The influence of psychological factors of individual investors on the target of invectors in vietnam stock market

UNIVERSITY OF ECONOMICS HOCHIMINH CITY--- ---NGUYỄN BÍCH CHƯƠNG The influence of psychological factors of individual investors on the target of investors in Vietnam stock market MAS

UNIVERSITY OF ECONOMICS HOCHIMINH CITY

-

-NGUYỄN BÍCH CHƯƠNG

The influence of psychological factors of individual investors on the target

of investors in Vietnam stock market

MASTER OF BUSINESS

HO CHI MINH CITY, 2014

UNIVERSITY OF ECONOMICS HOCHIMINH CITY

-

-NGUYỄN BÍCH CHƯƠNG

The influence of psychological factors of individual investorson the target

of investors in Vietnam stock market MAJOR: FINANCE / ACCOUNTING MASTER THESIS(Honours) SUPERVISOR: Dr TRẦN HÀ MINH QUÂN

HO CHI MINH CITY, 2014

I wish to acknowledge the support of my supervisors, Dr Tran Ha Minh Quanwho tirelessly encouraged and guided me in the completion of this research and wasalways available to tune me in the right direction

I also express the most enthusiastically grateful to my professors atInternational School of Business, University of Economics, Ho Chi Minh City, fortheir teaching and guidance during my course

I wish to recognise the support and encouragement I received from my friends

to help each other to complete our theses

I wish to thank my mum who has always supported me in my goals and equallyencouraged me in my studies

I wish to thank my company, Dong Nai Urban Environment Service CompanyLimited for creating favorable conditions of time and money for me to complete mycourse

Economic activities appeared thousands of years ago, when people justexchange each other‟s basic necessities, until great progress today, economy havebeen extensively studied, but behavioral finance is a new area Behavioral financetheories, which are based on the psychology, attempt to understand how emotions andcognitive errors influence individual investors‟ behaviors

This study examines the relationship between investors‟ sentiment and theirtarget on Vietnam stock market There are many psychological factors that affectperformance of investors, but this paper focus on four psychological factors ofindividual investors: Overconfident, ExcessiveOptimism, Psychology of Risk andHerd Behavior The target of investors is investor look for short-term arbitrage ordividend income and capital gains in the long-term

The servey was conducted at some sercurities companies at Ho Chi Minh Cityand Bien Hoa city, 400 questionaires were distributed directly to investors, 214 voteswas eligible The results show that there is existence of psychological factors ofindividual investors in the stock market and they impact the target of investors

As there are limited studies about behavioral finance in Vietnam, this study isexpected to contribute significantly to the development of this field in Vietnam

Keywords: Stock market, behavioral finance, overconfident, optimism, herd

behavior, psychology of risk.

