Factor affect individual investor behavior in viet nam luận văn thạc sĩ

UNIVERSITY OF ECONOMICS
HO CHI MINH CITY
VIETNAM

INSTITUTE OF SOCIAL STUDIES
THE HAGUE
THE NETHERLANDS

VIETNAM- NETHERLANDS
PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

FACTORS AFFECT INDIVIDUAL INVESTOR BEHAVIOR
IN VIETNAM STOCK MARKET
CASE STUDY: HO CHI MINH STOCK EXCHANGE
(SUMMARY)
A thesis submitted in partial fulfilment of the requirements for the degree of
MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

LE NHU HAl LONG

Academic Supervisor:

Dr. CAO HAO THI

HO CHI MINH CITY, JULY 2009


Table Of Contents

Abstract ..................................................................................................................... 1
1. Introduction .......................................................................................................... 1
2. Literature review .................................................................................................. 2

2.1 Prospect Theory ............................................................................................... 3
2.2 Heuristics ......................................................................................................... 4
2.3 Demographic Characteristics oflndividual Investor ....................................... 7
2.4 Empirical Studies ............................................................................................. 7
2.5 Conceptual Framework .................................................................................... 8
3. Research Methodology ......................................................................................... 8

3.1 Research Design ............................................................................................... 8
3.2 Measurement .................................................................................................... 9
3.3 Pilot Survey .................................................................................................... 11
3.4 Survey Design ................................................................................................ 12
4. Data Analysis and Empirical Findings ............................................................. 12

4.1 Satnple ............................................................................................................
4.2 Descriptive Statistics ......................................................................................
4.3 Reliability Analysis .................................................................. ~ .....................
4.4 Factor Analysis ..............................................................................................
4.5 Hierarchical Regression Analysis ..................................................................
4.6 Hypothesis Testing .........................................................................................

12
12
12
13
15
16

5. Conclusions and Recommendations ................................................................. 16

5.1 Main Findings ................................................................................................
5.2 Implications ....................................................................................................
5.3 Recommendations ..........................................................................................
5.4 Limitations .....................................................................................................
5.5 Future Research Directions ............................................................................

16
17
17
19
19

References ............................................................................................................... 20


Abstract

The objectives of this research are to determine the main factors influencing individual
investor behavior, to determine the relationship between factors and behavior of
individual investors. The scope of the research is limited to individual investor in Ho
Chi Minh City. The results indicated that jive factors including Information disclosed
by listed company, Information from professional organization/institution, Rumor
information, Information from inside company, and Herd behavior demonstrate a
significant influence upon individual investor behavior. The hypothesis testing results
indicated that most hypotheses in the conceptual framework were supported except the
influence of individual demographic characteristics on individual investor behavior.

1. Introduction

The first securities trading center of Vietnam stock market (VSM) was launched in July
2000 in Ho Chi Minh City as a pilot project. The second securities trading center was
established in Hanoi five years later in March 2005. Till December 31st, 2008, there
had been 170 stocks listed on Ho Chi Minh stock exchange (HoSE) with total
capitalization value of VND169,346 billions, 168 stocks listed on Hanoi securities
trading center (HaSTC) with total capitalization value ofVND50,428 billions. 1
Most investors still keep in mind a lesson they had learnt when the market index had
trotted up to peak at 571.04 points on July 61h, 2001 until it had quickly collapsed to the
trough of below 130 points. As a result of this, many investors who just shortly before
were making massive profits had ended up with huge debts.
Another similar event did occur in 2006, during which VN-Index had achieved at
632.69 points, which is far higher than previous record of 571.04 points, until it had
kept dropping down constantly and finally maintained at around below 400 points in
March, 2006. Within two months, investors had seen a quick unexpected change and
failed to react effectively.
I Bao cao phan tich nen kinh t6 VietNam 2008 va thj tnrang chfrng khoan 2009
(Vietnam economy in 2008 and stock exchanges in 2009 analysis report). Retrieved Feb 201\ 2009 from:
/>
1


The instability of VSM that had been witnessed in the two cited periods above is
particularly due to the impact of the so-called "psychological element" on individual
investors - investors usually follow exactly any move of majority. Vietnamese
investors do not only lack information about the market, but also they are in short of
experience. Basically, they base their trading activities on those of majority.
It is easy to see that VSM did not operate under any economic rules; theories of market

efficiency completely fail. Perhaps, this is the time to use the theory based on basic
human psychology to explain the behavior of investor in VSM.
Based on the above background, this research focuses on the following objectives:
•

To determine the main factors influencing individual investor behavior.

