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KEY FACTORS IMPACTING THE BUYING
DECISION OF INDIVIDUALS IN
VIETNAMS STOCK MARKET
BY
PHAM CONG TAI
(VIETNAM)
This paper was submitted in partial fulfillment of the requirements for the Masters of
Business Administration (MBA) degree at the Maastricht School of Management (MSM),
Maastricht, the Netherlands, July 2007.
Maastricht School of Management
P.O. Box 1203
6201 BE Maastricht
The Netherlands
Date: July 2007
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ACKOWLEDGEMENTS
This thesis could not be completed without the great help of many people.
First of all, I would like to express my sincerely gratitude to Dr. Nguyen Dinh Tho for
his intensive support, valuable instruction, correction and especially his enthusiasm.
Secondly, I would like to express my special thank to my colleagues, classmates, friends
and MSM-SIM HoChiMinh office for their support during the time of my study at
MSM.
The third, I am very grateful to professional officers and experts to give me the valuable advice
and consults in Vietnams stock market.
Finally, I also express my great thank to my wife for her assistance and encouragement to me
during last time.
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ABSTRACT
In the last few years, the Vietnamese stock market has been one of the fastest growing
rates in the world. More than two hundred companies have been listed and as a whole
constitute a significant portion of Vietnamese economy. However, the Vietnamese stock
market has the high development but still unstableness. Due to the booming of VN
index, early investors gained big profit after reselling stocks. Hence, numbers of
investors participated in stock market within two years. This is a motivation but also
obstruction of the Vietnamese market, because these novice investors have less
knowledge about stock and market. Buying behaviors of investors affect to the
development of stock market. This study investigates key factors impact on buying
decision of individual investors and exposes the significance of these factors to
individual investors in selection of stocks.
Based on the literature review, a theoretical model and hypotheses have been developed. A set of
questionnaire was prepared with 29 questions
The survey was designed in two phases: (1) the pilot phase was implemented with 30
respondents; (2) the main survey was conducted with a sample of 320 individual
investors attending at securities companies located in Ho Chi Minh city and Bien Hoa
city.
Descriptive statistical analysis method was used for the compilation of results. Factor
analysis using principle components with varimax rotation was used. After tested
unidimensionality, convergence, and discriminant validity, multi-regression was applied to test
model and hypotheses.
According the research findings, key factors impacting on the stock selection of
investors were identified and the significance of key factors to buying decision wasexposed.
Finally, managerial implication was raised up as contributions of this study.
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TABLE OF CONTENTS
Page
Table of Contents.................................................................................................... i
List of Figures........................................................................................................ iv
List of Tables ........................................................................................................ ..v
List of Abbreviations ............................................................................................. vii
Abstract................................................................................................................. ix
CHAPTER 1. INTRODUCTION....................................................................................1
1.1 Background....................................................................................................................... ...............1
1.2 Statement of problem........................................................................................................................3
1.3 Research Objectives..........................................................................................................................4
1.4 Scope of study...................................................................................................................... ............5
1.5 Contribution of study .......................................................................................................................5
1.6 Research design ...............................................................................................................................5
1.7 Sources of data .................................................................................................................................6
1.8 Arrangement of paper .................................................................................................................... ..6
CHAPTER 2. LITERATURE REVIEW AND HYPOTHESES..........................................................7
2.1 Model of buying behavior.................................................................................................................7
2.2 Environment factors..........................................................................................................................9
2.2.1 Cultural factors .......................................................................................................................10
2.2.2 Social factors...................................................................................................................... .....10
2.3 Individual influences......................................................................................................................11
2.3.1 Personal factors ................................................................................................................ ......12
2.3.2 Psychological factors........................................................................................................ .......12
2.4 Decision making process ................................................................................................................14
2.4.1 Good news ..............................................................................................................................16
2.4.2 Stocks stimuli ...................................................................................................................... ..16
2.4.3 Knowledge ......................................................................................................................... ....18
2.5 Buying decision......................................................................................................................... .....19
3.1 Research model and hypotheses .....................................................................................................19
3.1.1 Research model .......................................................................................................................19
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3.1.2 Hypotheses....................................................................................................................... .......20
CHAPTER 3. RESEARCH METHODOLOGY................................................................................20
3.1 Research methodology....................................................................................................................22
3.2 Research process.............................................................................................................................23
3.3 Questionnaire..................................................................................................................................23
3.4 Pilot study ......................................................................................................................................26
3.5. Main study ....................................................................................................................................26
3.5.1 Representative stock for study .................................................................................................26
3.5.2 Sample size and sampling method............................................................................................26
3.5.3 Data collection.........................................................................................................................27
3.5.4 Method of data analysis.................................................................................................... .......28
CHAPTER 4. FINDINGS AND DISCUSSION ..............................................................30
4.1 Sample profile................................................................................................................ ................30
4.1.1 Gender.....................................................................................................................................30
4.1.2 Age..........................................................................................................................................30
4.1.3 Education ................................................................................................................................31
4.1.4 Occupation......................................................................................................................... .....32
4.1.5 Year of participation................................................................................................................32
4.1.6 Times of bid orders..................................................................................................................32
4.1.7 Invested amount.......................................................................................................................33
4.1.8 Descriptive statistic..................................................................................................................35
4.2 Assessment of measurement scale...................................................................................................37
4.2.1 Assessment of reliability..........................................................................................................37
4.2.2 Factor analysis ...................................................................................................................... ..39
CHAPTER 5. MANAGERIAL IMPLICATION AND LIMITATION.......................................49
5.1 Managerial implication...................................................................................................................50
5.1.1 For Investor....................................................................................................................... ......50
5.1.2 For Securities companies ........................................................................................................51