Abstract 2

CHAPTER 1: INTRODUCTION 5

1.2 Problem statement 6

1.3 Scope 7

1.4 Research questions 8

1.5 Research Structure 8

CHAPTER 2: LITERATURE REVIEW AND HYPOTHESES 9

2.1 Target of investors 9

2.2 Review of psychological factors and hypotheses 10

2.2.1 Overconfidence 10

2.2.2 Excessive Optimism 11

2.2.3 Psychology of Risk 13

2.2.4 Herd Behavior 15

2.2.5 Moderator variables 16

2.3 Model 18

CHAPTER 3: METHODOLOGY 19

3.1 Research process 19

3.2 Data collection 19

3.3 Measurement items 20

3.4 Pilot study 21

3.5 Main survey 22

3.6 Methodology of data analysis 22

3.6.1 Descriptive statistics 22

3.6.2 Reliability analysis 22

3.6.3 Exploration factor analysis (EFA) 23

3.6.4 Binary logistic regression 23

CHAPTER 4: RESEARCH RESULTS 24

4.1 The main characteristics of the sample 24

4.2 Identify the general behavior of individual investors 26

4.2.1 Overconfidence 26

4.2.2 Excessive Optimism 27

4.2.3 Psychology of Risk 28

4.2.4 Herd behavior 29

4.3 Exploring and measuring the psychological factor group constitutes the behavior of individual investors 29

4.3.1 Over Confidence 30

4.3.2 Excessive Optimism 31

4.3.3 Psychology of risk 32

4.3.4 Hers behavior 33

4.4 Exploratory factor analysis (EFA) 33

4.5 Check the existence of the psychological factors 37

4.5.1 Overconfident 37

4.5.2 Excessive Optimism 37

4.5.3 Psychology of Risk 38

4.5.4 Herd behavior 39

4.6 The relationship between behavioral factors with gender, age and level 39

4.7 The effect of behavioral factors to investors‟ target 43

4.8 Hypothesis testing result 44

CHAPTER5:CONCLUSION,IMPLICATIONS,AND LIMITATIONS 46

5.1 Conclusion 46

5.2 Managerial implications 47

5.3 Limitation and for further research 51

References 53

APPENDIX 1: Questionnaire 56

APPENDIX 2: The frequency test of the general behavior of individual investors 58

CHAPTER 1: INTRODUCTION

1.1 Research background

Vietnam's stock market was launched in 2000, in the first 5 years, the marketdoes not seem to really attract the attention of the wider public and the up and downmovements of the market does not create social impact that may extend to affecttheoperation of the economy as well as the lives of every citizen.But from thebeginning to the mid of 2006, with growth reaching 60%, Vietnam stock marketbecame the 2nd faster frowth “point” in the world anh the awakeing of the fledglingmarket is increasingly “fascinated” investers at domestic and abroad Many reasonsare given to explain this strong growth, but the majority opinions, said that one of themain causes is psychological investing, investing with the movement of investors indomestic “Playing” the stock has been talking as a "fad", a "movement" spread withstunning speed After a time developextremely strongly and considered as one channelwith highest interest, end of 2009 stock market peaked at 1,170 points and no brakessliding bubble stock has burst, many investors were bankrupted… The sharp decline

of the VN-Index was affected by various factors such as tightening of monetarypolicies, especially lending for stock investment, high deposit interest rates, highinflation rate, and a recession of the US economy Lack of timely intervention ofauthorities was also areason why VN-Index fell dramatically Many comments andrecommendations given by security companies or even global financial organizationsdid not match with what has really happened Belief in the growth of stock market didnot help these analysts to save the VN-Index from remarkable declination After 13-year growth of Ho Chi Minh stock market, Vietnamese investors‟ decisions are stilldifficult

1.2 Problem statement

Every theory, every model of efficient markets seems pointless in Vietnamstock market Maybe it's time to use the theory based on basic human psychology toexplain stock market anomalies Behavioral finance can be helpful in this case because

it is based on psychology to explain why people buy or sell stocks (Waweru et al.,2008)

Behavioral finance is a financial sector that proposes psychology-based theories

to explain the abnormal stock market In behavioral finance, it is assumed that theinformation structure and the characteristics of market participants affect systeminvestment decisions as individuals and as a result of market Behavioral financeattempts to explain and increase understanding of the theoretical models of investors,

including the emotional processes involved and the extent to which they influence thedecision-making process Basically, behavioral finance attempts to explain what, why,and how of finance and investment, from the human perspective There has beencontroversy about the true meaning and effect of financial behavior since the fielditself is still developing and perfecting itself This evolution continues to occurbecause many scholars have a wide range of such diverse specialties and academic andprofessional Finally, behavioral finance studies of psychological factors andsociological processes that affect financial decisions of individuals, groups andorganizations.

Noted by Daniel Kahneman in a speech entitled "Psychology and Market" atNorthwestern University in 2000: "If you listen to financial analysts on the radio or on

TV, you quickly learn that the market has a psychology Indeed, it has character It hasthoughts, beliefs, moods, and sometimes stormy emotions."

1.3 Scope

There are many psychological factors discovered through research that theyhave a significant impact on the behavior of investors Among those, there are fourcommon psychological factors exist in almost every human being, there are:Overconfident, ExcessiveOptimism, Psychology of Risk and Herd Behavior

The research was conducted at some securities companies in Ho Chi Minh cityand Bien Hoa city,

The goal of this research: prove there is existenceof psychological factors ofinvestorsin Vietnam stock market and clarify the impact of psychological factors toinvestors‟ target?

This research focuses on understanding and analyzing the impact of the four

psychological factors: over-confident, optimistic, attitude toward risk and herd

behaviour to individual investors‟ target on Vietnam stock market

1.4Research questions

The research focuses on achieving the following questions:

• What are the behavioral variables influencing investors‟ target? The

relationship between these variables

• Are there herd psychological effects on Vietnam stock market?