•

To determine the relationship between factors and behavior of individual
investors.

•

To suggest recommendations for policy markers, listed company, and individual
investors.

Descriptive statistics are firstly used to describe the basic features of the data in this
research; secondly, this research using qualitative study to explore potential factors
which may have an impact on the decision making of the individual investor. Finally,
quantitative study measures the decision making of individual investor and factors that
have identified. The statistic software used in this research is SPSS 15.0. The
respondents in this research consist of individual investors who had trading account at
securities company in Ho Chi Minh City.
2. Literature review

Decision-making is a complex process. Decisions can never be made by just relying on
the personal resources and complex models, which do not take into consideration the
situation. Decision-making can be defined as the process of choosing a particular
alternative from a number of alternatives. It is an activity that follows after proper

evaluation of all the alternatives. They need to update themselves in multidimensional

2


fields so that they can accomplish the desired results/ goals in the competitive business
environment.
In the present of Vietnam stock market situation, behavioral finance is becoming an
integral part of the decision-making process, because it heavily influences investors'
performance. They can improve their performance by recognizing the biases and errors
of judgment to which all of us are prone. Behavioral finance deals with individuals and
ways of gathering and using information. Besides, behavioral finance seeks to
understand psychological decision processes. In addition, it focuses on the application
of psychological and economic principles for the improvement of financial decisionmaking. According to behavioral finance, investor behavior derives from psychological
principles of decision making to explain why people buy or sell stocks. Behavioral
finance focuses upon how investors interpret and act on information to make
investment decisions. This research based on the basic findings and principal theories
within behavioral finance in order to explain the psychologies of various irrational
investor behaviors in stock market, which lead to the hypotheses of this research.
2.1 Prospect Theory

Value

Figure 1 Prospect theory value function
(Source: Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision making under
risk. Econometrica, 47(2), 263-291)

3

Prospect theory was developed by Kahneman and Tversky (1979) as a psychologically
realistic alternative to expected utility theory. It allows one to describe how people
make choices in situations where they have to decide between alternatives that involve
risk, in particular, choices under risk are usually underweighted in comparison with
outcomes under certainty. The tendency mentioned will lead to a pervasive effect of
aversion to risk when provided sure gains while risk seeking involving sure losses. The
phenomenon can be simply described in S-shaped value function as Figure 1.
2.2 Heuristics

Heuristics is the decision process by which the investors find things out for themselves,
usually by trial and error, lead to the development of rules of thumb. In other words, it
refers to rules of thumb which humans use to made decisions in complex, uncertain
environments. According to Fromlet (200 1), heuristics can also be defined as the "use
of experience and practical efforts to answer questions or to improve performance".
Due to the fact that more and more information is spread faster and faster, life for
decision-makers in financial markets has become more complicated. Heuristics may
help to explain why the market sometimes acts in an irrational manner. The following
will introduce a number of heuristics of investor psychology that affect investor
decision-making.
2.2.1 Herd Behavior

According to Chan (2003 ), herd behavior may be the most generally recognized
observation on financial markets in a psychological context. In addition, according to
Black (1986), investors with no access to insider information, irrationally act on noise
as if it were information that would give them an edge. The first hypothesis of this
research is proposed:
H 1: Herd behavior have an impact on individual investor behavior.

