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Subjective Preferences over the Objective Analysis
Model of Investor’s investment behavior
Sajid Mohy Ul Din
MS Student 14297
Iqra University Islamabad Campus
Abstract
This paper explains the important determinants of the investment decision-making
behavior and constructs a conceptual model for the re-investment intention. Based on theoretical
framework I concluded that past investment experience is positively correlated with return
expectations and re-investment intention. Information type (Recession, Boom & asymmetry)
determines the risk & reward of the investment. I found that investors with low risk perception
(risk lover) are willing to accept more risk and vice verse. Risk perception and risk propensity is
negatively correlated. The more investor is willing to take risk the more they wants in return, risk
and return expectations are positively correlated.
Introduction
Due to high level of variation in stock prices and returns, investors are unable to priced
a stock or calculate expected return specially in developing counties where markets are not
completely efficient and investors can earn abnormal profit by analyzing the information
available to them.
Due to Economic, Political instability and law of order situation investors are hesitant to invest in
stock market thus investors finds it more risky to invest in stock markets and prefer to deposit
money in banks; considering them a safe investment option. Another factor that can be
influenced on risk perception, The investment period developing countries investors focus more
on short term investments rather than long term.
After 9/11, New York stock Exchange (NYSE) and others faced a serious down-turn and
investor lost huge amount of money. This made investors more cautious toward riskiness of
stock market. (Kahneman & Tversky, 1991) found that investors weight losses as much as twice
as gains.
Previous researchers found that Analyst advice, Information about company and economy,
investor’s status (Risk Lover/Averse) and the experience plays vital role to reform return
expectation, and in selection of stock. People in developing countries prefer to invest in stocks
that have previously performed well. Different theories proved that human’s data processing
capabilities are limited so they relay initiative judgments to make investment decisions.
The most important theory of traditional finance is Efficient Market Theory (EMT) developed by
Eugine Fama in 1970 “According to this theory stock prices reflect all the information available
in the market and investors adjust their preferences accordingly.” Classical information
processing theory terms this “available information to investors” as external stimuli.
Traditional theories gain sudden attention from the market as introduced but during the time of
market crashes all theories of traditional finance failed to answer the phenomenon prevailing in
the market and there are market anomalies “January Effect, Mental Accounting, & winner curse
are some of them. Traditional finance researchers neglect the psychological aspects of investor’s
investment behavior. Traditional finance tries to explain the economic behavior of decision
making while behavior finance explain the human behavior of decision-making.
In 1979 kahneman and Tversky proposed the Prospect Theory according to which” investors are
indifferently behave when confronted with risk”. With sure future profit investors will be risk
averse and will be risk lover when facing a loss in future” Kahneman is considered to be The
father of behavioral finance and won noble prize in 2002 for his work.
(Tversky, & Kahneman, 1974) reported that mostly outcomes of our decisions are not certain and
vary in numbers as well, so we attach probabilities to outcomes. All human beings don’t have the
same level of mental ability that’s why people use heuristics, (availability, Representativeness
etc) Biases (Anchoring, conformation, loss aversion) and framing effect to make complex
decision simple.
According to EMT, investors always behave in risk averse manner but psychologically they
change their risk preferences with respect to situation (kahneman and Tversky, 1979). By
implying the Sociology, financial theories and psychology in decision making process investors
can better understand the market to make well inform, prudent and intelligent investment
decisions. (Thaler, 1980) suggested that due to inconsistent customer’s behavior With EMT,
Tversky and Kahneman’s prospect theory provide the basis for decision making.
This paper presents the conceptual model of investor’s investment behavior and will evaluate the
Risk perception, Risk propensity, past experience and Reinvestment/Reinforcement intention of
investors in the market. How investors makes investment decision in real world rather than
optimized/rational decisions proposed by EMT.
The purpose of study is to construct a
conceptual model which may be used as the theoretical foundation for investigating the
psychological mechanisms of investment behaviors in developing countries.