• At which impact levels (if any) do the behavioral factors influence the

individual investors‟ target at the VietNam Stock market?

1.5 Research Structure

This thesis has five chapters

Chapter 1: Introduction, give the overview of the research and the problem need

CHAPTER 2: LITERATURE REVIEW AND HYPOTHESES

This chapter presents a review of relevant literature related to factors affectingindividual investors‟target This chapter also states the hypotheses and proposeconceptual model for this study

2.1 Target of investors

In this study, target of investors was shown through their investment decisionmaking: investors looking for short-term arbitrage or dividend income and capitalgains in the long-term

A long-term investment was defined is holding a stock over one year.Theoretically, if you hold a stock for a long time, you will go through periods ofvolatility and eventually, then you can gain profits as the underlying company grows,with an assumption that a good company will grow increasingly and revenues overtime Long-term investment also provides dividend income over the long-term

Short-term investment is not limited to day trading Short-term investment wasdefined as those that are hold their stock within one year and then take advantage ofmarket volatility that produces a quick profit

Geist (2003) recognized the impact of psychology on investors‟ financialdecision making He said that from the investing process however much we try toeliminate our psychology, we will finally fail, because our conscious and unconsciouspsychological convictions continually operate and influence our decision-making

2.2 Review of psychological factors and hypotheses

2.2.1Overconfidence

In the financial field, overconfidence is defined as the overestimating valuation

of a financial asset (Odean, 1998)

Investing is not an easy process Investors have to gather information, analyzethe information, and making a decision However, investors used to misinterpret theaccuracy of our information when they are overconfident and overestimate their skill

in analyzing it It happens after we get some success After getting some success in themarket, investors may exhibit overconfident behavior

Many psychological researchers have found that investors used to overestimatetheir knowledge (Lichtenstein, Fischhoffs and Philips, 1982) and they also overestimatetheir ability and with the personal importance of the task, their overestimates increase

"People are overconfident Psychologists have determined that overconfidencecauses people to overestimate their knowledge, underestimate risks, and exaggeratetheir ability to control events Does overconfidence occur in investment decisionmaking? Security selection is a difficult task It is precisely this type of task at whichpeople exhibit the greatest overconfidence." (Nofsinger, 2001)

According to Daniel and Titman (1999) overconfidence effects on the way thatindividual investors process information directly and indirectly The direct effect,discussed by Daniel, Hirshleifer and Subrahmanyam (1998) is that investors put toomuch weight on their own information because they tend to overestimate the precision

of their information The indirect effect occurs because investors filter information andbias their behavior in ways that allow them to maintain their confidence

Barber and Odean (1999) also believe that overconfidence cause high levels oftrading in financial markets They attest that overconfidence increases trading activitybecause it causes investors make sure about their own opinions and not considersufficiently the other opinions In their paper, they test whether a separate class ofinvestors, those with accounts at discount brokerages, trade excessively, in the casethat their trading profits are not enough to cover their costs.

In the precision of information, their method to test for overconfident was todetermine whether the securities bought by the investors outperformed those they sold

by enough to cover the costs of trading They research return horizons of 4 months,one year and two years following each transaction (they calculated returns from theCRSP daily return files) The results showed that on average, the securities thatinvestors bought underperformed those they sold

Several studies analyze the impact of gender on the confidence level and foundthat both men and women show overconfidence, but at men the level is higher (Barberand Odean, 2001), but women make the individual investment performance better thanmen Overconfidence leads to more transactions but hurt the investment performance

H1 Overconfidence has a positive impact on investor‟s target

2.2.2 Excessive Optimism

Althought there are many researchers have extensively studied the effect ofoverconfident, but the effect of optimism on individual economic choice has littleattention Puri and Robinson (2007) is one of the first recorded the impact of optimism

on individuals economic decisions Distinguishing between reasonable and excessiveoptimism, they document that moderate amount of optimism is associated with betterdecision making They recorded that reasonably optimistic people work harder It is

important to record that optimism is subjective awareness which depends on

Optimism is a brainpower attitude that explains situations and events as beingbest optimized, meaning that in some way for factors that may not be fullycomprehended, the present moment is in an optimum state The concept is typicallyexpanded to encompass the attitude of hope for future conditions show as optimal aswell This knowledge, although censured by counter views such as pessimism,idealism and realism, leads peopel believes that everything will be good

