MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY Phùng Viết Nhiên THE FACTORS INFLUENCING INDIVIDUAL INVESTOR’S BEHAVIOR IN VIETNAM STOCK EXCHANGE MASTER’S THESIS In Business Administration Ology code: 60.05 Supervisor Professor- Dr. VÕ THỊ QUÝ Ho Chi Minh City 2010 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 0 Acknowledgement This research project would not have been possible without the support of many people. Firstly I wish to express my deep sincere gratitude to my supervisor, Dr. Vo Thi Quy for her invaluable advices and helps.
Without her, this thesis could not have been completed. I would like to express my deepest gratitude and honor to my dear parents for not only the love they devote to me but also for the time I took from them which should have been my devotion to them in their aged time. Special thanks to my wife’s assistance in this study. She has encouraged me and helped me in English editing.
My thanks would also go to all of my colleagues from Nguyen Tat Thanh college, my classmates, especially, Lam Hong Phong, Nguyen Thanh Trung and Ms Dang Hai Yen, Ms Nguyen Nhu Chang for all of their friendship and encouragement. Finally, I also wish to thank my friends in Ocean Security, Dai A Security, Nhat Viet Security, Vietcombank, HSBC, National university… for their great support. My thanks would also go to the respondents, without them, my thesis could not have been done. i : add luanvanchat@agmail.com LUAN VAN CHAT LUONG download 1 Abstract This paper aimed at identifying the most and the least influencing factors on the Vietnamese investor’s behavior.
Base on Al-Tamimi’s questionnaire, this research developed a modified questionnaire. The questionnaire included thirty items that belong to five categories: self-image/firm-image co-incidence, accounting information, neutral information, advocate recommendations, personal financial needs. This study was carried out in 226 individual investors in Hochiminh stock exchange. The results showed that Vietnamese individual investors select stock base on some factors.
The most interested factors were Condition of financial statements, Expected corporate earnings, Expected profit from stock, Reputation of the firm, Fluctuation/developments in the VN stock index, Government's policy (tax, monetary, interest rate), Current economic indicators (such as GDP, inflation.), Affordable share price, Firm status in industry, Expected dividends. The least factors were related to advocate recommendations such as Self-company recommendation, Friend or family member opinions, Opinions of the firm’s stockholders, Broker recommendation, specialist recommendation, and Security company’s recommendations. Factors namely Fluctuation of gold's price, Minimizing risk, Fluctuation of dollars' price, Feelings for a firm's products and services, Reputation of the firm's shareholders or leader are also the least influencing factors on investor’s behavior. Key word: individual investor’s behavior.
ii : add luanvanchat@agmail.com LUAN VAN CHAT LUONG download TABLE OF CONTENT ------------ Chapter 1: INTRODUCTION 0 1.5 Scope and methodology of the study .7 Structure of the study .page 4 5 Chapter 2: LITERATURE REVIEW 6 2.2 Some of related theory .1 The concept of investors .2 Security Selection: the Treynor-Black model .4 Technical analysis and Fundamental analysis .page 25 Chapter 3: METHODOLOGY 3.page 26 12 iii : add luanvanchat@agmail.com LUAN VAN CHAT LUONG download 3.page 34 13 Chapter 4: DATA ANALYSIS AND FINDINGS 14 4. Descriptions of sample. Exploratory factor analysis (EFA). The most and the least factors influence on investor’s behavior .1 Effect of 8 groups of variables on investor’s behavior.2 Effect of separate variables on investor’s behavior .page 53 Chapter 5: CONCLUSIONS AND IMPLICATIONS 22 5.2 Summary of the study .3 Implications of this study .4 Conclusions of this study .5 Limitations and recommendations for further research .page 61 iv : add luanvanchat@agmail.com LUAN VAN CHAT LUONG download LIST OF REFERENCES .page 62 Appendix 1 – Questionnaire (Vietnamese version) .page 65 Appendix 2 – Observed variables .page 68 Appendix 3 - Descriptive Statistics of variables .page 69 26 Appendix 4 – Compare mean of variables .page 70 LIST OF FIGURES 27 Figure 1.
Outline of chapter 1. Structure of the study. The structure of Chapter 2. Outline of chapter 3.
Outline of chapter 3 .1 – Outline of chapter 5 .page 56 v : add luanvanchat@agmail.com LUAN VAN CHAT LUONG download LIST OF TABLES Table 2.1: The factors influencing on equity selection process of individual investor in USA in Nagy’s research .2: The factors influencing on equity selection process of individual investor in Greek in Merikas’ research .3: The factors influence on individual investor behavior in UAE in Al- Tamimi’s research .1: The measurement of scale of variables in this research .2 – KMO and Bartlett's Test .3: Rotated component matrix .4: Reliability of the measurement instrument .5: Frequency Distribution of Variables that Significantly Influence the Vietnamese behavior .6: Multiple Comparisons of groups .7: Descriptive Statistics of variables .8: The most influencing factors on Vietnamese investor’s behavior .9: The least influencing factors on Vietnamese investor’s behavior .10: The most influencing factors in this research, Nagy, Merikas and Al- Tamimi .11: The least influencing factors in this research, Nagy, Merikas and Al- Tamimi .page 55 vi : add luanvanchat@agmail.com LUAN VAN CHAT LUONG download 2 Chapter 1: INTRODUCTION 9 1.1 Introduction This chapter portrays general introduction for the current study with which research problem, research objectives and research questions are provided as the rationale for this study. An introduction to the research methodology to be used and the scope of the study is also addressed in this chapter. At the end of the chapter, the structure of this study is provided. The Outline of this chapter is shown in figure 1.
