Determinants of behavior intention to use derivative securities a study on individual investors behaviors in stock market of vietnam

Hence, this study is necessary to conduct in the current context of Vietnam tounderstand the level of investors toward derivative financial instruments when thederivative financial marke

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-Trang Nguyen Thanh Phuong

DETERMINANTS OF BEHAVIOR INTENTION TO USE DERIVATIVE SECURITIES A STUDY ON

INDIVIDUAL INVESTOR'S

BEHAVIORS IN STOCK MARKET

OF VIETNAM

MASTER OF BUSINESS (honours)

Ho Chi Minh City – Year 2018

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-Trang Nguyen Thanh Phuong

DETERMINANTS OF BEHAVIOR INTENTION TO USE DERIVATIVE SECURITIES A STUDY ON

INDIVIDUAL INVESTOR'S

BEHAVIORS IN STOCK MARKET

OF VIETNAM

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: DR Trần Phương Thảo

Ho Chi Minh City – Year 2018

I would like to express my sincere thankfulness to my supervisor, Dr TranPhuong Thao, who made me believe in myself and gave me the possibility tocomplete the thesis Her guidance helped me in all the time of research and writingthis thesis I am sure that this thesis would not have been possible without hersupport

I would like to express my gratitude to all staffs in ISB who supportednecessary materials and helped submit my papers

My sincere thanks also go to friends and colleagues who participated in thepilot study that led to the development of the final survey questionnaire and theirsupport over the time when I was busy to conduct the research

Especially, I would like to give my special thanks my family for supporting

me spiritually throughout my life

Trang Nguyen Thanh Phuong

This study investigates the determinants of behavior intention to usederivative securities on individual investor ‘s behaviors in stock markets ofVietnam Those determinants include attitude towards behavior, subjective norm,perceived behavioral control It also examines the effect of overconfidence,excessive optimism, herd behavior, risk aversion toward attitude towards behavior

An empirical test was conducted with a sample of 317 individual investors bymeans of structural equation modeling The results show that perceived behaviorcontrol has the strongest impact on the three main factors affecting behaviorintention to use derivative securities with a coefficient of 0.426 The other twofactors, including attitude towards behavior, subjective norm, have a direct impact

on behavior intention to use derivative securities with coefficients of 0.356 and0.216 respectively On the other hand, overconfidence, excessive optimism, herdbehavior and risk aversion have direct effect on attitude towards behavior.However, herd behavior and aversion effect attitude towards behavior with positivecoefficient while overconfidence, excessive optimism affect with negativecoefficient Finally, age and education play an important role in behavior intention

to use securities derivatives while there is no difference between men and womenwho intend to use derivative securities