A typical theoretical studies performed by Gervais, Heaton, and Odean (2002)found that excessive optimism often cause a positive impact because it encouragesmanagers to conduct investment This effect is positive because the fear of risk causesthe negative impact on the value of the company However, excessive optimism alsocauses a negative impact because it may lead companies or investors accept theopportunity to invest in negative NPV of the asset or the high risk assets

The status of the human psyche tends to rate themselves as superior thanaverage This make them often outrageous optimistic about the market, economicsystems and the investment potential Many excessive optimism investors said that badinvestments would not have influence with them that could affect the portfolio becausepeople failed to admit workers potentially detrimental in the investment decision

The effect of psychological deviations due to excessive optimistic:

- The psychology of optimism might be the main reasons investors are toofocused on the company and their investment because of the optimism can bring to themthe thought that other companies in the low races with their companies

- The psychology of optimism may be the cause of making the investmenttrust's net gain from the market, when in fact they are faced with inflation, fees, andtaxes

- The psychology of optimism may be the cause for people to invest more rosyreports about the prospects for the company from the analyst or the main listing Inaddition, those who invested excessively optimistic are generally less important to thebad news about their investments At the same time, optimistic sentiment could causeinvestors tend to invest in companies in close proximity to their geographic areas (local)because they may be overly optimistic about the local area overview

H2 ExcessiveOptimism has a positive impact on investor‟s target

2.2.3 Psychology of Risk

Since the 1960s, many researchers have used term of perceived risk to explainconsumers‟ behavior Within the term of consumer behavior, perceived risk is the riskthat a consumer believes it exists in the purchase of goods or services, whether a riskactually exists or not The notion of perceived risk has a strong basis in the term ofconsumer behavior that is rather similar with the discipline of behavioral finance, thatmean between consumers and investors‟ decision making process, there are manysimilarities

In stock market, investors usually make many uncertain decisions due to

unclear informations, that why investing is really risky The perceived degree of

uncertainty by individuals affects their decisions regarding investing, consumption andsaving Perceptions include psychological and emotional aspects, which later on instruct judgment and decision making.

Research has shown there is consistency in the public‟s deviations from

objective risk evaluation and that emotional counters appear to drive perceived

benefit and perceived risk (Alhakami and Slovic, 1994) They found that if a stock was „liked‟, people tended to evaluate its riskwas low and its benefits was high and which stock was „disliked‟, the risk was high and benefit was low, which leads to a negative relationship between risk and return

Some studies have shown that attitude to stock market risk depends on the recent behaviour of the stock market (Clarke and Statman 1998; Shefrin 2000;

MacKillop 2003; Grable, Lytton and O'Neill 2004; Yao, Hanna and Lindamood 2004).The other perspective on that evidence can be proceededfrom research by Weber and Milliman (1997) who offered that risk preference may be stable, such as stock market performance, may be engendered by changes in perceptions of risk They further found that influences on investment choices simultaneously affected risk perceptions

When investors are happy, they don‟t like gamble, because they don‟t want to hazard their good mood Thus, we don‟t know exactly how emotional states affect risk preferences and translate into market pricing As with the evidence on the impact of mood on risk choices, experimental evidence concerning the relationship between risk endurance and depression does not provide a clear knowledge Some studies question the significance of perturbation and depression in explaining choices above risky alternativesOthers infer that risk aversion is correlated with depressive trend (Eisenberg, Baron, and Seligman 1998) More importantly, as these authors recognize,

risk aversion is correlated with perturbation and depression Eisenberg, Baron,

andSeligman report that the correlation between depressive symptoms and risk

aversion result from the correlation with perturbation

Economic risks can be manifested in lower incomes or higher expenditures thanexpected The causes can be many, for instance, the hike in the price materials, thelapsing of deadlines for construction of a new operating facility, disruptions in aproduction process, emergence of a serious competitor on the market, the loss of keypersonnel, the change of a political regime, or natural disasters

H3 Psychology of Risk has a negative impact on investor’s target.