Theory and Model
Risk is a Situation in which outcomes of the actions are uncertain but we can assign
probabilities to possible outcomes, variance in return. (Dean & Thompson, 1996) stated two
concept of risk for experienced and naïve investors. Experienced investors assign probabilities
with more objectivity and confidence based on their past experience termed as positivist while
naïve investors on the other hand assign probabilities in context in which risk is represented with
little objectivity and confidence. (Ganzach, 2000; Finucane , 2000; Slovic, 2002) found that in
different situations investors gives different meaning to risk and the context play vital role in risk
perception.
The willingness of the investors to take risk (Risk Propensity) depends upon the investor’s status
and previous successful risk taking outcome. (Shyan, Gow, & Hui, 2010) found that naïve
investors feel more risk hence is reluctant to take risk and vice versa. They found marital status
don’t have any impact on risk propensity/perception. (Statman, 2008) reported that cultural
differences do influences over propensity to risky investments. He found that in collectivist and
low-income cultures people are more inclined to take risk being protected in case of downturn in
contrast to individualist culture.
Perception is a process that describes ways to interact with the investment environment in which
investor makes decision. Interaction usually consists of information regarding financial market or
analyst opinions. Simon (1986) found that not all the investors have the same mental level to
process the information available to them. Kahneman and Tversky (1979, 1982) found that due
to limited processing ability investors use heuristics (availability, representativeness, anchoring,
reinforcement-learning etc) to simplify the complex investment decisions, Furthermore risk
perception is also influenced by how the information is presented.
(Kathleen, 2005) found that investors with more experience accurately perceive risk and make
logical relationship of risk and expected return. Investors with successful risk taking history will
be more willing to take risk and vice versa. There is positive correlation between the risk and
past investment experience. (Sitkin and Wiengert: 1992, 1995) found that investors previous
Risk taking experience influence the risk perception of investment and in negative correlation.
The more they perceive risk less they invest. (Shyan, Gow, & Hui, 2010) found that Past
investment experience and risk propensity are positively correlated and experienced investors are
more willing to take risk than naïve but risk perception and return expectation is negatively
correlated (against traditional finance)
(Xiao, Kan, & Hong, 2006) found that timely and accurate information discloser can lessen the
risk perception. (Lee, Kun Chang, Chung, Namho, Kang & Inwon, 2008) found that decision
quality is influenced by quality of information available and how easily investors can use this
information. (Anna, 2008) found that different investors (current or Prospective) differently
evaluate the positive, negative, sequential and combined information. Current investor gives
more weight to negative information when presented simultaneously rather than sequentially.
(Diacon & Hasseldine, 2005.II) found that presenting past information (Framing Effect) can
significantly influence the investment decision and risk perception of the investment. They
overweight information that support their beliefs and neglect information against views
(conformation bias). James, David, & Colby, (2010) found that investment behavior (active vs.
passive trade) largely depend on market efficiency still knowing that market is not efficient
investors trade passively (market is efficient) due to time, skill and resources constrains. (Thaler
& DeBondt, 1985) found that investors place more weight to their current experience over the
other available information.
(Reed & Barnes, 2010) state that previous successive risk taking experience lead to low risk
perception for the future investment. (James, David, Brigitte & Andrew, 2010) suggested that
while making investment decisions investors heavily relay on past investment experience. When
investors have successful investment experience (high return and low variance in return) then
they prefer to reinvest or increase their investment in that particular stock and future rewards are
positively correlated with the recent received. (Terrance, Michal & Brad, 2004) found that (1)
investors repurchase the stocks that have sold for a gain in past rather than loss.(2) investor feels
pleasure to repurchase stocks that have lost value after they sold them. They reported two
behaviors, Regret: if investors come to know that after selling stock price has risen so they feel
regret being less well off by selling stocks. Pleasure: if the stock lost value after selling investors
fells they are better off selling them rather to keep it. (Terrance, O., Michal, S. & Brad, M.B.,
2010) Due to limited cognitive ability of investors to process information investors prefer to
repurchase/reinvest the stock they previously sold for profit rather than loss.
Expected return is return on investment calculated as taking the average of the probability
distribution of all the possible outcomes. (Ganzach, 2000) proposed two models for judging risk
and return. For unfamiliar assets people follow the crowd for judging the risk if asset is ranked as
“Good” resultantly carry low risk and high return and vice versa. For familiar assets risk
perception and return itself act as determinant rather than global preferences/following the
crowd. If the returns are high investor will perceive less risk.