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Table of Contents

Acknowledgement 1

Abstract 2

List of figures 5

List of tables 6

List of abbreviations 7

1 Introduction 8

2 Theoretical background and hypotheses 13

2.1 Foundational Theory 13

2.2 Research model and hypotheses 16

2.2.1 Attitude towards behavior (ATB) 17

2.2.2 Subjective Norm (SN) 21

2.2.3 Perceived behavioral control (PBC) 23

2.2.4 Demographic factors 24

3 Research methodology 26

3.1 Research approach 26

3.2 Questionnaire design 28

3.3 Data collection 32

3.4 Research Method 33

3.4.1 Pilot test 33

3.4.2 Main survey test 34

4 Data analysis and results 37

4.1 Descriptive statistics 37

4.2 Reliability Analysis 38

4.3 Exploratory Factor Analysis (EFA) 40

4.4 Confirmatory Factor Analysis (CFA) 43

4.4.1 Composite Reliability 43

4.4.2 Convergent Validity of all variables 45

4.4.3 Discriminant Validity of all variables 46

4.3 Structural Equation Modeling (SEM) 48

4.4 Indirect Effects of Behavior intention to use 49

4.5 Independent Sample T-test and Oneway Anova 50

4.5.1 Gender 50

4.5.2 Education 51

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4.5.3 Age 53

4.6 Hypothesis testing results 54

5 Discussion & conclusion 55

5.1 Discussion 55

5.2 Implications for managers 57

5.3 Conclusion 58

5.4 Limitations and directions for future research 59

REFERENCES 60

APPENDICES 63

Questionnaire (English version) 63

Questionnaire (Vietnamese) 67

A Frequencies 71

C Reliability 73

D Factor Analysis 81

E Confirmatory Factor Analysis 87

F Structural Equation Modeling 93

4

List of figures

Figure 1 The theory of planned behavior – (Ajzen, 1991) 14

Figure 2 Research model 17

Figure 3 Main steps of research process 28

Figure 4 First Measurement Standardized Modelling 47

Figure 5 Structural Equation Model 48

5

List of tables

Table 1 Measurement scale 30

Table 2 Sample size Criteria (Comfrey & Lee, 1992) 32

Table 3 Criteria for Measurement Model 35

Table 4 Descriptive statistics 37

Table 5 Remiability Test Results 38

Table 6 KMO and Bartlett's Test 40

Table 7 Total Variance Explained 41

Table 8 Pattern Matrix 42

Table 9 Value of Composite Reliability 45

Table 10 Value of Average Variance Extracted 45

Table 11 Discriminant Caculating Result 46

Table 12 Square root of AVE results 46

Table 13 Regression Weights of Model 49

Table 14 Indirect effects on Behavior intention to use 50

Table 15 Independent Samples Test 50

Table 16 Test of Homogeneity of Variances 51

Table 17 Anova tesing result 52

Table 18 Descriptives Statistics 52

Table 19 Test of Homogeneity of Variances 53

Table 20 Anova tesing result 53

Table 21 Descriptives Statistics 53

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List of abbreviations

1 AVE Average Variance Extracted

ATB Attitude Towards Behavior

2 CFA Confirmatory factor analysis

5 EFA Exploratory factor analysis

6 HOSE Ho Chi Minh City Stock Exchange

13 TBC Perceived Behavioral Control

14 TPB Theory of Planned Behavior

15 SEM Structural Equation Modeling

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1 Introduction

Derivatives are a valuable financial instrument that depends on the price ofthe underlying asset Basically, derivatives can be understood as a type of contractfor a future but predefined transaction Derivative instruments are conduct as a toolused to manage and control risk Specifically, derivative products are used toprevent risk when asset values fluctuate In addition, derivatives are considered ashedging instruments against volatility of commodity prices In the derivativesmarket, there are two main markets: the financial derivative market and commodityderivatives market In this study, the author will focus on the financial derivativesmarket on the stock market, exactly the Vietnam stock market

To date, Vietnam stock market has been established for quite a long time, butjust over 11 years the stock market of Vietnam has a significant development; Twostock exchanges have been established, namely the Ho Chi Minh City StockExchange (HOSE) and the Hanoi Stock Exchange (HNX), a stock exchangedepository center has been established, nearly 89 securities companies are operatingand more than 700 companies have listed their shares and fund certificates on twoVietnamese stock exchanges By 2013, at the Ho Chi Minh City Stock Exchange,the stock market capitalization has reached over $ 32 billion, equivalent to 25percent of GDP in 2013, the number of accounts of investors reached over 1.3million trading accounts, of which foreign investors had about 16,000 accounts,compared to the end of 2007, the total number of securities trading accounts hasincreased by more than 3.5 times and the number of accounts of foreign investorshas nearly doubled, proving that the demand of securities investors has increased

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significantly The daily trading value of the two exchanges in the market hasreached over 5000 billion.

Although the Vietnam's stock market has been developing for more than 13years, there is no derivative market based on securities tools to assist investors inhedging price fluctuations Macroeconomic uncertainty and severe financial riskhave negatively affected nearly all small investors trust the financial market Thereare only basic investment tools in the market such as stocks, bonds and fundcertificates After a long period of preparation and completion, the derivativesmarket will officially come into operation in the near future with the first derivativetraded futures contract Although the derivatives market has been formed anddeveloped for a long time, but for the majority of investors this is still a relativelynew trading form The emergence of these derivatives will make the stock marketmore vibrant and diverse On the other hand, it helps investors to improve theirknowledge and skills to develop the derivatives market later

In the body of literature, there are a wide range of studies examined thebehavioral intention of customers including Jeong & Lambert (2001), Burton,Sheather & Roberts (2003), Liu, Lu, Marchewka & Yu (2004), Amoako &Gyampah (2007), Gu, Lee & Suh (2009), Han & Kim (2010) In the context offinancial market, the behavioral intentions have been examined in a plenty ofstudies such as Berry, Parasuraman & Zeithaml (1996), Athanassopoulos (2000),Auh, Bell, McLeod & Shih (2007), Keh & Xie (2009), Bolton, Bitner & Mende(2013), Saeidi, Sofian & Saeidi (2015)

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In the aforementioned studies, the theories of behavioral have suggested theauthor to identify and analyze the key factors that capture the behavioral intentions

of investors in Vietnam's derivatives markets This study of behavioral intention isconducted by using different approaches The theory of planned behavior (TPB) hasbeen proven relatively effective predicting various human behaviors (Sheppard,Hartwick et al., 1988) Furthermore, the TPB theory has shown to be one of thestrongest theories with multiple implications and it was mentioned in many studiesrelated to behavioral intention Therefore, the identification of individual investorbehavior can be examined by the adoption of a behavioral approach to the study ofthe financial derivatives market and the level of investor perception of differentderivatives markets

Derivatives are used by large corporations and companies to manageexchange rate risk, loans or financial expenses Based on mentioned studies,derivatives are very useful in risk management Through the option call and putoption, market risks are prevented using forward and future contracts Derivativesare indispensable products in the deep, broad and diversified development offinancial markets To date, derivatives have developed rapidly, are strong on aglobal scale and play an increasingly important role in the financial and monetarysystem These tools show prominent features in risk prevention, meeting the needsand interests of many market participants However, it also shows the complexityand if not good management can cause economic instability