2.2.4 Herd Behavior

Psychology herd or mob mentality describes the way that some people areaffected by their close ones through certain behaviors, trends, and / or under thefulcrum The social psychologists study the related topics such as group intelligence,crowd wisdom, and decentralized decision

Psychology herd is mental phenomena of many individuals, arising from theinteraction between the psychology of the crowd members or the community, or bycertain psychological prominent, influential That is the conscious personality(individual consciousness) disappear and the emotional turning, thinking of theindividuals is in the same direction

In the stock market, herd behavior involves the investors tend to ignore thenature of the personal information, incline the observed results (Bikhchandani andSharma, 2001), incompatible with the basic elements and the foundation of the market

In financial market herding effect is identified as trend of investors‟ behaviors

to follow the others‟ actions Investors usually calculate carefully the present of herd,

because investors rely on community information more than private information canconduct the price deviation of the securities from fundamental value; therefore, manygood chances for investment at the present can be impacted Researchers also payattention to herding; because its effect on stock price changes can inpact the attributes

of risk and return models and this has impacts on the viewpoints of asset pricingtheories (Tan, Chiang, Mason & Nelling, 2008)

In the area of behavior, herding can engender some emotional biases, includingconformity, congruity and cognitive conflict Investors may prefer herding if theybelieve that herding can help them to extract useful and reliable information In thisinstance, herding can contribute to the evaluation of professional performance becauselow-ability ones may mimic the behavior of their high-ability peers in order to developtheir professional reputation (Kallinterakis, Munir & Markovic, 2010)

Follow Bikhchandani and Sharma, herd behavior exists in two basic forms ofherd behavior is intentional herd behavior and unintentional herd behavior Perspectivereview on unintentional herd behavior, Christie and Huang (1995) defines that herdbehavior is when small investors remove personal beliefs and conduct investmentdecisions primarily based on those behaviors collective market

H4 Herd Behavior has a positive impact on investor’s target.

2.2.5 Moderator variables

The age

The psychologicalevidence shows that older people will react inappropriatelywith new information because they usually treat and collect new informationsslowlyand inefficiently Older investors often have the effect of account allocation weaker

(Dhar and Zhu, 2006)and level of confidence lower than the young investor (Barberand Odean, 2001) Research by Kumar (2006) also pointed out that investors were alsoless implicated in adventure investment activities (take gamble) on the stock market.

At the same time, the author also clarified the relationship between age, investmentexperience and investment skills Research showed that the investment result after 70years old declined, this demonstrated that the negative effects of age The regressionestimates show that investment skills increase with experience due to the positiveimpact of learning over time but declines with age due to adverse effects of cognitiveage At the same time, the decline occurred more rapidly in the older investors havelower levels and poorer

Gender

A number of studies have also clarified the relationship between gender andinvestment decisions on Vietnam stock market The relationship between gender andpsychological confidence, Pulford (1997) concluded malesare more confident thanfemales At the same time, research by Odean (1998) also pointed out that, theoverconfident makes investors trade more often than other investors and as a result thetransactions are often ineffective

Level

Level of investors help them implement and apply their competencies, talents,help improve the efficiency of investment, investors have a higher level, they aremoreoptimistic, more confident, less pessimistic and less herd behavior

Investors have low level tend to appreciate the important role of the elements

of macroeconomics in making individual securities investment decisions Beside,there are many factors: recommendations of analysts, market research;

recommendations of the stock broker; recommendations from the amateur analysts;insider trading informations; intuition, rumors…also affect investors.The lower level,the impact of these elements stronger,vice versa This affirms, reviewed at a certainaspects, level of investors have a positive impact on the psychology of individualinvestors.

CHAPTER 3: METHODOLOGY

This chapter presents the research design process, data collection method andfind out relationship between psychological factors and individual investors‟target inVietNam Stock Market

is chosen for some reasons The first reason is that as the research questions aredefined clearly, questionnaire is the best choice to have standardized data, which iseasily to process, and analyze As the respondents are investors, they may not have

much time for interviews, thus, questionnaires may make them feel more comfortablebecause they can do it whenever they have free time Questionnaires also are moreconvenient for respondents in case they need to provide some sensitive information, inother words; they tend to be more honest than in an interview (Bryman & Bell, 2007).