5.1.3 For IPO ...................................................................................................................................51
5.1.4 For Government ......................................................................................................................52
5.2 Limitation and further study ...........................................................................................................52
Appendices............................................................................................................................ ..........54
Appendix A: Questionnaire in English..................................................................................................54
Appendix B: Questionnaire in Vietnamese............................................................................................57
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Appendix C: List of Securities Company for the survey .......................................................................60
Appendix D: List of Securities used for the survey................................................................................61
Appendix E : Scatterplot buying decision................................................................................... ..........62
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LIST OF FIGURES
page
Figure 2.1: Consumer decision-making framework ................................................................... ..... .......8
Figure 2.2: Model of buying behaviour ........................................................................................ ..... ....8
Figure 2.3: Model of buying behaviour ........................................................................................ ..... ....9
Figure 2.4: Research model ....................................................................................................... ..... ....19
Figure 3.1: Research Process ...................................................................................................... ..... ...23
Figure 4.1: Respondents gender ....................................................................................... ..... ..... .......30
Figure 4.2: Respondents age................................................................................................. ..... ..... ...30
Figure 4.3: Respondents education.................................................................................................. ...31
Figure 4.4: Respondents occupation....................................................................................... ..... .......32
Figure 4.5: Experiences on stock ........................................................................................... ..... ..... ...32
Figure 4.6: Times of orders.................................................................................................. ..... ..... .....33
Figure 4.7: Investment amount ...................................................................................................... .....33
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LIST OF TABLES
Page
Table 3.1: Measurement scales for construct in the model............................................................... .....25
Table 4.1: Descriptive Statistics ..................................................................................... ..... ..... ..... .....35
Table 4.2: Descriptive Statistics ..................................................................................... ..... ..... ..... .....36
Table 4.3: Result of reliability test.......................................................................................... ..... ........37
Table 4.4: Reliability statistic .............................................................................................. ..... ..... .....39
Table 4.5: Total Variance Explained ................................................................................................ ...40
Table 4.6: Rotated Component Matrix ................................................................................................41
Table 4.7: Model Summary ................................................................................................................42
Table 4.8: ANNOVA.................................................................................................42
Table 4.9: Coefficients.................................................................................................................... ....43
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LIST OF ABBREVIATIONS
GDP : Gross Domestic Product
FDI : Foreign Direct Investment
WTO : World Trade Organization
VN Index : Stock Index of Vietnam
ASEAN : Asia South East Nation
IPO : Initial public offer
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CHAPTER 1
INTRODUCTION
1.1 General background
In 2006, Vietnamese economy achieved the high speed of development with GDPs
growth rate of 8.2 %. It will expect to continue at positive increase in the coming
years. Total capital of FDI reached about 10 billion US dollars in 2006 which was the
highest increase during last decades. Especially, after Vietnam became a member of
WTO, Vietnamese companies are fairly treated and also cope with fierce competition
on the international trade. Vietnamese 2006 economys achievement will be the
positive motive for future development of its economy. In reality, the development of
economy in any country can not separate from the development of capital market.
Vietnam stock market has been established since four years, it still was in the state of
low development. However, Vietnam stock market became a prominent phenomenon
of Vietnamese economy in last year. VN index has achieved at growth rate of 150 %
which is the highest rate in the world stock markets recently. Vietnam soon becomes a
baby tiger in ASEAN and Vietnams stock market is the most prospective market
in ASIA (Bloomberg NEWS, Sept 21, 2006). The Economist newspaper of the UK
has carried an article entitled Vietnams stock market boom, saying that theVietnamese people have showed their great interest in this field (The Economist
newspaper of the UK, March 19, 2007). The hot development of Vietnams stock
market recently has shown up many arguments among financial experts, investors and
legislators. Some of them reckon that Vietnam stock market is unreal and high risky.
The others believe that it is logical in response to the positive achievement of
Vietnamese economy.
Introduction of stock and its roles
Stockis a certification to evidence the rights of corporation ownership, the capital raised
by a corporation through the issue of shares entitling holders to an ownership interest
(equity); "he owns a controlling share of the company's stock".
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Individual investor: is a person who buys and sells financial instruments (such as
stocks or bonds) in the financial markets.
Stock market is an organized marketplace for securities featured by the centralization
of supply and demand for the transaction of orders by member brokers for institutional and
individual investors. The stock market has an important role in national economy including
(1) Raising capital for businesses, (2) Mobilizing savings for investment, (3) Redistribution
of wealth, (4) Improving corporate governance, (5) Creating investment opportunities for
small investors, (6) Barometer of the economy.
The briefly introduction of the organization and operation of Vietnam stock market will
be described as follows:
The State Securities Commission (SSC), a body established formally in 1996,
is responsible for capital markets development, licensing of participants, and
the issue and enforcement of regulations. A wide range of regulations, with
significant input from multilateral bodies such as the International Finance
Corporation, have been promulgated, including those dealing with such issues
as insider trading, take-over trigger points and margin lending.
The Securities Trading Center of Vietnam (STC), firstly in HoChiMinh City,
was officially inaugurated on July 20, 2000, and trading commenced on July
28, 2000. Later on, Hanoi stock trading center was launched on March 08,
2005. As of this date, the numbers of listed companies have increased to 110
and 86 in HoChiMinh and Hanoi respectively. Both of them are managed by
the state securities commission. The STC assumes responsibilities of
organizing, executing and supervising the securities trading activities on the
centre.
The securities companies have the main business of brokerage, own trading,securities investment portfolio management, underwriting, and financial and
securities investment advisory.
Listing requirement: in order to be listed, a company must have been profitable for at
least 2 consecutive years, have a minimum capitalization of VND 80 billion
(approximately US$5,000,000), and have at least 50 shareholders who are not
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employees of the company, holding at least 20% of stake. Foreign invested joint
venture companies are technically qualified to list, but in order to do so; they must be
reorganized into joint stock company status. Companies intending to list must also
submit to audit by an approved, independent auditing company.
VN index goes up very quick but too fluctuation. It puts a question on why Vietnams
stock market is quickly hot, quickly cold. It often happens when all stocks in the
market goes up and down simultaneously. We need to know the reasons making the
change of the stock market. The response can be caused by stock investors, their
behaviors. Buying behavior of investors will push the stock market to go up and
selling behavior will make market go down. There are two kinds of investors including
institutional investors and individual investors. This research only focuses on
individual investors with reasons including (1) they present a significant market force,
currently 90 % of investors in Vietnam market are individuals; (2) no other group has a
greater freedom of choice in style or media of investment; (3) institution are
communities of individuals. (Frank R. Keller , 2001, Behavior of individuals in
securities investment decision, University of
Rhode island). However, individuals will
take consideration carefully in selection of stock for maximizing their investments
returns. There are many factors which individuals have to look into when they make
decision.
1.2 Statement of problem
As said above, investors have an important role in stock markets; the influence of
individual investors on market is very powerful. Selling and buying behaviors of
individual investors will create the changing of VN index. The rough development of
VN index reveals that behaviors of individual investors vary erratically. What and who
impact on individual investors to make their decision? Vietnams stock market is so
young but grows fast and so individual investors knowledge and understanding on
stock market are limited. Due to lack of knowledge and experience, individual
investors choose stock for buying not basing on their evaluation and expectation.
