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The purpose of this paper is to analyze the trading behaviors of retail investors and investigate their impacts on stock returns.

As retail investors are considered as the main noise traders in the capital market, using the trading records of Chinese retail investors from 2005 to 2009, the authors study their trading preferences and the correlation of their trades. Then, they use a multifactor model to test whether the co‐movement of stock returns could be explained by individual sentiment.

The authors' results show that the small‐cap stocks are obviously preferred by retail investors. Meanwhile, the net stock demands of retail investors are systematically correlated, even when the effect of market risk is excluded. In the perspective of the net stock demands, the authors use BSI to measure the individual sentiment, finding that individual sentiment plays an important role in the formation of the cross‐section of stock returns. However, the authors' results imply that BSI is a reverse indicator to predict the future returns, which implies that the trading behaviors of retail investors are irrational.

Consistent with behavioral theory, the authors' findings support the viewpoint that stock returns could be affected by the systematic correlated trading of retail investors. To some extent, their findings highlight the need to know more details of individual investors' trading behaviors through which the fluctuations of asset prices can be better understood.

Evidence suggests that retail investors who invest in individual stocks are, in the long run, largely outperformed by market indexes such as the MSCI World. While some turn to exchange traded funds (ETFs) to invest in such market indexes, few migrate completely to ETFs. This study aims to shed light on the rationale behind retail investors' partial and complete migration from stocks to ETFs.

Drawing from the pull-push-mooring framework, a qualitative study (N = 21) informs a quantitative study (N = 282) by following established mixed methods guidelines. This study develops propositions for partial and complete migration intention to ETFs.

Results reveal that perceived investment possibilities, perceived risk reduction, perceived administrative effort, perceived expensiveness and monetary loss costs influence the migration from stocks to ETFs. This study shows that three configurations of perceptions result in partial migration intention and one configuration results in complete migration intention.

This study explains why some migrate partially from stocks to ETFs and others migrate completely. Findings show that both migration behaviors are subject to the same perceptions, but the configurations that form the behaviors are different. While only some identified perceptions must be present for a partial migration, all of them must be present for a complete migration, as it requires retail investors to sell their stocks and accept the costs incurred to invest in ETFs instead.

The purpose of this study is to question the undifferentiated treatment of individual traders as “dumb noise traders?”. We question this undifferentiated verdict by conducting an analysis of the cognitive competence of individual investors.

The authors let experts (both experienced researchers as well as practitioners) assess the mathematical and verbal reasoning demands of investment tasks investigated in previous studies.

Based on this assessment, this paper concludes that individual investors are able to perform a number of complex cognitive actions, especially those demanding higher-order verbal reasoning. However, they seem to reach cognitive limitations with tasks demanding greater mathematical reasoning ability. This is especially unfortunate, as tasks requiring higher mathematical reasoning are considered to be more relevant to performance. These findings have important implications for future regulatory measures.

This study has two non-trivial limitations. First, indirect measurement of mental requirements does not allow authors to make definite statements about the cognitive competence of individual investors. To do so, it would be necessary to conduct laboratory experiments which directly measure performance of investors on different investment and other cognitively demanding tasks. However, such data are not available for retail investors on this market to the best of the authors’s knowledge. We therefore think that our approach is a valuable first step toward understanding investors’ cognitive competence using data that are available at this moment. Second, the number of analyzed (and available) tasks is rather low (n = 10) which limits the power of tests and restricts the authors from using more profound (deductive) statistical analyses.

This paper proposes to illustrate information in key investor documents mostly verbally (e.g. as proposed by Rieger, 2009), compel exchanges and issuers of retail derivatives to create awareness for the results of the reviewed studies and our conclusion and to offer online math trainings especially designed for individual investors to better prepare them for different trading activities, as these have been shown to be as effective as face-to-face trainings (Frederickson et al., 2005; Karr et al., 2003).

This study can only be considered as a first step toward understanding the cognitive limitations of individual investors indirectly and could be transferred to other market areas as well.

This study is the first to combine the assessment of outstanding researchers in this field with the results of previous studies. In doing so, this paper provides an overarching framework of interpretation for these studies.

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.

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.

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.

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.

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.