2.2.2 Overconfidence

Investors are usually overconfident about their abilities to complete difficult tasks
successfully, such as picking winning stocks. They believe their knowledge is more
accurate than it really is and that their forecasts are more precise than their experience
4


should validate. Several factors contribute to overconfidence. One of these factors,
called the illusion of knowledge, is having more information available. Increased levels
of information do not necessarily lead to greater knowledge because many investors
may not have the training, experience, or skills to interpret this information. Also,
investors tend to interpret new information as confirmation of their prior beliefs.
Daniel et al. (1998) offer a theory is that stock prices overreact to private information
and under-react to public information. Besides, according to Odean (1998),
overconfident traders believe their private information to be more precise than it is.
From these ideas, it can be consider that the decision making of individual investor
affected by private and public information.
•

Private Information

According to Merton (1987), individual investors tend to hold only a few different
common stocks in their portfolios. Economist argues that individual investors hold only
a few different common stocks in their portfolios because they have insider information
of the company which stock they are holding. In addition, Damodaran et al. (1993)
proved that insider trading is motivated by private information.
Besides, in the present, insider trading is also taking place in the Vietnam stock market;
some investors rely on the relationship with someone who has responsibility in the
listed company to capture the information, which is not announced outside yet, to
implement buying/selling this stock. The following hypothesis is proposed:
H2 : Information from inside company (insider information) have an impact on the

individual investor behavior.
•

Public Information

According to French el al. (1986), public information is information that becomes
known at the same time and available to the whole market, no one trades on the
information before it is released. In the present of Vietnam stock market, public
information can be come from different source, such as: rumor information,

5


information

disclosed

by

listed

company,

information

from

professional

organization/institution.
Rumor information

According to Schindler (2007), a rumor is a piece of information that has poor
authenticating data, not yet been confirmed by official sources or denied by them. A
rumor can either be confirmed as true or be found to be false at a certain point in the
future. In the present of Vietnam stock market, there are many types of rumor that
could influence the stock market.
The following hypothesis is proposed:
H 3 : Rumor information have an impact on the individual investor behavior.
Information disclosed by listed company

Information disclosed by listed company Is the information about the company
financial performance, board of director, future project, and stock trading of member in
board of director. This information must be disclosed to the public through the media,
such as: newspaper, television, or the website of the company. The following
hypothesis is proposed:
H 4: Information disclosed by listed company have an impact on the individual investor
behavior.
Information from professional organization/institution

Information from professional organization/institution is the information announces to
the public through by the media. This information source is come from investment
funds, specialized magazines, or from the report of prestigious organization/institution
(i.e. report ofHSBC, JP Morgan, and Merrill Lynch about Vietnam stock market). This
source of information has an important for individual investors when they make
decision to buy or sell stocks. When a good analyzed report about stock market
announces, this will take investors to buy stock, and in the other hand, they will sell
stock. The following hypothesis is proposed:

6


H 5 : Information from professional organization/institution have an impact on the
individual investor behavior.
2.3 Demographic Characteristics of Individual Investor
Grinblatt et al. (2001) found influence of several demographics (age and gender) on the
propensity to buy stocks. Besides, according to Westernholm el al. (2003), male
investors trade more frequently and are more diversified than female investors. In
addition, according to Chen et al. (2005), an experienced trader may be less inclined
toward behavioral biases in their trading decisions. The following hypothesis is
proposed:
H 6 : The relationship between factors and individual investor behavior will be
significantly influenced by the factors related to demographic characteristics.
2.4 Empirical Studies
2.4.1 Andre Farber, Nguyen Van Nam, and Vuong Quan Hoang (2006)
The question about the herd behavior on Vietnam stock market was firstly asked in the
early of 2001, and it have experimental demonstrated in 2006. Farber et al. (2006)
proved that herd behavior is very strong in Vietnam by statistic model. They have
checked the effect of herd behavior on the market return. Results of their study for
Vietnam stock market are: investors behave in herd when the market situation forces
the stocks to extreme positive returns; herd behaviors do exist on the Vietnam stock
market.
2.4.2 Robert A. Nagy and Robert W. Obenberger (1994)
Nagy and Obenberger (1994) using the varimax algorithm of orthogonal rotation to
analyzed 34 variables that presented by seven summary factors, such as: neutral
information, accounting information, self-image/firm-image coincidence, classic,
social-relevance, advocate-recommendation, and personal financial needs. Their
findings suggest that the recommendations of brokerage houses, individual stock
brokers, family members and coworkers go largely unheeded. Many individual