There is a difference in behavior between institutional investors and individual
investors. When making decision on the selection of certain stock, institutional
investors are interested in the control rights and business strategy of companies; their
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expected returns are long term investment. This creates a stable and potential finance
for companies activities. In contrary, individual investors only look intently in
numerous and instant earnings of stocks, they invest their money into the market
without understanding of stocks indicators and the concept high risk, high returns.
The sharpest picture of the Vietnamese stock market is that domestic investors pour
their money into the market without understanding in price-on-earning (P/E) ratio,
they just wait and see if their shares increase slightly, then sell out for profits, said by
Lavin Mok, managing director of Tremont Capital management Company (Asia).
Earning a big money in short time, individual investors consider stock market as
gambling. It is too risk for them and harmful to stock market. They are easy to get
bankruptcy because of stock markets risks. Furthermore, some of them make loan from
banks to buy stocks for profit and they are always in state of high pressure leading less
prudence in buying decision, their psychologies are easy to be impacted by surrounding
environment.
A common phenomenon of Vietnams stock market is prices of all stocks to go up
simultaneously, in spite of poor performance of some companies. In those cases,
investors get profit in any buying decision leading too many noise investors to
anticipate. This makes Vietnams stock market become chaos.
The above problems indicate that Vietnams stock market is strongly impacted by
buying behaviors of individual investors; these behaviors are so influenced by many
factors. Which are determinants influencing investors selection and how these key
factors impact?
1.3 Research Objective
The objective of this study includes (1) discovering key factors that impact on stock
selection of individual investors in Vietnams stock market; (2) exposing the
significance of these factors to individual investors in selection of stocks.
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1.4 Scope of study
This study focuses only the selection of stocks among alternatives by individual
investors; the stocks in this study are stocks to be listed.
Objective of the study is Vietnamese individual investors excluding foreigner investors
and institutional investors. Hence investors mentioning in this study are individual
investors.
Data for this study is collected by face to face interview with investors who are
attending at securities companies in HoChiMinh city and Bienhoa city.
Stock trading session of Vietnam market takes place between 8: AM and 11: AM, the
survey of the study conducts between 7:30 AM and 11:30 AM.
1.5 Contribution of study
The findings from this study also can give contributions as follows:
Companies will get successful in selling their stocks to public, both for initial
public offer (IPO) and raise capital for expanding business.
The securities companies could understand their customers and appealindividual investors by good systems and services, easy for them to make their
decision.
Authorities could promulgate appropriate policy to push up and to orient thedevelopment of stock market.
1.6 Research Design
This research begins with statement of problems and objectives. Then literature
concerning the objectives, research model is developed. The appropriate methodology
is designed to meet objectives of this research, and obtain enough comprehensive
information for research, in which also mentions the processes relating to data, sample,
and data collection. After data to be tested, data analysis is implemented by SPSS
software and discussion on the results is conducted. Finally, some managerial
implication is raised up.
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1.7 Sources of data
Obtaining the ultimate objectives of the research, the method of this study is both
primary and secondary data described as below:
(a)Secondary data: will be collected through desk research by collecting data
information from different sources such as internet, published books, reports, articles
and others.
(b) Primary data: An exploratory study via in-depth interview will be conducted with
the top of managements who have experiences and knowledge about Vietnamese stock
market. Based on the result of information from literature, qualitative and desk research,
the list of possible factors will be applied to develop the questionnaire which mainly use for
conducting study at the quantitative phase.
1.8 Arrangement of research paper
This research has five chapters. Chapter 1 introduces the background, problem
statement, and research objectives. Chapter 2 presents a review literature on buying
behavior. Based on the literature reviews, this chapter proposes a research model and
hypotheses. Chapter 3 describes the research methodology utilized to test measurement scales,
model and hypotheses to. Chapter 4 presents results and discussion. Chapter 5 summaries
the key findings, discusses their implication for managers. The limitations of this study are
also discussed in this chapter.
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CHAPTER 2
LITERATURE REVIEW
This chapter discusses the literatures on consumer behavior and buying decision.
Basing on these literatures and situation of Vietnam stock market, conceptual model and
hypotheses are developed.
2.1. Models of buying behavior
Engel et al. (1993, p.4) define consumer behavior as "... those activities directly
involved in obtaining, consuming, and disposing of products and services, including
the decision processes that precede and follow these actions. Kotler (1999) believes
that The company that really understands how consumers will respond to differentproduct features, prices, and advertising appeals has a great advantage over its
competitors, (p.229).
There have been many models of consumer decision-making such as those proposed
by Nicosia (1966), Engel et al. (1968), Howard and Sheth (1969), Dibb (1997), and
Kotler (1997). In theory, these models were similarities in creating a basic and general
foundation for the understanding of consumers, but their analytical levels of consumer
behaviour were different. All these models were mainly mentioned in understanding
of consumer behaviour of consuming products. So it was failed to apply specific
model as above for this study, because stocks are not consuming products, they
represent for investment activity. However, this research is basically relied on models
of consumer behaviour, and combining with the previous studies of stocks to adopt a
simplified approach as the guidance of the study. Literatures of this study mainly refer
to consumer behaviour models of Kotler (1997), Dibb et al (1997), Howard - Sheth
(1969).
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Individual Environmental
influences influences
Decision-making Process
Problem Information Evaluation of Purchase Post-purchaserecognition Search alternatives evaluation
Feedback
Figure 2.1: Consumer decision-making framework (Dibb et al., 1997)
According to Dibb et al. (1997), Decision making process was impacted by individual and
environmental influences. (1) Individual influence consists of what is inside buyersuch as:
personal factor, psychological factor. (2) Environmental influence includes cultural factors
and social factors. (Figure 2.1)
Marketing Other Buyer's Buyer's decisionstimuli stimuli characteristics process
Product Economic Cultural Problem recognition
Price Technological Social Information search
Place Political Personal Evaluation
Promotion Cultural Psychological Decision
Post purchase
behavior
Figure 2.2: Model of buying behaviour (Kotler, 1997)
Buyer's decisions
Product choice
Brand choice
Dealer choice
Purchase timing
Purchase amount
To Kotler (1997), Buyers decision was the result of decision process, it consisted offive steps: problem recognition, information search, evaluation, decision, and post
purchase behaviour. Decision process was affected by four factors such as: cultural,
social, personal, and psychological. These factors and buying decision process belong
to buying behaviour, and was impacted by product, price, place, and promotion.