In Vietnam, derivative products originating from currencies and commoditieshave been in use for many years On commodity derivatives, the Buon Me Thuot

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coffee trading center was established in 2006 with the main function of organizingthe trading of coffee produced in Vietnam in the form of spot and forward delivery(Forward contract) To date, the use of currency derivatives has been extended tomany domestic and foreign commercial banks, with a variety of instruments such asswaps, options, future contract The financial derivatives market is being preparedfor establishment and development in the near future In order to help individualinvestor familiarize with the new investment instrument, in the first phase of themarket operation, two basic futures contracts will be introduced including futures onthe stock index (VN30 and HNX30) and futures on government bonds Otherderivative contracts on asset types will be issued later.

In the derivatives market, there are four main contributing factors to thederivative market: infrastructure, legal framework, products and people (Hull,2006) In recent years, the government has developed, developed and prepared thelegal framework and technical infrastructure to operate the derivatives market.However, the government cannot upgrade human factors as they do withinfrastructure, legal framework or technical There are many models of humanbehavior, each of which is applied in different circumstances Human behavior fordifferent problems can be predicted very differently Similarly, in financialenvironments, for different financial products, human behavior is also very different(Mullainathan & Thaler, 2000; LeBaron, 2001; Shiller, 2002) In other words, ifindividual investors are not involved in the derivative financial market, this marketwill be ineffective and unable to grow in the future In addition, the internal factorssuch as education, experience, gender, culture, individual investors are also

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influenced by a number of psychological factors Although individual investorshave gradually become more professional in investment, some empirical studies ofmarket performance show evidence that the VN-Index is not random One of thereasons is the existence of psychological factors affecting the behavioral intentions

of individual investors in the stock market (Phan & Chu, 2014) In accordance, thedecision of investors although based on reasonable analysis, is influenced bypsychological factors (Murgea, 2008, Sehgal & Singh, 2012)

Hence, this study is necessary to conduct in the current context of Vietnam tounderstand the level of investors toward derivative financial instruments when thederivative financial market is put into operation The study also is expected toidentify factors that affect intention of investors in the use of derivative financialinstruments in Vietnam

The purpose of this study is to explore the factors that influence the decision

to participate in the financial derivative market of the investor in Vietnam OnAugust 10, 1977, the Derivative Market was officially opened The VietnameseState Securities Commission has issued certificates of eligibility for trading ofderivative securities to five securities companies including Saigon Securities Inc.(SSI), Vietnam Prosperity Securities Company (VPBS), Vietnam SecuritiesCorporation Vietnam Investment and Development (BSC), MB Securities (MBS)and VNDIRECT Securities (VND) Hence, this study focuses on investors who aredealing in these five securities companies

The results of this study will help to learn about the behavior of investors inthe derivative securities market in Vietnam Determining the level of impact of

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factors on the behavior of individual investors in the derivatives market isimportant It will help to capture the behavior of investors in the new derivativemarket as in Vietnam today This result is very important for both brokers as well asthe State Security Commission of Vietnam Knowing the behavior of investors canhelp them improve the intention to use derivative instruments in securities market tomanage and control risk in investing This can help to create market liquidity aswell as increase the number of investors in Vietnam's stock market.

2 Theoretical background and hypotheses

2.1 Foundational Theory

The theory of planned behavior (TPB) was developed by Ajzen and Fishbein

in 1980 This theory is considered to be pioneering in the field of psychosocialresearch and is widely applied in scientific research to learn about human behavior.The main content is shown in the studies of Ajzen (1985, 1991, 2002) Therelationship between intention and behavior has been empirically tested innumerous studies in many areas (Ajzen, 1988; Ajzen & Fishben, 1980; Canary &Seibold, 1984; Sheppard, Hartwick, and Warshaw, 1988) It was developed from thetheory of reasoned action (TRA) by (Ajzen and Fishbein 1980)

Theory of reasoned action (TRA) focuses on understanding the motivationalfactor of personal behavior consisting of two main components: attitude towardsbehavior (AT) and subjective norms (SN) Although the TRA is widely accepted inliterature, the theory is still limited Inability due to lack of opportunities orresources such as time, capital, skills To overcome these limitations, Ajzen (2002)

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added another variable to the original TRA model, perceived behavioral control(PBC) and this led to the theory of planned behavior (TPB).