Previous performance do help in stock selection but doesn’t grantee future success.
(Updated Model of Determinants of Decision making)
Methodology
Subject:
This study investigates the investment decision-making process of stock exchange
investors so my targeted population is individual investor at Islamabad Stock exchange.
Questionnaires were distributed by random sampling technique and total 100 questionnaires
were distributed out of which 60 were returned having a response rate of 60%.
Based on the theoretical evidences following hypotheses can be developed
H1: Past Investment Experience is positively related with Risk Propensity.
Adjusted Std. Error
Mod
R
R
of the
el
R
Square Square
Estimate
1
.783(a)
.613
.600
.21434
a Predictors: (Constant), EI, IP
Unstandardized
Coefficients
Std.
B
Error
Mod
el
1
(Consta
3.557
nt)
IP
-.646
EI
.229
a Dependent Variable: R
Standardiz
ed
Coefficients
Beta
.207
.072
.069
-.737
.273
t
Sig.
17.196
.000
-8.949
3.316
.000
.002
If the investors have more experience of investment then they are more willing to accept risk and
their propensity of risk taking will be high as compare to naïve. Our research indicates that there
exist strong correlation (R=.783) and experience significantly (IP, p=0.000 & IE, p=0.002)
influence the risk taking behavior of investor and coefficient is negative (IP, b=-0.646) which
indicate that previous successful/un-successful experience lesser/enhance his/her risk propensity.
While (IE, b=.229) indicate that more number of years experience you have greater their
willingness to take risk.
H2: Risk Propensity and Risk Perception are negatively correlated
Mod
el
1
R
.946(a)
Adjusted Std. Error
R
R
of the
Square Square
Estimate
.895
.893
.23393
a Predictors: (Constant), R
Mod
el
1
Unstandardized
Coefficients
Std.
B
Error
(Consta
9.815
nt)
R
-1.996
a Dependent Variable: WIC
Standardiz
ed
Coefficients
Beta
.243
.090
-.946
T
Sig.
40.451
.000
-22.201
.000
Adjusted Std. Error
Mod
R
R
of the
el
R
Square Square
Estimate
1
.277(a)
.077
.061
.37223
a Predictors: (Constant), R
Mod
el
1
Unstandardized
Coefficients
Std.
B
Error
(Consta
2.081
.386
nt)
R
-.314
.143
a Dependent Variable: WINF
Standardiz
ed
Coefficients
Beta
-.277
T
Sig.
5.391
.000
-2.196
.032
Investors are willing to accept more risk they will perceive less risk. We divide the risk into two
main constructs Controllability of Risk source and Familiarity of different risk source.
Our results indicate that there exist very strong correlation (R=.945) between Controllability
over different risk source and risk Propensity. While familiarity of risk source have little
correlation(R=.277) with risk propensity. Controllability of different risk sources significantly
(R, p=.000) influence risk perception of investors and coefficient (R, b=-1.996) show negative
relation higher the level of controllability lesser the risk perception. Familiarity with different
risk sources still significantly (R, p=.032) influence risk perception of investors and coefficient
(R, b=-0.314) show negative relation higher the level of Familiarity lesser the risk perception. .
Low risk perception leads to high risk taking behavior.
H3: Risk Perception influenced by the way information is framed.
Adjusted Std. Error
Mod
R
R
of the
el
R
Square Square
Estimate
1
.845(a)
.714
.698
.39263
a Predictors: (Constant), WIAS, WII, WIS
Mod
el
1
Unstandardized
Coefficients
Std.
B
Error
(Consta
11.282
nt)
WII
.104
WIS
-2.374
WIAS
.752
a Dependent Variable: WIC
Standardiz
ed
Coefficients
Beta
1.348
.227
.343
.070
.034
-.532
.797
T
Sig.
8.372
.000
.457
-6.920
10.670
.649
.000
.000
Adjusted Std. Error
Mod
R
R
of the
el
R
Square Square
Estimate
1
.900(a)
.811
.801
.17146
a Predictors: (Constant), WIAS, WII, WIS
Mod
el
Unstandardized
Coefficients
Standardiz
ed
T
Sig.