(Figure 2.2)
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Social and CulturalInfluences
Outputs:PsychologicalInfluencer
Inputs: Product,needs, stimuli,information
Processing purchase
Determinants decision
InhibitingFactors
Figure 2.3: Model of buying behaviour (Howard - Sheth, 1969)
Figure 2.3 mentions buying behaviour model of Howard-Shed (1969), Purchase
decision was influenced by social and cultural influences, psychological influencer,
input factors. Input factors were included product, needs, stimuli, information.
However, there was inhibiting factors to prevent making decision, for example: high price,
payment term, ugly looking of product.
Three above models indicated that there are differences in classification of factorsimpacting on buying decision, but they reflect almost the main factors. Generally, the
above frameworks reveal that buying decision is the result of decision-making process. This
process is also impacted by many factors such as: environmental factors, individual
determinants, and inputs.
2.2 Environmental factors
According to Schoefer (1998), consumers are not isolated units but are members of a
society, interacting with others and being influenced by them. These social
attachments include cultural factors and social factors.
2.2.1 Cultural factors
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Culture is "the set of basic values, perceptions, wants and behaviours learned by a
member of society from family and other important institutions (Kotler, 1997).
Culture also mandates the success or failure of specific products and services. A
product that provides benefits consistent with those desired by members of a culture
has a much better chance of attaining acceptance in the marketplace (Solomon, 1993).
A culture can be divided into sub-cultures and social class. (1) Sub-cultures based onnationalities, religions, age, geographic regions or ethnic identity. (2) A social class is
a social category, usually defined by its members having roughly equivalent socio-
economic status. Social class are societys relatively permanent and ordered division
whose member share similar value, interests and behaviours (Kotler, 1997).
2.2.2 Social factors:
Social factors can strongly affect on consumers behaviour; it consists of reference
group, family, role and status (Kotller, 1997). Individuals are surrounded by peer
groups (reference groups), family, other people, so all can be primary and direct in
individuals influence (Howard - Sheth, 1969). Most people have several reference
groups, such as friends, families, colleagues, religious and professional organisations
(Dibb et al., 1997). A large number of purchase decisions are influenced by a persons
interaction with his family, friends, relatives and acquaintances (Gupta & Chundawat,
2002).
(1) Generally, the more conspicuous a product, the more likely it is that the brand
decision will be influenced by reference groups (Dibb et al., 1997; Kotler, 1997). An
individual may also seek information from the reference group about other factors
regarding a prospective purchase, such as where to buy a particular product. The degree
to which a reference group will affect a purchase decision depends on an individual's
susceptibility to its influence and the strength of his/her involvement with the group (Dibb et
al., 1997; Kotler, 1997).
(2) Family members constitute the most influential primary reference group, because
family members will share benefits and reliabilities related buying decision. But the
significant level of influence depends on the understanding of family members on
product.
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(3) 51 % investors owing individual stock said that they relied on advice from
professional financial advisors when making investment decision (Paula J Dalley,
2006). Stock is not consumed goods, it is intangible to represent for investment item, and
sometime it may get loss. The choice of buyer will be influenced by surround peoples
recommendation (K Schoefer, 1998).
(4) Role and status sometimes influence on the buying behaviour.
(5) Advice: According to Richins and Root-Shaffer (1987), in a study on personal
influence in buying cars, identified three basic types of WOM communications:
product news, advice giving and personal experience. Product news is information
about the product such as features or performance attributes. Advice giving relates to
expressions of opinions about a product. Personal experience involves comments about
product attributes or reasons for buying the product. Whereas product news informs
consumers, advice and personal experience are likely to influence consumer decisions.
This, in turn, suggests that each of these types of communication is probably most
important in different stages of the decision-making process. Product news, for
example, is important in creating awareness about a product and its features. Hearing
about product experiences from friends or relatives support the consumer in the
evaluation of the relative merits of one brand or another. Finally, through the opinion
of 'relevant others', advice giving is important in making the purchase decision stage.
2.3 Individual influences
The manner in which the individual consumer influences the decision-making process
is central to an understanding of consumer behaviour. To Kotler (1997), these
influences can be classified into personal and psychological factors.
2.3.1 Personal factors
Personal factors are mentioned by Kotler (1997), Dibb et al. (1997), such as age and
life cycle stage, occupation, economic circumstances, life style, and personality and
self concept.
(1) Age and life cycle stage has changed over time and buying decision has
changed following.
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(2) Occupation help person to know well about related goods and affects the
goods choices, individuals have above average interest in stocks which concern in
their occupation or their working field.
(3) A persons economic circumstances will affect product choice.
(4) Lifestyle is a persons pattern of living as expressed in his or her activities,
interests and opinions, the changing of consumer values affect buying
behaviour.
(5) Personalityprovides the consumer with a central theme and a structure for
the individual so that a consistent pattern of behaviour can be developed
(Kotler, 1996), (Brassington and Pettitt, 1997), (Kotler, 1997), (Dibb et al.,
1997).
(6) The basic of self concept premise is that peoples possessions contribute to and
reflect their identities.
2.3.2 Psychological factors
A persons buying choices are influenced by four important psychological factors such as:
motivation, perception, learning and beliefs and attitudes (Kotler, 1997).
(1) Motives are internal factors that energise behaviour and provide guidance to
direct the activated behaviour. They will affect which needs a consumer
regards as important and therefore the priority in which they should be
satisfied. Maslow's theory of motivation, for example, suggests that needs are
arranged in a hierarchy, from the most pressing to the least pressing.
According to this theory, a consumer would seek to satisfy lower needs (e.g.
physiological needs) before progressing to higher needs such as self-esteem or
status (Feldman, 1989).
(2)Perception represents the process of selecting, organising and interpreting
information inputs to produce meaning. Information inputs are the sensations
received through the senses, i.e. sight, taste, hearing, smell and touch.
However, each consumer receives, organises and interprets this sensory
information in an individual way (Dibb et el., 1997), (Kotler, 1997),
(Brassington and Pettitt, 1997).
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(3)Learning describes changes in an individuals behaviour arising from
experience (Kotler, 1997). Most human behaviour is learned. Not only do
consumers acquire and remember product names and characteristics, but they also
learn standards for judging products, places to shop, problem-solving abilities,
behaviour patterns and tastes. Such learned material, stored in memory,
significantly influences how a consumer reacts to each situation that he/she faces
(Engel et al., 1993; Wilkie, 1994).
