.
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This research mainly intends to ascertain the stimulus of investor investment tendencies on the amount of capital investment in the share market.
Abstract
Purpose
This research mainly intends to ascertain the stimulus of investor investment tendencies on the amount of capital investment in the share market.
Design/methodology/approach
Utilizing a sample of 477 individual investors who actively trade on the Bangladesh capital market, this empirical study was conducted. The objective of this examination is to ascertain the investment trading behavior of retail investors in the Bangladesh capital market using multiple regression, hypothesis testing and correlation analysis.
Findings
The coefficients of market categories, preferred share price ranges and investment source reveal negative predictor correlations; all predictors are statistically significant, with the exception of investment source. Positive predictive correlations exist between investor category, financial literacy degree, investment duration, emotional tolerance level, risk consideration, investment monitoring activities, internal sentiment and correct investment selection. Except for risk consideration and investment monitoring activities, all components have statistically significant predictions. The quantity of capital invested in the stock market is heavily influenced by the investment duration, preferred share price ranges, investor type, emotional toleration level and decision-making accuracy level.
Research limitations/implications
This investigation was conducted exclusively with Bangladeshi individual stockholders. Therefore, the existing study can be extended to institutional investors and conceivably to other divisions. It is possible to conduct this similar study internationally. And the query can enlarge with more sample size and use a more sophisticated econometric model. Despite that the outcomes of this study help the regulatory authorities to arrange more informative seminars and consciousness programs.
Practical implications
The conclusions have practical implications since they empower investors to modify their portfolios based on elements including share price ranges, investment horizons and emotional stability. To improve chances of success and reach financial objectives, they stress the significance of bettering financial understanding, active monitoring and risk analysis. Results can also be enhanced by distributing ownership over a number of market sectors and price points. The results highlight the value of patience and giving potential returns enough time.
Originality/value
This study on the trading behavior of investors in Bangladesh is unique and based on field study, and the findings of this study will deliver information to the stakeholders of the capital market regarding the investors’ trading behavior belonging to different categories, financial literacy level, investment duration, emotional tolerance level and internal feeling.
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