Coefficients
B
1
Std.
Error
(Consta
5.067
nt)
WII
1.351
WIS
-1.185
WIAS
-.073
a Dependent Variable: WINF
Beta
.589
.099
.150
.031
.837
-.494
-.144
8.610
.000
13.651
-7.907
-2.366
.000
.000
.021
When the investor believes that all the relevant information he/she possesses, they will perceive
less risk. Our results indicate that there exist very strong correlation (R=.845) between
Controllability over different risk source and different information type (WII, WIS & WIAS).
Familiarity of risk source too have strong correlation (R=0.900) with Information type.
Results indicate that Information regarding overall economic condition doesn’t significantly
(WII, p=.642) influence Controllability over different risk source because economic condition
are not controllable by any single investor or group of investors.
Complete and accurate Information discloser significantly (p=0.000) influence Controllability
over different risk source, investors are in better position to accurately judge the risk associated
with investment and their risk perception will be low and coefficient shows (b=-2.374) negative
relationship more complete and accurately companies disclose their financial reports less will be
the risk perception of investors.
Information asymmetry significantly (p=0.000) influence Controllability over different risk
source, when investor believe all the information is available in the market then their risk
perception will be low and coefficient (b=0.752) shows positive relationship
Results indicate that Information regarding overall economic condition significantly (WII,
p=0.000) influence Familiarity of risk source and coefficient (b=1.351) show positive
relationship. More familiarity about economic condition will lower down the risk perception
Complete and accurate Information discloser significantly (p=0.000) influence Familiarity of risk
source, investors are in better position to accurately judge the risk associated with investment
and their risk perception will be low and coefficient shows (b=-1.184) negative relationship
more complete and accurately companies disclose their financial reports less will be the risk
perception of investors.
Information asymmetry significantly (p=0.021) influence Familiarity of risk source source, when
investor believe all the information is available in the market then their risk perception will be
low and coefficient (b=-0.073) shows negative relationship.
H4: Past Investment Experience is positively related to Expected Return and Reinvestment
Behavior.
Adjusted Std. Error
Mod
R
R
of the
el
R
Square Square
Estimate
1
.781(a)
.609
.595
.34471
a Predictors: (Constant), EI, IP
Mod
el
Unstandardized
Coefficients
Std.
B
Error
Standardiz
ed
Coefficients
Beta
t
Sig.
1
(Consta
3.563
nt)
IP
-1.094
EI
-.027
a Dependent Variable: RE
.333
.116
.111
-.780
-.020
10.712
.000
-9.419
-.246
.000
.807
Based on theoretical framework we hypothesis that longer the past investment experience higher
will be the expected return investors demand. Our result indicates that there exist strong
correlation(R= 0.781) between experience and expected return but number of years experience
doesn’t significantly (IE, p=0.807) influence the return expectations. Investors having
successful/un-successful history significantly (IP, p=0.000) influence the return expectations.
Adjusted Std. Error
Mod
R
R
of the
el
R
Square Square
Estimate
1
.889(a)
.790
.783
.29059
a Predictors: (Constant), EI, IP
Mod
el
1
Unstandardized
Coefficients
Std.
B
Error
(Consta
1.923
nt)
IP
.987
EI
1.004
a Dependent Variable: RI
Standardiz
ed
Coefficients
Beta
.280
.098
.094
.612
-.652
t
Sig.
6.856
.000
10.083
-10.734
.000
.000
Our result indicates that there exist strong correlation (R= 0.889) between experience and
reinvestment behavior, experience significantly (p=0.000) influence the reinvestment behavior
and coefficient is positive. Higher the number of years experience and previous successful
history of investment will lead to more investment.
H5: Risk Perception and expected return are positively correlated
Adjusted Std. Error
Mod
R
R
of the
el
R
Square Square
Estimate
1
.959(a)
.920
.918
.17877
a Predictors: (Constant), WIC, WINF
Mod
el
1
Unstandardized
Coefficients
Std.