(4) A beliefis a descriptive though that a person has about something (Kotler,
1997). Beliefs make up product and brand images that affect buying behaviour;
it may be based on real knowledge, opinion or faith. Beliefs based models of
investor behaviour received attention in the finance literature over the last few
years, research in psychology indicated that individuals sometimes expect trend
to continue and sometimes expect mean-reversion (Kahneman and Tversky,
1971, 1973).
(5) An attitude describes a persons relatively consistent evaluations, feelings
and tendencies toward objects, people, events and his/her activities. As such,
attitudes strongly influence how consumers will act and react to products and
services (Kotler, 1997; Dibb et al 1997).
(6) The herd behaviour is one attribute of psychology and is referred to as the
action of trade by which individuals suppress their on beliefs, expectations,
information and their investment decision solely on the collective actions of the
market (Andre Farber et al., 2006). Individual investors in Vietnam stock
market do not base on their own expectation of stocks, but follow the majority
rule (Investment review, 2006), (Saga.vn, 2006), (stock forum, 2006).
Evidences that make individuals to imitate the actions of others are as follows:
(i) Insiders buying: top management of company (Executives and
Directors) know their business ultimately than any outsiders, so the
think of many investors is that there should be a way for investors to
benefit from observing what insiders are doing. Insiders buying will
impact on buying decision of investors. Insiders are indeed better
informed and earn abnormal returns (Jaffe, 1974), (Finnerty, 1976),
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(Seihun, 1986, 1988), (Rozeff and Zaman, 1988), (Lin and Howe, 1990),
(Zeng et al, 1999).
(ii) The trading volume is linked inextricably to liquidity (Benston
and Hagermen, 1974; Stoll, 1978), the association between trading
activity and stock market returns (Gallan et.al., 1992; Hiemstra and
Jones, 1994).
(iii) Buying or selling of foreign investors effect on the behavior
of
domestic investors (Yeon, 1994). The participation of foreign
investors positively impact on Vietnam stock market; however it also
creates the herd behavior of local investors who watch and follow the
buying of foreign investors. According to those investors, foreign
investors have more knowledge and experience in stocks and big
capital.
2.4 Decision making process : a major part of consumer behavior is the decision
process used in making purchases. This decision-making process, according to Engel et al.
(1993), includes five stages:
(1) Problem recognition represents the beginning of a consumer's decision-
making process. At this stage the consumer perceives a need and becomes
motivated to solve the problem that he/she has just recognised. Once the
problem is recognised, the remainder of the consumer decision-making process
is invoked to determine exactly how the consumer will go about satisfying the
need (Wilkie, 1994),
(2) Information search can be defined as the motivated activation of
knowledge stored in memory or acquisition of information from the
environment (Engel et al., 1993). As this definition indicates, information
search can be either internal or external in nature. In the internal search, the
consumers search their memory for information about products that might
solve the problem. This information may be based on past experience of the
product, if they cannot retrieve enough information from their memory for a
decision; they seek additional information in an external search. The external
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search may focus on communication with friends and colleagues, comparison of
available brands and prices, marketer dominated sources, such as television or
press advertisements, and public sources (Engel et al., 1993; Loudon and Della
Bitta, 1993; Ennew, 1993; Dibb et al., 1997).
(3) Evaluation of alternatives was to make a choice. Four tasks are involved:
the consumer must (i) determine the evaluative criteria to use for judging
alternatives, (ii) decide which alternatives to consider (iii) assess the
performance of considered alternatives, and (iiii) select and apply a decision
rule to make the final choice (Engel et al., 1993). Consumers must also
determine the set of alternatives from which a choice will be made (that is, the
evoked set). In some situations, the evoked set will depend on the consumer's
ability to recall alternatives from his/her memory. If consumers lack prior
knowledge about choice alternatives, they must then turn to the environment for
assistance in forming their evoked set (Engel et al. 1993). A consumer may also rely
on his/her existing knowledge for judging the performance of choice alternatives
along salient evaluative criteria.
(4) The outcome of the alternative evaluation stage is an intention to
buy (or
not to buy). In general, this will be the product which has the most satisfactory
performance in relation to the evaluative criteria (Assael, 1992; Ennew, 1993).
(5) Post-purchase evaluation: the consumer decision-making process does not
end when a purchase has been made. Once the product is purchased, the will
evaluate its performance in the process of consumption. The outcome is one of
satisfaction or dissatisfaction.
Following Howard - Sheth (1969) model of consumer behavior, between the inputs
and outputs are the 'constructs', the processes which the consumer goes through to
decide upon his or her actions. The inputs that consumer receives are product, needs, stimuli,
information.
2.4.1 Good News
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The economics and finance literatures proved the effect of economic news on asset
returns, economists have revealed the relationship between news and the volatility of
returns. Merton (1997) develops a static model of asset prices in which investors only
trade stock that they have information about. The news releases, reports, as well as
other information of stock will impact on stock's price (Rick Wayman, 2003). The
release of new information effects on price volatility and volume of stock, specifically,
utilization of the announced information by investors is evidenced by greater trading
volume (Bae et.al, 1999). Word-of-mouth has also been studied as a mechanism
through which consumers convey both informational and normative influences in the
product evaluation (Arndt (1967); Brown and Reingen, 1987). Good news may give
the stock a short-term pop (http://www.newsalert.com). Empirical literature of Andrea
Frazzini (2006) reported that stock price appear to drift after major corporation news
announcements. Good news is events to make stock price increase, so it will impact on
the stock selection of individuals. These events include earning announcements
(Mendenhall, 1991), (Abarbanell and Bernard, 1992), tender offer and open market
repurchases (Lakonishok and Vermaelen, 1990), (Ikenbery et.al., 1995), takeover bid
activity (Jensen and ruback, 1993), seasoned equity offer (Jagadeesh, 2000),
management earning forecast (Jennings, 1997), Public announcements of insider trade
(Seynhun, 1986, 1988), headline news (Chan, 2003) and R&D expense increase
(Eberhat et.al., 2004).
2.4.2 Stocks stimuli
According to Davis et al. (1974) characteristics of the product are often a major factor
influencing a customers purchasing. Products benefit is the main motivation of buyer
to choose product. Consumer behavior comprises the behavior pattern of decision units
(individuals and groups) which precede, determine and follow on decision process for
the acquisition of need satisfying - products (Du Plessis and Rousseau, 1999). It
includes what they buy, why they buy it, when they buy it, where they buy it, how
often they buy it and how often they use it (Schiffman & Kanuk, 2000). Stocks are
special goods, buying stocks means that to perform investment activity, win or loss of
investment depends on stock choice. Qualities of stocks are high profitability, so to
choose right stocks for buying is very important to individuals. There are some
criterions of stocks which investors usually consider when making decision. As
mention of the website http://www.e-articles.info/, Stocks have distinct
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characteristics, and as general economic conditions change, they behave in special
ways.