Outline of chapter 1 1.5 Scope and Methodology 1.7 Structure of the study 10 1.2 Research background The Vietnam Stock Exchange (VSE) was established in 2000. At that time, trading in the stock market was operated only at the HoChiMinh Stock Exchange (HOSE), market is expressed through VN index. Initially, two equity issues were 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com listed, Refrigeration Electrical Engineering Joint Stock Corporation (‘REE’) and Saigon Cable and Telecommunication Material Joint Stock Company (‘SACOM’). Until 2005, there were only 41 equities issues listed.
During that period VN index fluctuated erratically, sometime it raised up to nearly 600 score sometime it fell down nearly 100. As of 2006, particularly in end-year half, quantity of listed companied increased quickly, 196 companies were listed at the end of 2006. In total there were thirteen licensed securities companies. Along with rising of listed companies, VN index increased continuously from 600 in middle to nearly 1000 at the end of 2006.
Not stop at that point, with the event that Vietnam joined to WTO at the end of 2006, the stock market really broke out. The market was hot continuously regardless of the warning of experts and pinnacle of VN index was 1170 on 13/03/2007. There had been 249 companies listed on stock market until 2007. Of these, 138 are at HOSE, left ones are at Hanoi Stock Exchange (HNX).
With 249 being listed, market capitalization is about 491 billions VND, equivalent to 30 billion US dollars. Comparing Vietnam market capitalization to other stock markets of developed countries, perhaps Vietnam market is not worth considering. However, 30 billion US dollars market capitalization is equivalent to 43% GDP of the whole nation that would be significant to Vietnam. Over 9 years of establishment and development, in general, the market has positive contribution.
The Vietnamese Stock market have experience strong fluctuation: from over 1100 on 13/03/2007 down to over 250 point in the beginning of 2008. During this time, at the cheapest (over 250 point), some investors are hesitant to buy stock but at the highest (over 1100 point), some investors fight to buy stock. So what make investors buy and/or sell stock? Which factors influence investor’s behavior? 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.3 Problem statement Vietnam security market had the highest growth rate in the Asia Pacific in 2006 with 145%, even higher than Sanghai security market with 130% growth rate. And at early 2007, VN security market continuously increased with 46% - the highest growth rate in the world.
This fierce increase of VN market made shock to not only many domestic investors but also security experts including market control officers. Along with this, the worry about risk of forming buble in the security market had been a controversial topic. A lot of reasons had been made to explain too hot development of VN security maket. Domestic investors blamed for foreign investors, foreign investors blamed for domestic investors’ “craziness”.
However, in general most of people supposed that main reason was “herd psyshology behavior”, crowd psychology investment of domestic investors –lack of knowledge and personal expectation. Is it right? So what factors affect on 34 Vietnamese individual investors’ behavior? 12 1.4 Research objective The purpose of this study is examining the most and the least influencing factors on the Vietnamese individual investors’ behavior.5 Scope and methodology of the study 1.1 Scope of the study The Ho Chi Minh Stock Exchange have more listed company and trading volume than Hanoi Stock Exchange, so my study just focuses on individual investors 35 at the Ho Chi Minh City Securities Center. Therefore they may not represent for all individual investors in Vietnamese Stock Exchange 1.2 Research Method 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com This study was conducted with two phases: a pilot test and the main study. In the first phase, a qualitative approach was employed in order to explore whether the scale for measuring the constructs of factors influencing individual investor’s behavior in HOSE.
Some amendments have been made where needed. This step was carried out by using group discussion techniques. A quantitative approach was then used in the second phase. Data was collected by interviewing individual investors at several Securities Companies.
The purpose of this phase was to re-assess the reliability of the measurement scales using Cronbach alpha coefficient and Exploratory Factor Analysis (EFA). SPSS software version 16.0 was used for data analysis. Chapter 3 will discuss the methodology for this study in more detail.6 Contribution The study is important for individual investors, companies listed in Vietnamese Stock market. For both local and international investors, the factors influencing on individual investor’s behavior is the most important because this would affect their profit in future.
Foreign investors might also need to know the most influencing factors on the Vietnamese investor’s behavior because they are allowed to hold shares of the Vietnamese listed companies and they invest in Vietnamese stock Market. For companies, identifying the most influencing factors on individual investor’s behavior would affect their future policies and strategies. Finally, for government, identifying the most influencing on individual investor’s behavior would affect legislations and the additional procedures needed in order to satisfy investors’ desires and also to give more support to market efficiency 15 1.7 Structure of the study The structure of this study is shown in figure 1.2 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Structure of the study Chapter 1 Introduction Chapter 2 Literature Review Chapter 3 Methodology Chapter 4 Data analysis and Finding Chapter 5 Conclusion and implications 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 3 Chapter 2: LITERATURE REVIEW 16 2.1 Introduction The previous chapter introduces an overview of the study background, the rationale of the study, the research objective and the research questions.
These chapter searches and reviews relevant theories. The aim of this review is to examine which factors influence individual investor’s behavior and that will be tested in the Ho Chi Minh Stock Exchange to answer the research questions. The structure of Chapter 2 2.2 Some of related theory 2.2 Some of related theory 2.1 The concept of investors Institutional investor is a e ntity with large amounts to invest, such as 36 37 38 39 investment companies, mutual funds, brokerages, insurance companies, pension 40 41 42 43 funds, investment banks and endowment funds.