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

The stock market is one of signals expressing the economic development ofevery country. The market changes depend on the investors’ decisions. In order toanalyze the market operation, the effect market theory proves that the investors arerational people independent on the feeling. However, the school of the behavioralfinance theory illustrates that the investors are not rational and still suffer from theimpact of psychological factors. The psychological factors may have a significanteffect on their attitude and behavior. This means that when they are in goodpsychology, they become more optimistic, but they are more pessimistic in badpsychology. As a result, studying the impact of psychological factors on people’sbehavior are playing an important role in estimating the investors’ behavior.In order to test the existence of psychological factors, the author implemented3surveys as follows:(1) the1stsurvey tested the inconsistence of the individualinvestors or testing the hypothesis of that the individual investors are irrational andbehave based on the prospect theory;(2) the2ndsurvey tested the existence ofcommon psychological factors and its impact on the investment strategy and thedifference in the impact of psychological factors on the investors classifiedaccording to demographical factors;(3) The last one tested the ability to take risk ofthe investors based on the demographical factors.For the1stsurvey, the author applied the descriptive statistics by the rate toassess the gap in different decision scenarios with the same probability. For the2ndsurvey, the factor significance of the model were tested by Cronbach Alpha index;then the factor discovering analysis (EFA) was carried out; in order to evaluate theconvergence and the different value of analyzed terms, the confirmed factor analysiswas carried out; to assess the effect of the factors on the investment strategy, logistic regression was applied. ANOVA was used to assess the impact of commondemographical factors on the investors’ decision. For the3rdsurvey, non-parameteranalyzing method through Chi-square, Cremer V was applied to evaluate its effecton the investors’ ability to take risk. The surveying method is implemented throughthe relation network.The study of422individual investors in Hanoi Stock Exchange and Ho ChiMinh Stock Exchange proved that:(i) Vietnamese individual investors are irrational(ii) The common psychology factors (overconfidence, optimistic, herd behavior,risky and pessimistic) existed inside the individual investors and impacted on theirinvestment strategy;(iii) There are some demographical factors affecting theinvestors’ psychology;(iv) the ability to take risk was different among the investorgroups classified by demographical factors. The study also points out some of itslimitation and further study orientation for others. Finally, the study shows somedrawback and brings out some suggestion to administrators and investors inVietnamese stock Market. The dissertation contributes significantly to furtherunderstanding the behavior of individual investors in Vietnamese Stock Market inparticular and in the Stock Market of developing or in-transition economy countriesin general.