(1) Income stocks must be paid higher dividends than comparable companies.
High profitability of stock is the most important indicator; it is measured by profit
and capital ratio
(2) Blue-chip stocks are high-quality stocks with a long history of earnings and
dividend payments, these stocks are often good long-term investments.
(3) Growth stocks are stocks of growth company which are positioned for
future growth and capital appreciation, and their market price can change
rapidly. Defensive stocks tend to be stable and relatively safe in declining
markets. According to Mr. Nguyen (Securities and investment magazine,
2007), investors need to have criterions of stock for their selection.
(4)The P/E (Price Earning Ratio) compares the stocks price to its earnings,
this ratio must be less than 20 (Warren Buffett).
(5) Stock price has momentum of increasing a good trend of stock price.
The
trend is your friend (Marty Zweig, 1998), the trend is the basis of all profit, and
we need long term trends to make sizeable money. (6) Liquidity commoves
with returns and predicts future returns (Amihud, 2002), Chorida et.al (2001),
Jones (2001), Bekaert et.al (2003). The influence of investors on stock liquidity
may be further reinforced by the influence of their trading practices on stock
price (Lakonishok et.al., 1992). The variation in market liquidity is an
underlying risk factor in stock market (Pastor and Stambaugh, 2003), (Acharya and
Pedersen, 2005).
2.4.3 Knowledge is the theoretical or practical understanding of a subject (Wikipedia).
Karl Derek, managing director of an Australian Contacts Consultants International,
commended on Vietnam stock market: it is due to domestic investors desire to get as
much money as they can in a short time, they are aping one another to enter the market
without any knowledge, and as a result, the share prices are being terribly pushed day
by day.
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(1) Knowledge is also used to mean the confident understanding of a
subject,
potentially with the ability to use it for a specific purpose (Hey and Jonathan, 2004),
knowledge help individuals to have a good at fundamental and technical analysis of
stock.
(2) Experience creates prior knowledge of individual, prior knowledge can be
conceptualised in terms of experience or as being subjective or objective (Duhan et al.,
1997). The higher the levels of prior knowledge about a product, the more developed
the schema of the product is (Marks and Olson, 1981). Experience-based knowledge
can be defined as familiarity with products, familiarity may result from search
experience, usage experience (Park and Lessing, 1981) or it can be defined
experientially as product-related experiences of the consumer with the product (Alba and
Hutchinson, 1987), and on the observation that individuals tend to believe that they get
knowledge through their experiences, Duhan et al., (1997).
(3) Predictability : theory and empirical research proved that stock returns are
forecastable (Fama and French, 1998). Fama and Schwert (1997), Keim and
Stambaugh (1986), Fama and French (1998), Kothari and Shanken (1997) show that
financial indexes of stock can be used to predict the expect returns.
(4) Training: Investors can acquire their knowledge by two ways: (1) the impact of
personally experienced investment outcomes on future actions tells us some thing
important about how investors learn. (2) Individual investors can learn about their stock
selection ability from their training courses, and learning from training courses can support
investors to reduce mistakes.
2.5. Buying decision
According to Odean (1999), the results for stock purchases are in part due to an
attention effect. When buying a stock people do not tend to systematically scan
thousand of list shares until they find a good buy. The extent of instrumental action
is likely to vary for different degrees of complexity of the decision-making process
(Assael, 1992). Buying decision of stock is making choice among listed stocks on
market; investors buying decision will choose the most favourite stocks. Buying
decision in this study mentions how to making choice of stocks in market.
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2.2. Research model and hypotheses
2.2.1 Research model
Except some professional investors, almost individuals in Vietnam stock market are
novice investors. Of courses, high returns is the target of investment activity, but too high
profitability expectations in short time make novice investors easy to be impacted by many
factors. The Vietnamese stock market has recently developed with instability. Basing on
the literatures of buying behaviours and empirical actions of investors in market, the
research model for this study has been inferred.
H1
Advice
H2
Good news
H3
Stock stimuli Buying Decision
H4
Knowledge ofinvestor
H5
The herd
behavior
2.2.2. Hypotheses
If consumers lack prior knowledge about choice alternatives, they must then turn to the
environment for assistance (Engel et al, 1993). Thanks to VN index which boomed
from 500 points (03/2006) up to over 1,100 points (03/2007), some individual
investors got big profit from reselling stocks in market. Therefore, it attracted many
peoples anticipating in Vietnams stock market. Being less knowledge and eager for
gain big profit soon, individuals often hesitate to select stock in market; consequently,
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their buying decision of individuals is easy to be influenced by advice, or by
consultancies of surrounding peoples or agencies. Thus, it is hypothesized that:
H1: Advice impact on stock selection of individuals.
Almost of individual investors in Vietnams stock market did not plan their targets of
investment, they buy stock at low price and are ready to resell at higher price for profit,
and they expect stock price rising up as soon as possible. Any event making stock price
increase will influence on buying decision of investor, especially good news to be
announced (Mendenhall, 1991), (Abarbanell and Bernard, 1992). Hence, the second
hypothesis is stated as follows:
H2: Good news strongly impacts on buying decision of investors.
When evaluating the products in the evoked set, consumers may employ a number of
different evaluative criteria in making their decision. These criteria are products
characteristics or features that the consumer wants (Loudon and Della Bitta, 1993),
(Kotler et al., 1996), (Engel et al, 1993). Expectation of investors is stocks returns;
hence they will choose stock that can help them to maximize their profit. Stocks
stimuli influence the stock selection of individuals. The third hypothesis is therefore
supposed:
H3: Stocks stimuli strongly impacts on stock selection of individuals.
To satisfy the expected returns, investor must understand the characteristics of stock which
he/she chooses; this depends on individuals skill such as analysis, experience,
predictability, and learning. Two people with the same motivation and the same
situation may act quite differently (Kotler, 1997), that is because their recognition and
evaluation of alternatives are different. Knowledge is the theoretical or practical
understanding of a subject (Wikipedia). So Knowledge impacts on stock selection of
individual on Vietnams stock market. It is hypothesised that:
H4: Knowledge of individual investor strongly influence on buying decision.