Perceived behavioral control reflects the ease or difficulty of performing thebehavior and whether the behavior is controlled or restricted (Ajzen, 1991) TheTPB model is shown in figure 1

Figure 1 The theory of planned behavior – (Ajzen, 1991)

According to the theory of planned behavior (TPB), behavioral control canaffect behaviors in two ways: PBC may affect intentions of behavior and PBC candirectly influence behavior Both of these controlling effects may be related to thecourse of action of investors In addition, other factors that affect investors' actionsare internal factors and external factors Internal factors include feelings, personalknowledge, experiences and skills External factors include financial resources, time

or partner (Ajzen, 2005) In TPB theory, the three main factors are behavioralattitudes, subjective norms, and perceived behavioral control These factors havebeen proven and confirmed in numerous researches

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Behavioral intentions have been predicted by attitudes, subjective norms,perceived behavioral control in the past The theory of plan has been tested formany years and has been shown to be reliable, effective through numerousempirical studies TPB has been widely used in the prediction of human behavior inbusiness (Krueger & Carsrud, 1993), the study of bad habits (Chang, 1998) ortobacco control behaviors for adults (Hu & Lanese, 1998) In addition to predictingand controlling personal behavior, TPB is also used to predict behavior that benefitsthe community For example, research on resource sharing in the organization(Bolloju, 2005) or decision making in human resource management (Carpenter &Reimers, 2005) TPB is also analyzing the intention to use a variety of new forms,such as the use of internet in shopping (Hsieh & Rai, 2008), the intention to usetechnology devices in households (Pavlou & Fygenson, 2006), or intention to usecredit cards (Rutherford & DeVaney, 2009).

TPB is widely used in the financial and securities markets (Gopi &Ramayah, 2007) Gopi and Ramayah (2007) use TPB to study the intent of onlinehome-based business, or use internet banking for securities trading (Serkan, 2004).All of the above may indicate that TPB is a good model for predicting behavior In afamous study by East (1993), he used TPB to accurately predict the behavior ofsecurities investors in the short term According to Ajzen (2005), in the short term,TPB shows that "people intend to take action when they evaluate it positively, whenthey feel social pressure to do it, and when they believe they have the means and theopportunity to do it” This view of motivation shows the ability to explain the mainfactors that affect individual investment behavior

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The stock market in Vietnam has been developing for a long time, however,very few studies have used TPB to study stock investment behavior Most of theprevious studies focused on behavior finance theory, financial literacy ordemographic factor to investment behavior On the other hand, derivative is aneffective risk management tool in securities trading has been recently applied inVietnam This attracted the author to use TPB as a theoretical background fordeveloping model research and studying the behavior of intention to use derivative

in securities investment in Vietnam

2.2 Research model and hypotheses

As mentioned above, TPB has many applications in analyzing humanbehavior and has been tested in hundreds of studies worldwide In this section, theauthor proposes a research model to test the factors that influence the intention touse derivative in securities investments The main purpose is to determine thefactors that influence the intention to use as well as the relationship between factors

in the research model In addition, the author identifies psychological determinantsthat have an indirect effect on intention to use (Phan & Zhou, 2014) The researchmodel and hypotheses will be presented below:

Behavioral intentions according to the TPB theory are intentions to performsome behavior, in this study the intention is to use This makes sense behavior adependent variable in many experimental studies using TPB as the theory Studies

of behavioral intent have been demonstrated and determined through manyempirical studies According to Ajzen (1991), behavioral intentions have beenstrongly influenced by motivation factors (elements in the TPB model) Behavioral

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intentions imply that people will be willing to act or attempt to do something.Therefore, the intention to use derivative indicates that investors are likely to usederivative in securities trading.

Figure 2 Research model

2.2.1 Attitude towards behavior (ATB)

Attitude is described as the impact of each positive or negative emotion on aparticular behavior (Fishbein & Ajzen, 1980) Attitude of an individual is measured

by the belief and appreciation for that behavior Consequently, attitudes have beenwidely used to determine predictions of future behavior On the other hand, attitudeshave been updated with new definitions as reaction of individual behavior todifferent objects (Ajzen & Fishbein, 2000)

In other words, if a person is influenced by attitudes towards a particularbehavior, they will be intent on performing that behavior higher than others Incontrast, individuals are not attracted by the behavior, they will not intend to dothat There are many studies examining the impact of attitudes on behavioral 17

intention The results show that there is a strong relationship between attitude andbehavioral intention If an individual who has a positive attitude will tend to act Incontrast, individuals with negative attitudes will have a tendency not to performsuch behavior, even criticize (Gibler & Nelson, 1998) Therefore, attitude is one ofthe determinants of personal behavior On the contrary, individuals with negativeattitude will have a tendency not to perform such behavior, even criticize or obstruct(Gibler & Nelson, 1998) Therefore, attitude is one of the determinants of personalbehavior.