investors discount the benefits of valuation models when evaluating stocks.
7


2.4.3 John R. Nofsinger (2001)

Nofsinger (200 1) investigate the trading behavior of investors by developing a measure
of abnormal trading and using the buy and sell volume of institutions and individuals
around firm-specific news releases in the Wall Street Journal and macro-economic
announcements. He found that investors conduct heavy trading around the publication
of firm-specific news in general, and earnings, dividend, and capital budgeting news in
particular.
2.4.5 Clara Vega (2006)

Vega (2006) measured the effect of private and public information on the post-earning
announcement drift. The empirical results show that the more information (private or
public) investors have about the true value of an asset, and the more they agree and
trade on this information-the smaller the abnormal return drift.
2.5 Conceptual Framework

In this research, the conceptual framework is illustrated in Figure 2.
Moderator variables

Antecedent variables

Demographic characteristics of
individual investor:
• Age
• Gender
• Investment experienced

Public information
• Rumor information
• Information disclosed by listed
company
• Information from professional
organization/institution
Private information
• Information from Inside Company
(insider information)

Outcome variable
Individual Investor Behavior

Herd behavior

Figure 2 Conceptual Framework
3. Research Methodology
3.1 Research Design

The research design of this research comprises three main steps as illustrated in Figure

3.
8


Step 1
Literature
Review

In-depth
Interviews

Step 2
Pilot
Survey

Reliability
Analysis

Exploratory
Factor Analysis
(EFA)

Step 3
Survey

I

~

Reliability
Analysis

Exploratory
Factor Analysis
(EFA)

~

I

Confirmatory
Factor Analysis
(CFA)

Figure 3 Research process

3.2 Measurement
3.2.1 Indicators of Independent Variables
Rumor Information

The indicators to measure Rumor information are: (a) information from internet such
as: chat-rooms, news groups, and forums; (b) information from society about company
debt; (c) information from society about stock dividend payout.
Information disclosed by Listed Company
The indicators to measure Information disclosed by listed company are: (a) the decision
of board of directors to buying back shares of company or selling shares which are held
by the member of the board of directors; (b) quarterly and annual earnings
announcements, net income and realized sales figures; (c) cash and stock dividend
announcements; (d) capital investments, joint ventures, new products.
Iriformation from Professional Organization/Institution

The indicators of this measurement are adopted: (a) analytical reports of a professional
organization/institution (HSBC, JP Morgan, Merrill Lynch); (b) analytical reports of

9


investment funds; (c) recommendation from brokerage house; (d) recommendation

from individual stock broker; and (e) recommendation from friends/coworkers.
Information from Inside Company (Insider Information)

The measurement of Information from inside company of this research is: (a)
information from people who have a special relationship with the member of board of
director/management; (b) information from member of board of director/management;
(c) information from the officers who are working in the company.
Herd Behavior

Base on the study of Schindler (2007), this research measure herd behavior by five
indicators, included: (a) observation of other people's behavior; (b) news and
comments on stock-price changes through news media; (c) news and comments on
trading and transactions through news media; (d) reports on investor behavior through
news media; and (e) action by a large group of people or population segment.
3.2.2 Indicators of Moderator Variables
Gender

The measurement for gender is a dummy variable indicating whether the investor is a
male (1) or female (0).
Age

This research divided age in three categories: (a) less than 26; (b) from 26 to 45; and
(c) more than 45.
Investment Experienced

The experience categories were (a) less than 1 year, (b) 1-3 years, (c) 3-5 years, and (d)
more than 5 years.
3.2.3 Measures of Dependent Variable: Individual Investor Behavior

This research measure individual investor behavior by three indicators, included: (a)