The determinants of investors’ sentiment based on secondary stock market proxies in many empirical studies are reported. However, to the best of our knowledge, no study undertakes investor sentiment drivers developed from primary survey measures by constructing an investor sentiment index (ISI) in relation to market drivers to date. This study aims to fill this research gap by first developing the ISI for the Indian retail investors and then examining which of the stock market drivers impacts such sentiment.

The ISI is constructed using the mean scores of eight statements as formulated based on popular direct investor sentiment surveys undertaken across the world. Then, we use the multiple regression approach overall and for top 33.33% (high-sentiment) and bottom 33.33% (low-sentiment) investors based on the responses of 576 respondents on 18 statements (proxying eight study hypotheses) collected in 2016. Moreover, the demography-based classification based investors’ sentiment is examined to make our results more robust and in-depth.

On an overall basis, the IPO activities/issues and information certainty, trading volume and momentum and institutional investors’ investment activities market drivers significantly and positively impact retail investors is examined. However, only IPO activities/issues and information certainty influences both high- and low-sentiment investors. It is intriguing to report that nature of the stock markets show conflicting results for high- (negative significant) and low- (positive significant) sentiment investors.

The construction of the ISI from primary survey measure is for the first time in Indian context in relation to investigating the stock market drivers influential to retail investors’ sentiment. In addition, hypothesized market drivers are also unique, each representing different fundamental and technical characteristics associated with the Indian market.

The study explored various dimensions of overconfidence bias (OB) among retail investors in Indian financial markets. Further, these dimensions were validated through formative assessments for OB.

The study applied exploratory factor analysis (EFA) to 764 respondents to explore dimensions of OB. These were validated with formative assessments on 489 respondents by the partial least square path modeling (PLS-PM) approach in SmartPLS 4.0 software.

The major findings of EFA explored four dimensions for OB, i.e. accuracy, perceived control, positive illusions and past investment success. The formative assessments revealed that positive illusions followed by past investment success among retail investors played an instrumental role in orchestrating the OBs that affect investment decisions in financial markets.

The formative index of OB has several practical implications for registered financial and investment advisors, bank advisors, business media companies and portfolio managers, besides individual investors in the domain of behavioral finance.

This research provides a novel approach to provide a formative index of OB with four dimensions. This formative index can acts as an overview for upcoming researchers to investigate the OB of retail individual investors.

1. Overconfidence bias is an important predictor of retail investors' behavior

2. Formative dimensions of the overconfidence bias index.

3. Accuracy, perceived control, positive illusions and past investment success are important dimensions of overconfidence bias.

4. Modern portfolio theory and illusion of control theory support this study.

Overconfidence bias is an important predictor of retail investors' behavior

Formative dimensions of the overconfidence bias index.

Accuracy, perceived control, positive illusions and past investment success are important dimensions of overconfidence bias.

Modern portfolio theory and illusion of control theory support this study.

This study aims to determine experimentally factors affecting the satisfaction of retail stock investors with various investor protection regulatory measures implemented by the Government of India and Securities and Exchange Board of India (SEBI). Also, an effort has been made to gauge the level of satisfaction of retail equities investors with the laws and guidelines developed by the Indian Government and SEBI for their invested funds.

To accomplish the study’s goals, a well-structured questionnaire was created with the help of a literature review, and copies of it were filled by Punjabi retail equities investors with the aid of stockbrokers, i.e. intermediaries. Amritsar, Jalandhar, Ludhiana and Mohali-area intermediaries were chosen using a random selection procedure. Xerox copies of the questionnaire were given to the intermediaries, who were then asked to collect responses from their clients. Some intermediaries requested the researcher to sit in their offices to collect responses from their clients. Only 373 questionnaires out of 1,000 questionnaires that were provided had been received back. Only 328 copies were correctly filled by the equity investors. To conduct the analysis, 328 copies, which were fully completed, were used as data. The appropriate approaches, such as descriptives, factor analysis and ordinal regression analysis, were used to study the data.

With the aid of factor analysis, four factors have been identified that influence investors’ satisfaction with various investor protection regulatory measures implemented by government and SEBI regulations, including regulations addressing primary and secondary market dealings, rules for investor awareness and protection, rules to prevent company malpractices and laws for corporate governance and investor protection. The impact of these four components on investor satisfaction has been investigated using ordinal regression analysis. The pseudo-R-square statistics for the ordinal regression model demonstrated the model’s capacity for the explanation. The findings suggested that a significant amount of the overall satisfaction score about the various investor protection measures implemented by the government/SEBI has been explained by the regression model.