B
Error
(Consta
-2.054
nt)
WINF
.777
WIC
.675
a Dependent Variable: RE
Standardiz
ed
Coefficients
Beta
.158
.061
.033
.479
.775
t
Sig.
-12.979
.000
12.723
20.581
.000
.000
H6: Information Type influences the Expected Return.
Adjusted Std. Error
Mod
R
R
of the
el
R
Square Square
Estimate
1
.883(a)
.779
.767
.26136
a Predictors: (Constant), WIAS, WII, WIS
Mod
el
Unstandardized
Coefficients
Standardiz
ed
t
Sig.
Coefficients
B
1
(Consta
1.533
nt)
WII
-.062
WIS
.569
WIAS
-.650
a Dependent Variable: RE
Std.
Error
Beta
.897
.151
.228
.047
-.027
.168
-.909
1.709
.093
-.408
2.492
-13.861
.685
.016
.000
Discussion
This study uses the theoretical framework to verify the relationship between Risk
Propensity/Perception, past investment experience, information type, Return expectations, and
Reinvestment behavior of investors. Due to frequent market crashes, Terrorist attacks and
economic recessions, investors lost huge amount of money. The worst effect of all these factors
can be seen especially in developing countries with addition to poor law and order situation,
Asymmetric information, poor investment knowledge and unstable political environment.
Based on theoretical evidences there is positive correlation between Investment experience and
risk propensity. Investors place more weight to their recent experience; Previous successful risk
taking behavior leads to low risk perception and high propensity to take risk while unsuccessful
experience leads to risk aversion (Thaler & DeBondt, 1985). The more the investor feels risk the
less he is willing to take it. Risk perception and risk propensity are in negative correlation.
Investors with less investment experience perceive more risk and reluctant to invest. On the other
hand experienced investors perceive less risk and accept more risky investment. Investors with
more experiences are able to assign probabilities which are very close to actual outcome based
on their past investment history while novice investors don’t have this ability to accurately assign
probabilities to outcome and makes risk-return judgment, in the context risk is presented(.( Sitkin
& Wiengert, 1995: Kathleen, 2005) . (Shyan, Gow, & Hui, 2010) confirmed this relationship
between experience and risk perception.
Investor thinks future will be same as the past. Investment in stock market is continuous process.
Investors repeatedly confront with reinvestment decisions. Most of the time while making reinvestment decisions investors relay heavily on past investment experience. If they have
successful history of risk, taking this will lead them to engage in more risky investment
decisions. Investor shows emotional attachment with the stocks they previously held (Kahneman,
& Tversky, 1979, 1982). Investors prefer to re- invest in stocks/bonds that they sold for gain in
the past rather than loss. Investment is complex decision requires rigorous analysis of available
data (financial statements, Industry analysis, Economic reports & expert opinions) but due to
time constrains and poor investment knowledge investors reply on intuition judgment looking
back to their previous investment history. Imply different heuristics (representativeness,
availability etc) to simplify these complex investment decisions. For example: whenever we go
to buy something if we have positive past history of use/utilization of brand (Terrance, Michal &
Brad, 2004). We prefer to repurchase the same brand same can be applied to stock market. Based
on theoretical framework there is positive relationship between past investment experience and
re-investment behavior. (Reed & Barnes, 2010: James, David, Brigitte & Andrew, 2010:
Terrance, Michal, & Brad, 2010) confirmed this hypothesis.
Risk & Return on financial assets heavily relay on economic condition of the country, industry
and specific organization. The impact of economy boom or recession is not same for all the
industries in the economy. For example: in economic recession, food industry doesn’t much
suffer as compare to construction industry. Economic boom/recession information helps in
selection of particular financial assets available in the market. In economic boom, investor makes
risky investment (low risk perception) and demands high returns. While in recession investors
are reluctant to invest money because they feel it more risky while the return is low. Information
about company, industry, and economy is not an end itself it is the analysis that provide useful
knowledge out of information. Information can be useful only when the source of origin is
authentic and processing of information is easy (Xiao, Kan, & Hong, 2006: Lee, Chang, K.,
Chung, Namho, Kang & Inwon, 2008). Information importance also depends on investor’s view
about market. If investor believes that market is highly efficient they trade passively. There is no
need of information processing because market itself reflect the all information available and
adjust prices according. Studies proved that market is less efficient and investor process
information to earn above average returns or try to beat the market (James, David, & Colby,
2010). So we can say that information plays a vital role in assessing the risk perception and
return expectation.