For the attitude towards behavior, Ajzen and Fishbein (1980) believe that theattitude toward any concepts is one of the feelings about one's favourableness andunfavourableness Thus, attitude towards behavior is only the end result while thereare small factors that affect attitude towards behavior Phan and Zhou (2004) haveidentified four factors that directly affect attitude towards behavior, includingoverconfidence, excessive optimism, herd behavior, and risk aversion Thus,attitude towards behavior is considered as a dependent variable influenced by fourpsychological factors as follows:

Overconfidence is the expression of self-confidence behavior of someknowledge or decision Overconfidence has been studied extensively in the stockmarket (Barberis & Thaler, 2003) In trading, many investors are confident abouttheir knowledge, their ability in reality is not so Transaction results are far fromtheir confidence However, they do not see this problem Mostly, investors areoverconfident believe that they choose the best stock and the best time to sell thestock for the highest profit

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Excessive confidence influences their decision Excessive confidence alsocauses them to ignore other useful data in the investment decision that leads to theirerroneous investment decision (Odean, 1998; Wang, 2000; Gervais & Heaton,2002; Grinblatt & Keloharju, 2009; Montier, 2009) Overconfidence also greatlyinfluences the use of derivative in securities transactions.

Most investors are overconfident about their ability, so they will not use riskcontrol measures in their trades, particularly derivative An over-confident investorperforms high-frequency transactions and thus increases the volume and volatility

of the market while their expected returns decrease (Gervais, Heaton and 2002).Therefore, the confidence of a person's ability to directly influence the investmentattitude, leading to more frequent transactions

For the overconfident investor, they are too confident about their investmentinformation as well as their capabilities This will cause them not to appreciate thereality of the market as well as the stock they are holding Excessive optimism is acombination that holds overconfidence and over optimism This is evident in badsituations, especially when the market is on the decline They always believe thatbad situations happen only in the short term, so it will not affect their portfoliomuch

Or they believe that their portfolios are very good, will rebound in a shorttime so there is no need to sell (Wang, 2001, Gervais & Heaton, 2002; Johnson &Lindblom, 2002) Excessive optimism also stimulates investors to increase thenumber of portfolios because they believe that the market will improve and thatthey will achieve high returns in the short run (Johnsson & Lindblom, 2002) The

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use of derivative in trading depends largely on the attitude of the investor Whenthey feel optimistic, they will not need to use derivative, otherwise, if theiroptimism diminishes, they will use derivative as a hedge.

In stock investment, herd behavior is the behavior of investors acting on thebehavior of others, or when heard from a certain investor, they will immediatelytake action In simple terms, investors copy someone else's transactions based on thelevel of success of the other investment performance (Banerjee, 1992; Bikhchandani

& Sharma, 2000; Hwang & Salmon, 2004) If this happens in small quantities, itwill not affect the market

However, if a large number of investors act according to other reputableinvestors, it will affect the market Stock prices may be overvalued leading toincreased investment risk Investors of this type are called unreasonable investors.Dependending too much on the individual or organization will lead to thatorganization having a great influence on the market, thereby increasing investmentrisk (Barber & Odean, 2009)

Herd behavior can greatly affect the behavior of investors Investors whohave high herd behavior may not use derivative to manage risk For investors withlow herd behavior, they will use derivative as a tool to control risk from theirbehavior

Risk in the financial sector is the uncertainty of an unexpected decision orincident Tversky and Kahneman (1974) propose prospect theory and reveal thatforecasting and forecasting under uncertainty do not usually follow probabilityrules Risk averse is a factor in prospect theory that determines that people tend to

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risk averse in the "profitable zone" and risk seeking in the "losing zone" (Tversky &Kahneman 1992).

Thus, for risk aversion investors, they prefer to look for risk, so they will bemore interested in the market fluctuations and high risk Conversely, for investorswith low risk aversion, they only trade when they feel safe and secure (Olsen, 2007,2008) The use of derivative in securities trading is also affected Risk aversion doesnot like derivative because they think that dealing with derivative is too safe andprofit will be low Conversely, for the volatile market, derivative as a useful tool forinvestors with low aversion risk

H1: Attitude towards behavior positively affects the behavioral intention of

investors in using financial derivative instruments.

H1a: Overconfidence is negatively affects the attitude among individual

friends and family as a determining factor in their behavior People with high SNmean that their decision is influenced by the people who are important to them(Ajzen & Fishbein, 1980) SN plays a very important role in decision making, and isone of the main players in the TPB model Specifically, for financial markets, if anindividual investor in the stock market witnessed a more important person than theythought they should perform that action, they will have more motivation to make adecision On the other hand, people often think that when the important peopledisagree with these activities, they will not intend to behave More specifically,even when a person does not want to do something, they can also be influenced to

do the behavior by the actions of others (Venkatesh & Davis, 2000) Friends,parents, relatives, brokers or reputable financial experts can influence the decision

of the investor (Kalafatis et al., 1999)

Attitudes of others also influence both intentions and decisions In particular,the decision of the investor to choose a derivative financial instrument is affected bythe attitude of others People who close relationship to the investor have a lot ofimpact on the behavior of that investor This means when others think that negativefor the tools, investor will be more likely to adjust their intentions of use On thecontrary, the intention of an investor would increase if they were interested in thefinancial instrument (Kotler & Keller, 2006; Rivis & Sheeran; 2003)

However, there are also studies that give different results in predicting theeffect of subjective norm on intention The problem is that the causal relationshipbetween subjective norms and behavioral intentions is evidenced in various studies(Teo & Lee, 2010) On the other hand, this relationship was also denied by other

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studies (Lewis et al., 2003) Moreover, recent studies have also shown thatsubjectivity is a different predictor of subjective norms for investors' intentions indifferent regions (Wu et al., 2011).

