The Impact of Psychological Factors on Investors’ Decision Making in Malaysian Stock Market: A Case of Klang Valley and Pahang
By S. Bakar, Amelia Ng Chui Yi. 2016
250 citations recorded by the source corpus.
Abstract For years, traditional finance has always presumed that investors are rational in their decision making process in the stock market about risk return trade-offs and maximizing utility. However, behavioral finance studies revealed that human beings do not behave as rationally as economists suppose as their decisions at times are affected by their psychological feelings. Numerous studies from ASEAN, Middle East and Western countries have in fact established that psychological factors do have relationships and impacts on the decision making of investors in their stock markets. In light of this, this research attempts to bridge the gap of the differences in terms of geographical location and demographic profile between Malaysia and other countries by examining the impact of the psychological factors on investors’ decision making in the Malaysian stock market. Questionnaires are distributed to a sample size of 200 investors in the Klang Valley and Pahang areas aged between 18-60 years who are involved in the Malaysian stock market. The findings show that overconfidence, conservatism and availability bias have significant impacts on the investors’ decision making while herding behavior has no significant impact on the investors’ decision making. It is also found that the psychological factors are dependent of individual's gender. The results of this research are mostly consistent with the evidences in previous studies. This study, hopefully, will help investors to be aware of the impact of their own psychological factors on their decision making in the stock market, thus increasing the rationality of investment decisions for enhanced market efficiency.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/f7cd720ad8b4a19653146aadbe1f238e525e840b
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Citations in the corpus
- Impact of Financial Literacy and Behavioural Biases on Investment Decision-making (2021, background): “The findings are similar to Qawi (2010) and Bakar and Yi (2016), however, conservatism, confirmation and hind sight bias assists the investors to follow certain norms in investment decisions.”
- Do investors exhibit behavioral biases in investment decision making? A systematic review (2018, methodology): “Bakar and Yi (2015) have explained the impact of various biases and their effect on the investor decision-making. The results are in the context of the Malaysian Stock Market, and it has proved that overconfidence, conservatism and availability bias have a significant impact on the investor decision”