Past investment information helps in selection of financial assets but this does not grantee that
the future will be the same as the past. For example: if you toss a coin and it shows, Head (H), H,
Tail(T), H, H. Based on the past information available one can judge next turn will be T but not
grantees the same. There are equal chances of H or the T.
Practical Implementation
Investing involves huge amount of money, considerable time, and effort, so that
investors can accurately judge the risk-return combination. Most of the investors just look at
their past investment history and over or under estimate the risk and return of the financial assets.
This paper provides more comprehensive model, in what asset to invest and accurately assess the
risk and return. Paper found that investors not only look at their previous experience but also
analysis the information available in the market to measure the risk and return. By looking at the
previous experience and then making analysis for the selective assets makes investment decision
little bit simple.
Concluding Remarks & Future Research Direction
This paper conclude that more experience the investor more accurately they assign
probabilities to expected return and more willing to take risk. Past investment, experience helps
in selection of future investment options. Past investment is positively correlated with risk
propensity, expected return, and re-investment behavior. The result is consistent with the
previous research findings (Sitkin and Wiengert, 1992, 1995: Kathleen, 2005: James, David,
Brigitte & Andrew, 2010). Investors will reluctant to invest when they feel it more risky,
investors behave differently in different situations. When they are sure about the gain in future
they invest less to avoid possible loss, but when there is sure loss in future they will invest more
to cover expected loss. Investor put more weight to losses than gains. So risk propensity is
negatively correlated with risk perception. Result is consistent with the previous research
findings (Kahneman & Tversky, 1982, 1985: Sitkin and Wiengert, 1992, 1995: Kathleen, 2005,
Shyan, Gow, & Hui, 2010). Investor’s trading behavior heavily influenced by the market
efficiency, markets are not completely efficient. Investor needs financial reports, business &
economic condition and expert advice to make risk and return judgments. Information type is
positively correlated with risk perception and return expectations. Result is consistent with the
previous research findings (Diacon & Hasseldine, 2005.II: Xiao, Kan, & Hong, 2006: James,
David, & Colby, 2010). When there is recession or industry is facing losses, investors feel it
more risky to invest and set high return expectations. So risk perception and return expectation is
positively correlated.
The future research can empirically test the relationship between past investment experience and
re-investment behavior.
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Choices under Different Socio-Economic Status: Some Experimental Evidences from
Individual Investors. Master Thesis. Nanhua University, Chiayi, Taiwan. Retrieved April,
10th, 2011, from http://ssrn.com/abstract=1787842.
22) Odean, T., Strahilevitz, M., & Barber, B.M (2010). Once Burned, Twice Shy: How Naïve
Learning, Counterfactuals, and Regret Affect the Repurchase of Stocks Previously Sold.
Mimeo, University of California; Berkeley.
23) Lovric, M., Kaymak, U., & Spronk, J. (n.d) A Conceptual Model of Investor Behavior.
Master Thesis. Erasmus School of Economics, Erasmus University Rotterdam.
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INDIVIDUAL INVESTORS RATIONAL? Retrieved March 5th 2011, from
http://www.nikmaheran.com/v1/attachments/029_DBA%20FINANCE%20IVESTORS%20BEHAVIOR.pdf
Appendix:
Questionnaire
Please write your gender: ______________
Q 1: Please Tick your age group
18–29
30–39
40–49
50–59
MS/M Phil
PhDs
60 and Above
Q 2: Please Tick your Educational Level
Graduate
Masters
Post Doctorate
(INDEPENDENT)
Please tick in which class you are
a) Have Practical Experience of investment in financial products
b) Only have Theoretical Knowledge not practical experience
If you choose option (a) indicate in which financial products you have experience
Shares
Bonds
Others (Please Specify) _____________
Please indicate length of investment experience (Number of years) ___________
Risk Perception and Return: How you think about risk and your required rate of return
Indicate the level of risk in your own subjective preference you associate with each statement
below: (R)
Using a day’s pay to Purchasing Lottery Ticket or Place
Sporting bets
Lending One month pay to friends
Using 25-50% of a month’s pay to buy speculative stocks
Doing job without any fixed pay
Highl
y
Risky
Modera
te
Risk
Low
Risk
Risk
Free
Don’
t
kno
w
To gamble with a week’s pay
If I have previously successful history of investment, I will
perceive re-investment in the same or other stock
Please evaluate the extent how you feel the following information is familiar or Un-Familiar to
you.