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Literature on Draft
buying decision questionnaire(1)
Pilot study Draft
(Face to face questionnaire
interview, N=30) (2)
Quantitative study
- N = 320
Final - Cronbach alphaquestionnaire - EFA
- Multiple regression
Figure 3.1 Research process
Indepth
interview
Modification
Based on literature on buying decision, a draft questionnaire was prepared, these
questions was consulted experts about correctness of questionnaire. The next was
conducting a pilot study, questionnaire was adjusted and completed, and then they
were used for main study. Data was collected from survey and coded in SPSS
software. Scales and exploratory factor analysis used to assess reliability of scale,
model, and hypotheses. Finally, multiple regression was applied to result in findings.
3.4.1 Questionnaire design
Basing on the literature of consumer behavior, and result of in-depth-interview, we
build a table of measurement scale for construction to ensure the reliability of scale.
Reliability and validity are important aspects of questionnaire design; a perfectly
reliable questionnaire elicits consistent responses (Suskie, 1996). Five-point
measurement scales of the questionnaire were compiled basing on scale of Rennis Linker
(1932), and following seven (07) guidelines for design a useful questionnaire of Leary (1995).
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TABLE 3.1 MEASUREMENT SCALES FOR CONSTRUCTS IN THE MODEL
CONSRUCT ITEM
Advices SFA01
(ADF)
SFA02
SFA03
SFA04
SFA05
Good News GIF06
(GIF)
GIF07
GIF08
GIF09
GIF10
Stocks SSF11
stimuli
(SSF) SSF12
SSF13
SSF14
SSF15
SSF16
Knowledge PFA17
(PFA )
PFA18
OBSERVED VARIABLE
- My friends advices impacts on my
selection of stock X
- My relatives advices is a basic
factor for my selection of stock X -
My colleagues advices is
important factor influencing on my
choice of X
- Advices from my familys
members affect on my choosing
stock X
- My brokers advice about stock X
impacts on my selection of X
- As soon as getting good news of
earning announcement of stock X, I
will choose X immediately- My selection of stock X is
impacted by good news of equity
offer of company X
- Good news of company X s
performance affects on my selection of
stock X
- As soon as Good news of tender
offer and open markets of company X
to be announced, I will select
stock X
- Good news of company Xs
expansion impacts on my choice ofstock X
- High profitability (EPS) of stock X
impacts on my selection.
- Because of the high liquidity of stock
X, I will choose stock X.
- Because stock X is Blue chip, I
will choose stock X
- Good price trend of stock X impact on
my choice
- My selection of stock X is
impacted by reputation of companyX
- Price to earning (P/E) of stock X
impacts on my choice of X
- My understanding of stock Xs
indicators influences on my
selection of X
- My experience is a base for me to
choose stock X
MODIFIEDFROM
- K Schoefer (1998)
- Koller (1997)
- Did et al (1997)
- Howard - Sheth
(1969)
- Paula (2006)
- Abarban and
Bernard (1992)
- Mendenhall
(1991)
- Jagadeesh (2000)
- Jennings (1997)
- Lakonishok and
Vermaelen (1990)
-Jensen &Rubakul
(1993)
- Eberhat et.al(2004)
- Davis et al (1974)
- Amihud (2002).
- Subrahmanyam
(2001)
- Nguyen (2007).
- Marty Zweig
(1998)
- Lakononishok
Schleifer & Vishy(1992)
- Warren Buffett -
Kotler (1997). -
Dibb et al (1997) -
Duhan et al
(1997)
- Fama and French
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PFA19 - My predictability tell me to choose (1998)
stock X - Kothari and
PFA20 - My training course of stock Shanker (1997)
supports my selection of stock X - Howard sheth
(1968)
The herd IPF21 - I choose stock X following - Andre Faber et.al,
Behavior insiders buying (2006).
(IPF) IPF22 - Many investors buy stock X, so it
impacts on my buying of X - Barberis and
IPF23 - I select stock X because X has the thaler
big quantities o
IPF24 - Many foreigners buy stock X, so I - Barberis et.al,
choose X (1998)
3.4.2 Pilot study
Primary questionnaire was used to conduct pilot interview with 30 individual investors
to identify wording problems, ambiguities and understanding. Due to small sample
size (N=30), we chose only one stock among listed stocks on market, which had the
biggest bid orders in previous 2 day before pilot survey, FPT (stock name: FPT) was
selected because it had the most numerous bid orders at date of June 08, 2007. Pilot
survey was implemented on 11th and 12th of June, and randomly sampling for pilot
survey was applied; during interviewing, interviewer tried to exchange idea about
questionnaire as much as possible. Then the questionnaire was adjusted for next main
study.
3.4.3 Main study
3.4.3.1 Representative stock for study
In main study: stocks for survey must represent for all listed stocks on market. A group of 12
stocks were selected and ensured that their bid orders must gain over 50% rate of total bid
orders of market.
The representative stocks for interviewing with each respondent was random, it means that
interviewer did care whether respondent already bough the representative stock or not.
Questionnaire was filled with name of representative stock.
3.4.3.2 Sample size and sampling method
Sample size determination is perhaps one of the most important aspects in the design
of a reliability study. If the sample size is too small, the test will lack power and the
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confidence interval will be too large. But too large sample size will be wasteful of
resource. Depending on purpose of research, there are many ways to choose sample
size: (1) following Hair et.al. (1998) sample size is at least from 100 to 150,
(2)minimum sample size should be 200 (Hoelter, 1983), (3) the sample size should be
at least five to twenty times the number of parameters to be estimated in order to get
reliable and interpretable results (Bollen, 1989). As said above, multiple regression
was applied to analyze data in this study, so sample size was based on the formula
N>=50 + 8m (Tabachnik and Fidell, 1989), in which m was the number of
independent variables. Therefore, theory samples size of this study should be 242 (50
+ (24 X 8)), but we estimated 360 questionnaires. So, the sample size was conducted
with 360 individual investors attending at stock exchange of 17 securities companies,
15 of them are in HoChiMinh and 2 remainders are in Bienhoa (please see appendix
3..).
Random sampling is the best single way to obtain a representative sample (Gay, 1987).
So, this research was applied the random sampling method, interviewer randomly
chose respondents at securities companies and make sure that respondent is investor;
the numbers of respondents will depend on security companies size (please see
appendix 3..)..
