Individual Investors’ Decision-making Behaviour In The Vietnamese Stock Market: A Theory Of Planned Behaviour-based Approach

Coming into operation since2000, the Vietnamese stock market is considered as one ofthe emerging stock markets. Over13years, it efficiency has been improving with a rapidincrease in the size of its listed companies and market capitalization. Particularlyindividual investors in the market have become more professional in their investmentactivities. Some empirical studies on market efficiency, however, show evidencessupporting the argument that the Vietnamese stock index (VN-Index) does not follow arandom walk, which implies the predictability of stock prices. One of the importantreasons leading to this situation is defined as the existence of psychological factorsinfluencing investors’ decision-making behaviour. Consequently in the stock market,investors’ decision-making process is not always based on rational factors but alsoinfluenced by the psychological ones. Psychological factors in fact may leave a significantimpact on their attitude and investment behaviour. Namely when people are in good mood,they make more optimistic judgments; meanwhile, when they are not in good mood, morepessimistic judgments are made. As a result, studying factors, particularly thepsychological ones, influencing behaviour has increasingly become important inpredicting individual investors’behaviour.The study in this thesis aims at exploring individual investors’ psychological factorsinfluencing their investment behaviour. This is an empirical study based on theVietnamese stock market. As an interesting topic, it has yet not received sufficientempirical researches. The main research approach applied in this study is the Theory ofPlanned Behaviour (TPB). Proposed by Ajzen in1988, TPB has proved to be one of thepowerful behavioural theories with a wide range of impact and has been used in humanbehaviour studies. Developed based on Theory of Reasoned Action (TRA), TPB helps tounderstand the way people change their behaviour and can be applied to predict the actualbehaviour of people. The implication of TPB, which has been demonstrated by asignificant number of empirical studies, together with the literatures on the efficientmarket hypothesis and stock market have provided a strong technical support in order toclarify individual investors’decision-making behaviour in the Vietnamese stock market. In light of exploring the issue, we, first of all, examine weak-form efficiency of the marketduring their operation period of July28th2000–July28th2013to prove that it isessential to study individual investors’decision-making behaviour in the Vietnamese stockmarket. Findings from the empirical study show that weak-form efficiency does not holdfor the Vietnamese stock market after its13years in operation. Based on that, the thesis byintegrating literatures related to TPB and conducting a study using qualitative method andin-depth interviewing with20experienced individual investors and some experts, resultsshow that individual investors’decision-making behaviour in the Vietnamese stock marketis influenced by four important psychological factors namely overconfidence, excessiveoptimism, psychology of risk and herd behaviour.In order to further explore the influence of four psychological factors on individuals’behavioural intention, this thesis develops, based on TPB, a framework of factors leavingimpact on individual investors’decision-making behaviour. Adecomposed approach to theTPB is employed for quantitative analysis of the framework. This approach can help toidentify the most striking factors influencing individual investors’ decision-makingbehaviour. To prove for the validity of the proposed framework, an empirical study with472individual investors from three biggest cities (which are representatives of the north,central and south regions) of Viet Nam was conducted. Findings from the empirical studyprovide evidence supporting the argument that Vietnamese individuals’ decision-makingbehaviour in the stock market is remarkably influenced by all factors proposed in theresearch framework particularly the four main psychological factors (overconfidence,excessive optimism, psychology of risk and herd behaviour). The thesis, at the same time,recognizes the strong moderating effects of individual investors’ gender and experiencelevel on the relationship among different factors in the model studied. Further to that, theempirical viewpoint in this thesis confirms the basic hypothesis of the TPB, which arguesthat people’s behavioural intention is defined by three main factors namely attitude,subjective norms and perceived behavioural control. Findings from this thesis convey bothacademic and practical values.