(I-F)
Information about the fluctuation of interest rate
Totall
y
Famil
iar
Moder
ate
Famili
ar
Neither
Familiar
/Nor Un
Familiar
Un
Famil
iar
Totally
UnFamilia
r
Information about the investment intention of market
maker/banker
Information about the improper management of listed
company
Information about the variation in policies related to stock
Market
Information about the excessive speculation
Please evaluate the extent how you feel the following information is Control able or Un-control
able to you. (I-C)
Information about the fluctuation of interest rate
Totall Modera
y
te
Contro Control
l
Neither
Control
/Nor Un
Control
Un
Cont
rol
Tota
lly
UnCont
rol
Information about the investment intention of market
maker/banker
Information about the improper management of listed company
Information about the variation in policies related to stock
Market
Information about the excessive speculation
How would you formulate your return expectations for taking risk? (RE)
Comple Partia
tely
lly
Agree Agree
You must bear the risk to earn expected return on financial
Neither
Agree
/Nor
Dis
Dis
Agr
ee
Comple
tely Dis
Agree
products
Agree
You formulate your return expectations based on previous
performance of share, bonds etc.
You want more returns for the extra knowledge investment
knowledge you posses
Stocks, Bonds of familiar companies are better for
investment(low risk involved)
Information Section: Assesses the weight investor gives to the information about the risk when
making investment decisions and the extent of satisfaction with the listed company’s information
discloser.
How important is the information about each statement to you when making investment decision
(II)
Highl Modera Low
y
te
Import
Impor Import
t
Information about the fluctuation of interest rate
Un
Import
Don’t
know
Information about the investment intention of market
maker/banker
Information about the improper management of listed
company
Information about the variation in policies related to stock
Market
Information about the excessive speculation
If the information provided for financial product is
insufficient, I would feel it unsafe to make investment
How satisfied you are with information disclosure about listed companies (IS)
Completeness of Information Disclosed
Information transparency
Information authenticity
Timely getting information
Totally
Satisfie
d
Modera
te
Satisfie
d
Neither
Satisfied Nor
Unsatisfied
Moderate
Un
Satisfied
Totally UnSatisfied
What is your opinion about information asymmetric and its impact on investment decision
making? (IAS)
Totall
y
Satisf
ied
Information asymmetry does not exist in stock markets
Moder
ate
Satisfi
ed
Neither
Satisfie
d Nor
Unsatis
fied
Moder
ate Un
Satisfi
ed
Total
ly
UnSatisf
ied
Information asymmetry is just heard of but is not supported by
any evidence
Information asymmetry indeed exists in stock market but does
not have any impact on investment decision
Information asymmetry frequently happens in stock market and
has little impact your investment decision
Information asymmetry has great impact on your investment
decision
How satisfied with were you with your investment in stock
market last year?
How satisfied with are you with the whole stock markets.
Investment behaviors
Consist of three parts: Past investment experience, Re-investment intention and
investment satisfaction
How was your last investment performance? (IP)
The performance of your investment in shares last year
Very
Success Neithe
Un
Success
ful
r
Success
ful
Succes
ful
s Nor
Unsuc
cessful
The performance of your investment in debt products
last year
The performance of your overall portfolio
(DEPENDENT)
What is your investment plan in financial products for next year?
Totally
UnSuccessfu
l
What is your plan of investment in stocks perform
successfully last year
What is your plan of investment in stocks perform Unsuccessfully last year
What is your plan of investment in overall stock market
keeping in view the last year performance
Increas Statu
e
s
Investm Quo
ent
Neither
Increase
Nor
Decrease
Decreas
e
investm
ent
With
draw
from
market