Intend to buy/sell; (b) My first choice to buy/sell; and (c) Strongly recommend others
to buy/sell.
10


3.2.4 Measurement Scale

The measurement scale of this research is five-point Likert (5 is the highest level and 1
is the smallest level)
3.3 Pilot Survey
3.3.1 Sample

In the pilot survey, questionnaires were collected by face to face interview with 39
potential respondents who were invested at Securities Companies in Ho Chi Minh City,
Vietnam.
3.3.2 Descriptive Analysis

The results of a preliminary assessment show that all items have item-total correlations
values greater than .30 and factor loading values greater than .50. There is only one
item with item-total correlations values less than .30, "Information from society about
company debt" with item-total correlation .227. According to Nunnally (1978), this
item should be deleted. This item was not removed because they have strong
theoretical support and the sample size of 39 in pilot survey was not large enough to
justify exclusion.
3.3.3 Reliability Analysis of the Pre-test

Cronbach's alpha scores were used to assess the reliabilities for the five groups of
information factors. These ranged from 0.642 to 0.846. The reliability score of
individual investor behavior criteria is 0.656; all alpha values are well above the
threshold of 0.60.

3.3.4 Factor Analysis

Factor analysis was used to reduce the 20 information factors into meaningful sub-sets
of factors. The analysis identified seven groups of information factors with an
eigenvalue greater than 1, accounting 79.32% of the cumulative variance; and one
group of individual investor behavior criteria with an eigenvalue greater than 1, and
accounting for 61.263% of the variance. The common accepted decision criteria in
11


social science research were applied: an eigenvalue higher than 1, at least 50% variance
being explained, and simplicity of factor structure (Hair et al., 1995).
3.4 Survey Design

Similar to the questionnaire in the pilot survey, the final survey in the research required
respondents to think of a security in which they intend to buy/sell. The final
questionnaire includes 26 closed questions. A closed question both asks a question and
gives the respondents a fixed response from which to choose.
4. Data Analysis and Empirical Findings
4.1 Sample

The population of this research is individual investors in Ho Chi Minh City. Data were
collected from a sample of 187 individual investors who are trading at Securities
Company in Ho Chi Minh City by face to face interview.
4.2 Descriptive Statistics

A frequency analysis was conducted for the characteristic related to the demographic of
individual investor. This information includes the age, gender, and investment
experienced. The results show in Table 1.
4.3 Reliability Analysis

Cronbach's alpha scores were used to assess the reliabilities for the five groups of
information factors and individual investor behavior criteria. The Information disclosed
by listed company, Information from professional organization/institution, Rumor
information, Information from inside company (insider information), and Herd
behavior had reliabilities ranging from .773 to .610 respectively. The individual
investor behavior criteria reliability was .638. All principal components had a
Cronbach's alpha value more than .60, a threshold acceptable in exploratory research
(Nunnally, 1978).

12


Table 1 Descriptive Statistics
Frequency

Percentage
(%)

Under26

29

15.5

From 26 to 45

125

66.8

Above 45

33

17.6

Female

77

41.2

Male

110

58.8

Less than 1 year

44

23.5

From 1 year to 3 years

86

46

From 3 years to 5 years

39

20.9

More than 5 years

18

9.6

BSC

39

20.9

esc

14

7.5

PVSC

8

4.3

BVSC

39

20.9

VICS

41

21.9

ICBS

21

11.2

Mirae Asset

11

5.9

ORS

14

7.5

Measure

Age

Gender

Value

Investment experienced

Securities company

4.4 Factor Analysis

Factor analysis was used to reduce the 20 information factors into meaningful sub-sets
of factors. The analysis identified five groups of information factors with an eigenvalue
greater than 1, accounting 60.481% of the cumulative variance; and one group of
individual investor behavior criteria with an eigenvalue greater than 1, and accounting
for 59.131% of the variance. The results of factor analysis show in Table 2 and Table
3.