However, despite different conclusions about the role of subjective normswith behavioral intention, it may be possible to show a significant associationbetween subjective norms and behavioral intention It can be predicted that if anindividual investor is affected by subjective norms, they may intend to use more ofthose who do not suffer the same pressure

H2: Subject norm positively affects the behavioral intention of investors in

using financial derivative instruments.

H3: Subject norm positively affects the attitude among individual investors.

2.2.3 Perceived behavioral control (PBC)

Perceived behavioral control is a complementary factor to overcome theconstraint on the TPB model, which is applicable in the case of individuals affected

by external factors (SN) Thus, individuals will feel more active in their decision byreducing the pressure from SN (Ajzen, 2002) PBC is defined as perceived byindividuals as easy or difficult to carry out specific behaviors (Ajzen, 2005) Inother words, if the investor's PBC are stronger, they will be motivated more toperform this behavior (Ajzen, 2005) In addition, perceived behavioral control isdefined as the degree to which he or she has control of internal and external factorsthat facilitate or limit behavioral activity

In addition, Ajzen (1991) built the PBC based on research and synthesis ofvarious historical data Specifically, information is collected through personal

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communication with family members, relatives and friends, as well as pastexperiences that help to predict perception and behavior In addition, the availability

of resources such as time, money, and opportunity improves perceived control andcapable of performing behavior (Ajzen, 1991) Many empirical studies indicate thatPBC may have significant differences in behavior Hence, they have demonstrated apositive relationship between PBC and behavior

The relationship between perceived behavioral control and behavioralintention has been demonstrated in various studies In particular, Ramayah (2007)studied the "Internet taxpayer forecasting by applying the TPB model” Or Alamand Sayuti (2011) have studied behavioral control applications as a tool forpredicting investment intentions A series of studies by Iakovleva, et al (2011), Wu

et al (2011) have also found on the same issues In addition, Phan and Chu (2004)also applied TPB to predict the behavior of individual investors when participating

in the Vietnam stock market These studies indicated that the ability of individuals

to intentionally act upon high PBC and vice versa

H4: Perceived behavioral control positively affects the behavioral intention

of investors in using financial derivative instruments.

2.2.4 Demographic factors

Many evidences have showed that age, gender, income and education affectthe preferences and attitudes towards investment decisions In particular, Jain andMandot (2012) conclude that different demographic factors such as age, maritalstatus, sex, city, income level, market knowledge, occupation and professional

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qualifications have a major influence on the investor's investment decision Inaddition, Lewellen (1977) makes the same conclusion.

Gender is one of the most influential factors in the minds of investors.Especially for new financial instruments Men tend to explore, while women needthe assurance of the financial instruments they choose (Hofstede, 1998) In somecognitive studies (Carol 1982) and in communication (Tannen 1991), they foundthat there is a difference between male and female investors

With some of the above evidence, the author assesses gender differences inthe conduct of investment behavior, particularly in the context of the stock marketthere are the majority of male investors in the market The aspects to investigate arethe effects of psychological factors on investment attitudes as well as attitudes,subjective norms and perceptions of behavioral control for behavioral intentions ofindividual investors

In addition, age is also an important factor affecting behavior in financialmarkets Korniotis and Kumar (2011) have shown that older people have moremature investment options than young people In addition, older people tend to usefinancial derivative to manage risk more than young people In contrast, youngpeople prefer adventure with their choice, so they use less defensive tools

Another factor that influences the behavior of the word is education There

is an impact of knowledge and investment orientation, which affects the perception

of risk and investment behaviors of investors Graham et al (2009) noted thatinvestors have a larger portfolio or more education will be more likely to beperceived and competent than investors with smaller or less educated portfolios

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Therefore, educating investors on derivative financial instruments also affects theirintention to use derivative for investment.

H5a: There is difference between male and female in the behavioral

intention of investors in using financial derivative instruments.

H5b: Age positively affects the behavioral intention of investors in using

financial derivative instruments.

H5c: Education level positively affects the behavioral intention of investors

in using financial derivative instruments.