3.3 Measurement items

This essay was based on the investigation results analysis by questionnaires toinvestors, consists 19 questionnaires to identify and measure the behavior of individualinvestors (Trần Thị Hải Lý & Hoàng Thị Phương Thảo, 2012)

These questions help assess the level of investor confidence:

 Investors are confident that they have the ability to choose good stocks than others (c1)

 Investors completely control their investment activities (c2)

 Investors understand clearly about stocks in their portfolio (c3)

 Investors fully understand the market (c4)

 Investors have never done an impulsive transaction (c5)

Optimistic sentiment was reflected in the results answer of these questions:

 Investors continued to invest in the market (in terms of market going slight increase when the survey was conducted) (o1)

 Investors continued to increase capital in the market within the next year (o2)

 Over the years, investors believe that the stock market will rehabilitate (o3)

 If the VN-Index declined by 5%, the investor believes that the index will quickly recover (o4)

 Vietnam stock market is still an attractive investment channel (o5)

Attitudes to risk are reflected in the results answer of these questions:

 Investors liked the fluctuate sharply opportunity to receive higher profits (r1)

 Investors prefer to invest in companies that are familiar or well-known about it (r2)

 When prices fall, investors usually hold stocks longer to wait the prices increase again (r3)

 Investors prefer to invest in companies that pay stable dividends (r4)

Herd mentality is shown by the results answer of these questions:

 Does an investor consult others decision when investing or not? (ex: petition ofbroker, analysts…) (h1)

 If investors have private information contrary the majority of other investors‟transactions in the market, do they decide to keep their or not? (h2)

 Do investors look at the trading volume on the electrical panel to make the

investment decision or not? (h3)

 Do investors trade according to foreign investors? (h4)

- Investors looking for short-term arbitrage or dividend income and capital gains in thelong term? (Y)

3.4Pilot study

Two phases of study were undertaken in this study: a pilot study and a mainsurvey A pilot study was conducted before formal main survey in order to controlerrors such as ambiguous or repetitive questions In the pilot study researcher did apilot survey of 30 people at some security companies The questionnaire was dividedinto two parts: personal information, behavioral factors influencing investment target

In the part of personal information, nominal measurement was used Nominal scaleswere used to classify objects: gender, age, educational level

In the second part, the questions were designed by 5-point Likert scale (1:

strongly disagree, 2: disagree, 3: neutral, 4: agree, 5: strongly agree)

3.5Main survey

The main survey was distributed directly to investors at some securitiescompanies in Bien Hoa city and Ho Chi Minh city, 400 surveys were given Beside,the author designed the questionnaires on docs.google.com, then posted onsomeforums: Phutoan.com.vn, Vietstock.vn, Saga.vn…,The purpose of this survey was tovalidate the measures and to test the structural model.The detail of the questionnaire inVietnamese version will be shown in Appendix 1

3.6Methodology of data analysis

3.6.1 Descriptive statistics

To count and evaluate the general information like Mode of data collection,gender, age, education level, of respondents, the descriptive statistics is conducted inthis study

3.6.2 Reliability analysis

Thesis will perform verification scales to measure the psychological groupthrough Cronbach's alpha coefficient to optimize the psychological scale Cronbach‟salpha coefficient was used to test the scales on psychological groups In generally, thevalue of Cronbach‟s Alpha for acceptable reliability is 0.7, it could decrease to 0.6 inexploration research, and any variables, which have the value of Correlated Item-TotalCorrelation below 0.4, would consider to be rejected (Hair et al, 1998)

3.6.3 Exploration factor analysis (EFA)

In this study, EFA method was used mostly for data reductions reason and testvalidity of measurement scale.Factor analysis can be used to find meaningful patternswithin a large amount of data.The goal of factor analysis is to reduce “thedimensionality of the original space and to give an interpretation to the new space,spanned by a reduced number of new dimensions which are supposed to underline theold ones” (Rietveld & Van Hout 1993).By performing EFA, the underlying factorstructure is identified For this study, Exploration factor analysis will be conducted byVarimax rotation in condition of KMO value more than 0.5

3.6.4 Binary logistic regression

Binary logistic regression is a type of regression analysis where the dependent variable is a dummy variable (coded 0, 1), in this study, the dependent variable was the target of investors: Investors looking for short-term arbitrage or dividend income and capital gains in the long term? Code 0 is investors choose invest in short-term, code 1 is investors choose invest in long-term

CHAPTER 4: RESEARCH RESULTS

This chapter shows the outcome of the questionnaire and analyses of theirrelevance to objective and the research questions.The data analysis & discussion partwere divided into the following sections: descriptive analysis, reliability test, factoranalysis, and binary regression analysis