13


Table 2 Factor Analysis of the Information Factors
Factor 1:
Herd
behavior

Herd2
Herd4
Herd3
Herdl
HerdS
Insider2
Insider!
Insider3
Com Dis2
Com Dis3
Com Disl
Pro_Org2
Pro_Org4
Pro_Org3
Pro Orgl
Rumorl
Rumor2
Eigenvalues
Variance explained(%)
Cumulative variance explained
(%)

Factor 2:
Factor 3:
Information Information
from inside disclosed by
company
listed
company

Factor 4:
Information
from
professional
organization/
institution

Factor 5:
Rumor
information

.785
.729
.701
.665
.636
.828
.762
.682
.821
.807
.790
.739
.669
.639
.626

4.277
15.693
15.693

2.112
12.488
28.181

1.507
12.371
40.552

1.302
11.709
52.261

.732
.587
1.085
8.221
60.481

Table 3 Factor Analysis of the Individual Investor Behavior Criteria
Factor 1:
Individual Investor
Behavior Criteria
.858
.766
.672
1.774
59.131
59.131

Behav2
Behavl
Behav3
Eigenvalues
Variance explained(%)
Cumulative variance explained(%)

In the factor analysis results, KMO of the information factors was .733 and KMO was
.583 for the individual investor behavior criteria. The p-values of the key information
factors and the individual investor behavior criteria were statistically significant.

14


4.5 Hierarchical Regression Analysis

Two hierarchical models were developed. The first introduces the five sets of
information factors in Model 1. Three individual demographic characteristics were
included in Model 2 as dummy variables. The results of this analysis are presented in
Table 4.
Table 4 Hierarchical Regression Analysis of Individual Investor Behavior Criteria
Variables

Modell

Antecedent variables
Herd behavior
Information from inside company
Information disclosed by listed company
Information from professional organization/institution

Rumor information
Moderators variables
Gender
Agel
Age2
Expl
Exp2
Exp3
Constant/Intercept term
F-value
R2 -value
Adjusted R2-value

Model2

.364**
.133*
.241 **
.145*
.180*

.314**
.149*
.259**
.157*
.178**

2.41E-017
12.853 **
.262

.242

-.059
-.297
-.038
.201
.354
-.001
.34
6.619**
.294
.249

* p < 0.05
** p < 0.01
From the results of analysis showed above, it can be conclude that there is no
relationship between individual demographic characteristics and individual investor
behavior. All of factors have significant statistic (Sig.) less than .05, with range from
.038 (Information from inside company) to .00 (Herd behavior, and Information
disclosed by listed company). Therefore, the multiple regression model is expressed as
follow:
Y= .364X1 + .133X2 + .241X3 + .145X4 + .180X5
Where:
Y: Individual investor behavior
X 1: Herd behavior
15


X 2 : Information from inside company
X 3 : Information disclosed by listed company

X 4 : Information from professional organization/institution
X 5 : Rumor information

4.6 Hypothesis Testing
A total of six hypotheses were developed to examine the relationships in the conceptual
framework.

Table 5 Summary ofHypotheses Testing
Hypothesis

H•
H2

m.......

Descriptions

Results of
hypotheses
testing

..~.~E.~. .?~~~Y~?.!.. .~~Y.~.~-~. . i..~.P~~!. .?.-~.~~~~y~~~~l..}~Y~.~!.?~.?.~~-~Y.i.?~ ·

. . . . . . . . ..~~.PP.?~~~
Information from Inside Company (insider information) have an impact
Supported
on
the
individual
investor

behavior.
. .................................................... .........................................................
............................................................................................... .

Ru..~.?..!.. }?.f.?!.~~!i.??. hay_~ a~.}~.P~~!. .??.!he }.~.~i.Yi4~~1 investo,!._behavior. . . . . . . ~~P.P?~~?.
Information disclosed by listed company have an impact on the
Supported
individual
investor
behavior.
..................................
...........
.................................................. .................................... .....................................
... ····················································
Supported
Information
from
professional
organization/institution have an impact on
Hs
the
individual
investor
behavior.
....................................
......................................................... ,,,,,,,,................................. ....................................................... .........................................................
............................................................................................................................. ..
H6
The relationship between information factors and individual investor
Rejected

behavior will be significantly influenced by the factors related to
individual demographic characteristics.