3 Research methodology

3.1 Research approach

Quantitative and qualitative research methods are two main types of methodsused in scientific research (Spencer, Ritchie and O'Connor, 2003) Experimentalsurveys of phenomena observed organically through statistics are often referred to

as quantitative research Statistics in quantitative research come in many forms,from statistics, mathematics, to computer engineering Quantitative research isapplied to the research, development, and application of theories, hypotheses, andmodels that relate to the object of study By quantitative methods, quantitativeresearch allows quantitative relationships to be verified Measurement data isusually expressed as percentage, mean, standard deviation

Qualitative research is widely applied in many different fields This methodhas been used quite widely in the past However, this is still a useful method ofinvestigation in modern research in a variety of situations Qualitative researchallows us to synthesize and deduce understanding of the subject By synthesizing 26

the information that has been authenticated and documenting past research results toprovide an objective way of measuring things, people The major questions inqualitative research that the researcher must answer include "what, where, when,how?" The sample size of qualitative research is usually small (Sogunro, 2001).

Quantitative methods are more formalized and used to measure the number

of problems by statistical data Furthermore, it is also used to measure attitudes,views, behaviors and other determinants, and then infer the results to a largerpopulation sample The factors and models of exposure in the study may beconstructed using the measurement data used in the quantitative study In addition,quantitative data collection methods are organized more tightly than the qualitativedata collection methods In addition, Neuman (2006) offers a quantitative approachthat combines a variety of methods Such methods can be online surveys, offline,direct to telephone interviews, organized monitoring activities

Synthesized from the above information, with the purpose of understandingthe level as well as testing the relationship to establish the cause and effectrelationship for the object studied, quantitative research should be applied in thisstudy The research process includes 9 steps are shown below:

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Figure 3 Main steps of research process

3.2 Questionnaire design

The questionnaire is distributed in two ways, online surveys and hard copies.The purpose is to ensure sufficient sample size as the subject of the survey isknowledgeable about the derivative is very limited Questionnaire is translated intoVietnamese and all questions will be brief, easy to understand and not to beconfused

There are two forms of measurement scales in this questionnaire design:

• Nominal scale: present data into categories (Crossman, 2009)

• 5-point Likert scale: level of agreement or disagreement with each of aseries of statement (Naresh, 2009) The range from 1 to 5 corresponds to stronglydisagree and strongly agree

The questionnaire included two parts The first part was respondents’demographics included age, gender and education displayed in categories questions.The last part was main survey displayed in 5-point Likert scale questions

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Table 1 Measurement scale

OVC1 I am confident in my ability to trade securities

OVC2 I am confident in the holding stock will rise

OVC3 I am confident in market information

OVC4 There is no need to use derivative to reduce riskEO1 I do not sell stocks when the market is

plummeting

EO2 I trust the stock will rise

EO3 I believe that the market will stabilize after

several sessions of declines

EO4 There is no need to use derivative when the

market shows signs of deterioration

HB1 I invest by following the specialist ‘s portfolio

HB2 I invest by following friend’s portfolio

HB3 I invest in stocks according to the crowd

HB4 I sold out when I saw a large number of sellers

HB5 I bought into stock being bought a lot

RA1 I have low risk tolerance

RA2 I like safe investing

RA3 I like to invest in “hot” stock

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RA4 I sell stock when prices falling.

RA5 I like to use derivative for hedging

ATB1 Derivative helps me better control risk when

trading stocks

ATB2 Derivative is more beneficial than the cost that I

have to spendATB3 I feel derivative brings a lot of benefits

ATB4 I am more confident when using derivative in

stock tradingSN1 Friends, colleagues advised me to use derivative

SN2 Relatives advised me to use derivative in stock

tradingSN3 The broker recommends me to use the derivation

in stock trading

Icek AjzenSN4 The information available is advisable to use (2006)

derivative in stock trading

PBC1 I can use derivative as soon as I need it

PBC2 I can manually use derivative

PBC3 I have no problem using derivative

PBC4 I can easily use derivative with the help of broker

BI1 I intend to use derivative in stock trading

BI2 I intend to introduce my friends to use derivative

in stock tradingBI3 I will introduce family members to use derivative

in stock trading

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3.3 Data collection

Before conducting a large sample survey, a pilot test was conducted to assessthe competency of the questionnaire (Iarossi, 2006) The number of samplesrequired in the pilot test is from 15 to 25 (Aaker, Kumar & Day, 2006) Therefore,for this research, the author conducted pilot test for 30 respondents

According to Gorsuch (1983) and Hair et al (2010), the ratio betweensubject and variable must be at least 5:1 It means five respondents per variable.However, the most acceptable sample size calculation is 10:1 ratio (10 samples forone variable) Therefore, the minimum sample size is 165 and desired sample size is

330 On the other hand, according to Comfrey & Lee (1992), the number of

samples ranked from very poor to very good as follows:

Table 2 Sample size Criteria (Comfrey & Lee, 1992)

Sample size Level

Convenient method is the most common method of data collection Thismethod appreciates the convenience as well as the accessibility of the object aseasily as possible This will make it much easier to gather the required number ofobjects to assess significance of research problems in order to save time and costs

In addition, the number of people with derivative knowledge is limited so this is themost feasible method Questionnaire will be delivered both online and

offline 32

In both online & offline, surveys will be collected from individual investorsfrom 5 securities companies operating in the derivative stock market includingSaigon Securities Inc (SSI), Vietnam Prosperity Securities Company (VPBS),Vietnam Securities Corporation Vietnam Investment and Development (BSC), MBSecurities (MBS) and VNDIRECT Securities (VND).