4.1 The main characteristics of the sample

To identify and analyze the behavior of individual investors on Vietnam stockmarket, thesis author has organized the survey, investigated and interviewed 400individual investors After checking the answer sheet, 186 votes were not enoughreliable information, should not be included in the sample 214 remaining votes wereeligible for the sample

Table 4.1: Gender

Valid: (1) = Male; (2) = Female

Table 4.1 reflects the demographic information of the sample Among theinvestors were interviewed, the proportion accounting for mainly men (57.5%) thanwomen (42%), today, there are many female investors participating in the stockmarket

Table 4.2: Age

(1) = 18 ~ 25; (2) = 26 ~ 35; (3) = 36 ~ 45; (4) = 46 ~ 55; (5) = Over 55

Individual investors are mostly young, under the age of 25 years old was15.9%, the reason is the current economic life is richer and plenty of students whoparticipate in the stock securities, mainly learning experience and try their abilities,from 26 to 35 years old accounting for 31.3%, from 36-45 years old accounting for34.1%,two age are investors who are staff from the office and professionalinvestors

46 to 55 years old account for 10.3%, over the age of 55 accounting for only 8.4%.Table 4.3: Level

(1) = Secondary; (2) = College; (3) = University; (4) = Over University

The individual investor education are mainly college and university accounted for 66.9% and over university was 11.2%

4.2 Identify the general behavior of individual investors

Table 4.4 reflects some of the survey results of psychological confidence of

investors Investors are not very confident in the selection of securities, in the question

of confidence, the majority of investors choose level 3,at questionC1 “Investors are

confident that they have the ability to choose good stocks than others” there are 67

investors chose level 2, accounted for 31.3 %, 94 investors chose level 3, accounted

for 43.9 %, at question C5 “Investors have never done an impulsive transaction” there

are 49 investors chose level 2, accounted for 22.9 %, 123 49 investors chose level 3,

accounted for 57.5%, this proves investors are not too confident about their decisions

4.2.2 Excessive Optimism

Table 4.5: Excessive Optimism

1

(Disagree) (Neutral) (Agree)

The survey was conducted from 12/2013 to 01/2014 At that time Vietnam

stock market growth strongly, 21.97% and 18.83%: this is in turn of increase of

VN-Index and HNX-Index in 2013 VN-Index ended the last trading session of

2013 at 504.63 points, the HNX-Index closed at 67.84 points at 2013 The rise of

the index was made Vietnam become one of the 10 countries with the world's most

powerful recovery

However, the surveys showed that many investors are not optimistic about the

market Table 6 reflects the results answer a number of questions to assess the positive

sentiment of individual investors about Vietnam stock market

Optimism of individual investors on Vietnam's stock market is also reflected in

the response of the level of agreement with the statement: “If the VN-Index declined

by 5%, the investor believes that the index will quickly recover”results 72 investors

chose level 2, account for 33.6%, 96 investors choose level 3, accounting for 44.9%,

while only 46 investors choose level 4 or above, accounting for 21.5%.At the question

than 50% investors chose level 3, with 118 votes, accounting for 55.1%.

Demonstrate investors are not too optimism with the growth of the stock

market, when in 2013 there are many adverse informations, in 2014 there are not

many good information enough to promote market develop

4.2.3Psychology of Risk

Table 4.6: Psychology of Risk

1

(Disagree) (Neutral) (Agree)

4.2.4Herd behavior

Table 4.7: Herd Behavior

(Strongly (Disagre (Neutr (Agre (Strongly

Today, after 13 years development with many ups and downs, Vietnamese investors

have drawn a lot of experiences, in addition, investors can access to many accurate

informations, stock training so the knowledge of investors have increased

significantly, however herd mentality is also high

At question h1: Does an investor consult others decision when investing or

not? (ex: petition of broker, analysts…) there are 115 investors chose level 3

accounting for 53.7% , and 29.4% investors chose level 4 and over, at question h4: Do

investors trade according to foreign investors? There are 73.3% investors chose level 3

and over, demonstrate investors consult others before making investment decisions,

which leads to herd mentality still on Vietnam stock market

4.3 Exploring and measuring the psychological factor group constitutes the

behavior of individual investors

Thepsychological elements group of the individual investors behavior in the

Viet Nam stock market including: Over Confident, Excessive Optimism, Psychology

of Risk, Herd behavior