5. Conclusions and Recommendations
5.1 Main Findings
The results of analysis showed that individual investor behavior is expressed as follow:
Y= .364X 1 + .133X2 + .241X3 + .145X4 + .180X5
Where:
Y: Individual investor behavior
X 1: Herd behavior
X 2 : Information from inside company
X 3 : Information disclosed by listed company
X 4 : Information from professional organization/institution
16


X5 : Rumor information
5.2 Implications

The results of this research supported the information factors and the investor behavior
criteria developed in the literature review.
The results of this research may be helpful for board of director of company. Under the
guidance of board of director, functional departments will analyze the main criteria of
their business and provide all on their information channel fully and exactly thence the
investors. Besides, from the results of this research, the board of director must control
the internal information.
Finally, the results of this research will help to improve brokerage service in securities
compames.
5.3 Recommendations
•

Recommendations for Policy Markers

The State Securities Commission should often provide the investors with the analytical
reports and the warnings of market movement (when the market's growth is too "hot"
or too "cold"), that could help the investors have more accurate information about the
market situation thence they will decide between buying or selling reasonably.
The State securities Commission should strengthening inspection and monitoring the
published information of the listed companies and the stock companies as well because
these are the most important information sources that could influent buying or selling
decisions ofthe investors significantly.
The State securities Commission should limit the bad rumors that affect the listed
company or the rumors that aim to seek profit of the particular investment groups as
well. Besides, they must issue denial of the rumor, which is true or false, so the rumor
could not influent the investors.
The State securities Commission should closely control the insider trading, insider
trading already exists in the present on VSM. Insider trading will be a disadvantage for

17


small investors; if insider trading is still perform regularly, its will be an obstacle to the
development of VSM.
•

Recommendations for Listed Company

The listed companies must have their high awareness of providing the accurate and
transparent information to the investors. According to the results of the previous
chapter, the information of the listed companies exercises their large influence on the

behavior of investors when they make the decisions to buy/sell stocks.
The listed companies must analyze the main criteria of their business and provide all on
their information channel fully and exactly thence the investors could have a proper
look at the real value of enterprise as well as the price of their stocks which are being
traded on the stock market.
The listed companies should have the published information department which will
provide all the necessary information of business to the investors and adjust
immediately the false rumors which relate to the business operations.
In addition, the listed companies must control the internal information, which is not
announced to the public yet, to make justice to the investors, who do not know the
information yet, and limit the investors who get the information to seek profit from
some ways.
•

Recommendations for Individual Investors

Investors must check and review the accurate level of the information flow, since then
they could make the decisions properly. Now the individual domestic investors are
standing against the foreign investors and the investment organizations that have a
large amount of potential capital, good knowledge and investment experience.
Therefore, the domestic investors should equip themselves with the knowledge of the
securities and the stock market and the knowledge of economy so they could analyze
and select information to make the proper investment decisions that could make profits
for themselves; avoiding the situation that they invest with the surfing style or the mass
of human psychological behavior.
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5.4 Limitations

Firstly, samples of the research are only in a few securities company in Ho Chi Minh
City, therefore, the statistic of analysis may be lacking of credibility. In addition,
although the sample size is adequate, however, the research results will be reliable if
the sample size is larger. Another limitation concerns the findings of this research are
based only on individual investor. Finally, although the research was able to create a
basic insight into factors that affect investor behavior, there are other factors that have
not been identified.
5.5 Future Research Directions
It would be of interest to look further into this topic to see if general patterns can be

detected in the behavior of investors. In order to achieve this, further researches has to
be conducted to provide sufficient depth. One suggestion would be to conduct similar
studies on other city and with larger samples. In addition, further researches would be
to extend samples into organization investors. Finally, some factors were not
mentioned in this research; hence, further researches would be to look more into other
factors that may affect investor behavior.

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Reference from websites:
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