3.4 Research Method

3.4.1 Pilot test

One of the most noteworthy steps in conducting a survey is to conduct asurvey and test the data obtained from a small group of subjects in the pilot test Thepurpose of the pilot test is to ensure that all persons in the survey sample not onlyask questions in the questionnaire, but also in the same way This makes the datacollected true and unmistakable, avoiding affecting statistical results, analyzing orrunning the model Through the pilot test, questionable issues will be identified andcorrected before conducting a broad survey In addition, the inspection andprocessing of the survey data collected to find out how to overcome the possibledata errors

The pilot test was conducted by collecting 50 respondents The respondentswere individual investors who currently customer in five securities companiesmentioned above The data collected from pilot study was testing by Cronbach’salpha reliability and exploratory factor analysis (EFA) to refine the measurementscale The main survey was sent to the investors through an online survey created

by the google document platform

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3.4.2 Main survey test

SPSS (Statistical Package for Social Sciences) is a computer program forstatistics It will be used to analyze collected data in this research The analysissequence consists of descriptive statistics, reliability, exploratory factor analysis Inaddition, confirmatory factor analysis (CFA) and structural equation modeling(SEM) will be conducted (Anderson and Gerbing, 1988) by AMOS (adds-on SPSS)

In particular, Cronbach's alpha will be used to test reliability Validity of thedata will be tested by EFA Then, CFA will perform to validate the measurementscales Finally, SEM will be used to test the research model Moreover, this researchalso conducts the statistics with demographic and descriptive statistics withmeasurement scale

Reliability test is performed to measure the internal consistency of theconstruct In other words, testing for reliability is to discover and remove failuresbefore conducting factor analysis Internal consistency is measured by Cronbach’salpha, which is the most widely – used method According to George and Mallery(2003), Cronbach’s alpha is acceptable when equals to 0.6 Besides, the rules havestated that if Cronbach’s alpha if Item deleted is greater than the overall Cronbach’salpha and corrected item - total correlation is less than 0.4, the variable should bedeleted from the list The table below shows the results after conducting reliabilitytest

After finding the reliability of each item in one dimension, the exploratoryfactor analysis was conducted to identify the reliability among independent and

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dependent variables in order to access the highest validity for the scale In this step,the main aim is to find out factors among observed variables by putting variableswith similar characteristics into one group.

• Based on Pallant (2005), the KMO (Kaiser-Meyer-Olkin) must be from 0.6

and above to have a good factor analysis

• In the Bartlett’s Test of Sphericity, the Sig would be less than 0.05 for factor

analysis to be considered appropriate (Tabachnick & Fidell, 2007)

• Number of factors extracted must have Eigenvalue greater than 1.0

• The Total Variance Explained value of each item needs to be higher than

The table below shows the criteria to evaluate the measurement model fit

Table 3 Criteria for Measurement Model

Measure Threshold

Chi-square/DF (CMIN/DF) < 3 good; < 5 sometimes permissible

p-value for the model > 0.05

CFI (Comparative Fit Index) > 0.95 great; > 0.9 traditional; > 0.8 sometimes

permissible GFI (Goodness-of-Fit Index) > 0.95 great; > 0.9 traditional; > 0.8 sometimes

permissible

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RMSEA (Root Mean Squared Error < 0.06: good fit

of Approximation) 0.06 – 0.08: acceptable fit

0.08 – 0.1: mediocre fit

≥ 0.1: poor fit

TLI (Tucker Lewis Index) ≥ 0.9

CR (Composite Reliability) > 0.7 and > AVE

AVE (Average Variance Extracted) > 0.5

Standardized Regression Weight > 0.5

Source: Joreskog (1969), Bagozzi (1981), Brown and Cudeck (1993), Hair et al (2010)

According to Anderson, Black, Babin and Hair (2010) in the “Multivariatedata analysis”, the Composite Reliability (CR), Average Variance Extracted (AVE),Maximum Shared Variance (MSV) and Average Shared Variance (ASV) of scalesmust be measured in order to check the reliability, convergent validity anddiscriminant validity of the construct Those requirements are reliability (CR) > 0.7,convergent validity (AVE) >0.5 and discriminant validity with MSV < AVE, ASV

< AVE and square root of AVE greater than inter-construct correlations

If convergent validity issues happen, then the variables do not correlate wellwith each other within their parent factor If discriminant validity issues happen,then variables correlate more highly with variables outside their parent factor thanwith the variables within their parent factor

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