A study could be conducted to analyse the perspective of various stakeholders towards the disclosures made and norms followed by corporate houses. The current study may be expanded to cover the entire nation because it is only at the state level currently. It might be conceivable to examine how investments made in the retail capital market affect investors in rural areas. The influence of reforms on the functioning of stock markets could potentially be examined through another study. It could be possible to undertake a study on female investors’ knowledge about retail investment trends. The effect of digital stock trading could be examined in India. The effect of technological innovations on capital markets can be studied.

This research would be extremely useful to regulators in developing policies to protect retail equities investors. Investors are required to be safeguarded and protected to deal freely in the securities market, so they should be given more freedom in terms of investor protection measures. Stock exchanges should have the potential to bring about technological advancements in trading to protect investors from any kind of financial loss. Since the government has the power to create rules and regulations to strengthen investor protection. So, this research will be extremely useful to the government.

This work has societal ramifications. Because when adequate rules and regulations are in place to safeguard investors, they will be able to invest freely. Companies will use capital wisely and profitably. Companies should undertake tasks towards corporate social responsibility out of profits because corporate houses are part and parcel of society only.

Many investors may lack the necessary expertise to make sound financial judgments. They might not be aware of the entire risk-reward profile of various investment options. However, they must know various investor protection measures taken by the Government of India & Securities and Exchange Board of India (SEBI) to safeguard their interests. Investors must be well-informed on the precautions to take while dealing with market intermediaries, as well as in the stock market.

The authors examine the industrywise investment preferences of foreign portfolio investors (FPIs), domestic institutional investors (DIIs) and retail investors in the Indian context. They also investigate the factors influencing their preferences.

Using the quarterly shareholdings and returns data of the Indian market from March 31, 2009 to March 31, 2018, the authors employ analysis of variance to study investors' preferences and a random effect panel data model to examine the factors that influence these preferences.

FPIs hold proportionally more stocks in service-oriented industries and large-cap firms, DIIs hold proportionally large numbers of shares in paper industries and retail investors hold proportionally more shares in chemicals and textiles. FPIs prefer stocks with a high export-to-sales ratio and firms registered on a foreign stock market. Domestic investors, especially retail investors, prefer small-cap stocks and firms whose operations require local knowledge. In addition, industry heterogeneity determines investment decisions. Firm-specific and macroeconomic factors that influence investment decisions differ across industries. Finally, government policies and reforms also play a key role in attracting investors.

Policymakers can identify the key variables that influence investment, which can help direct and regulate investment in India and similar emerging markets.

This study fills a research gap by addressing how industry-level heterogeneity affects investors' preferences in terms of the industrywise preferences of different types of investors and the factors that influence their preferences.

The determinants of investor sentiment based on stock market proxies are found in numbers in empirical studies. However, investor sentiment antecedents developed from primary survey measures by constructing an investor sentiment index (ISI) are not done till date. The purpose of this paper is to fill this research gap by first developing an ISI for the Indian retail investors and then examining the investor-specific, stock market-specific, macroeconomic and policy-specific factors’ individual impact on the investor sentiment.

First, the authors develop the ISI by using the mean scores of six statements as formulated based on popular direct investor sentiment surveys undertaken throughout the world. Then, the authors employ the structural equation modeling approach on the responses of 576 respondents on 40 statements (representing the index and four study hypotheses) collected in 2016 across the country.

The results show that investor- and stock market-specific factors are the major antecedents of investor sentiment for these investors. However, interestingly macroeconomic fundamentals and policy-specific factors have no role to play in driving their sentiment to invest in the stock market.

The major implication of the results is that the Indian retail investors are showing a mixed approach of Bayesian and behavioral finance decision making. So, these implications can guide the investment consultants, regulators, other stakeholders in markets and overwhelmingly the retail investors to introspect their investment decision making across time horizons.

The formulation of ISI in an emerging market context and thereafter examining possible antecedents to influence retail investors in their investment decision making are not done till date. So, the study is unique in its research issue and findings and will have significant implication for the retail investors at least in emerging market contexts.