3.4.3.3 Data collection
Currently, there are 109 listed stocks trading on HSTC; we chose 12 stocks as a group
for this research, this group of stocks had highest rate of bid orders on market, it
gained the rate at 59% of total bid orders on the date of June 15, 2006 (see appendix
3). The survey was conducted from 17 - 20 June, 2007 in HoChiMinh city and
Bienhoa.
After interviewed, only 320 of 360 questionnaires can be used for data analysis, the
remainder was eliminated because of too many missing answers or has not yet
interviewed.
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3.4.3.4 Method of data analysis
After checked the correctness and completeness of data, coding and keying data into a
database in SPSS was implemented (SPSS version 11.5). Descriptive statistics was used
for all variables to describe the mean, frequency, percentage, and standard deviation as
well as to profile the respondents information.
3.4..3.5 Assessment of scales reliability:
Reliability is the measurement of the internal consistency of the construct, observed
variables depict the common construct. High reliable constructs are those in which the items
are highly inter-correlated, it means that they are measuring the same construct (Hair et.al.,
1992).
Scale reliability analysis is applied to calculate Cronbach alpha and item total
correlation. Cronbach alpha is employed to test the reliability of measuring scale of each
construct, the constructs with cronbach alpha values are > 0.6 and item total correlation
is >0.3 to be accepted (Nunnally & Burnstein, 1994).
3.4.3.6 Assessment of uni-dimensionality, convergent and discriminant validity:
After eliminated variables with unreliability, factor analysis was developed to assess test
uni-dimensionality, convergent validity and discriminant validity.
Method of factor analysis: (1) testing correlation of variables with KMO and the
Bartletts test of sphericity, (2) Extraction with principal component method, analysis of
correlation matrix, and extracting at eigenvalues over 1, (3) rotation with varimax method,
(4) suppress absolute values less than 0.1.
(a) Assessment of unidimensional construct: According to Neuman (1999),
unidimensionality measures a single construct and all items in a scale fit together. Kaise
Meyer value (KMO) must be higher than 0.6 (Kaise, 1970, 1974), the Bartletts test of
sphericity (Bartlett, 1994) reached statistic significance (sig =0.000).
(b) Assessment of convergent and discriminant validity:
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Convergent validity means that multiple measures of the same construct hang together or
operate in similar ways (Neuman, 1999).
Discriminant validity means that the items of one construct hang together, but also
diverge or negatively associated with the other constructs (Neuman, 1999).
The measurement scale was purified by reviewing each construct and deleting items that
load on multiple constructs or had low item-to-construct loadings 3), the result has
problem.
Assessing hypotheses: (1) checking significant statistic to know whether predication
of independent variable to be rejected or accept. If the significant (p) is lower than 0.05
it means the hypothesis related to that factor failed to reject and if p is greater than
0.05 means that hypothesis fail to accept. (2) In terms of the level of the influence on each
independent variable to dependent variable, if the standardized coefficient (beta) is high
indicating that strongly impact on independent variable to dependent variable and if beta is
small, the influence is low.
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CHAPTER 4
FINDINGS AND DISCUSSION
4.1. Sample profile
4.1.1. Gender
61.3% 38.7%
Male Female
Figure 4.1: Respondents gender
From figure 4.1 above, the respondents of survey were 320 in total, male was 196
(61.3 %), and female was 124 (38.7 %). This indicated that Male was more interesting
and participating in stock market. Men have more social interaction and more risk
taking.
4.1.2. Age
46.0%
6.9%
36.3%
1.2% 9.7%
under 20 21-30 31-40 41-50 Over 51
Figure 4.2: Respondents age
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Figure 4.2 above indicates that the individual investors age from 21-30 are the one
who invest on stock highest which holds 46% and followed by the older group 31-40
(36.3%). The youngest groups under 20 years old is less interesting in stock (6.9%)
4.1.3 Education
Figure 4.3 below shows that most of investors have well educated, almost 70%
participants are graduated at university, 10% participants are at the level of
postuniversity and another 16% people are at college level.
post university 9.7%61.9%
university
college 15.9%
10-12 7.5%
1-9 0.6%
refusal 4.4%
Figure 4.3: Respondents education
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4.1.4 Occupation
Other 9.7%
Student 8.4%
Retailer 15.0%
house working 4.4%
Worker 2.5% 28.4%Office staff
Manager 21.6%High rank officer 10.0%
Figure 4.4: Respondents occupation
From the figure 4.4 above, the results shows that office workers are those who are most
interesting on stock investment which holds 28.4% and followed by management level
(21.6%) and next is retailers (15%).
4.1.5 Year of participation
50.3% 44.4%
1.9% 3.4%
less 1 year 1-2 years 2-4 years over 4 years
Figure 4.5: Experiences on stock
Figure 4.5 shows that almost of respondents are novice investors, 94.7 % of them has
less than 2 years participating in stock market. This indicates that Vietnam stock
market has just boomed for 2 recent years. Especially, VN index increased 150% in
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last year; it attracted lots of new investors (50.3%). Only a few (5%) of respondents took
part in market more than 2 years.
4.1.6 Times of bid orders
over 100 orders
51-100 orders
10-50 orders
less 10 orders
12.9%
15.6%
45.6%
25.9%
Figure 4.6: Times of orders
Figure 4.6 shows that 74.1 % of respondents place bid orders very often (over 10
times), only 25.9 % order for buying stock less than 10 times. It reveals that most of
respondents are stock traders, because, as mentioned above, 94.7 % of investors are
novice but they trade too much.
4.1.7 Invested amount (VND)
38.1%
12.8%
less 100 mil 101-500 mil
33.8%
15.3%
501 mil - 1 bill over 1 bill
Figure 4.7: Investment amount
Figure 4.7 indicates that 38.1% of respondents are retail investors who has invested
amount less than 100 million (VND), the invested amount category 101 - 500
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(million) is 33.8 %. 12.8% is category 501(mil) - 1bil, the remainder (15.3 %) is over
1 billion. Returns from investment in stock market attract a variety of social strata.
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4.1.7 Descriptive statistic
4.1.7.1 Determinants of buying decision
Table 4.1 Descriptive StatisticsStd.
Advice from my friends
Advice from relatives
Advice from colleagues
Advice from family
members
Advice from broker
Good news of dividends
Good news of equityoffer
Good news of earning
forecast
Good news of bid offer
Good news of expansion
High profitability (EPS)
High liquidity
Good trend of price
Company's reputation
Understanding
ExperiencePredictability
Training
Insider's buying
Buying of many
investors
High volume buying
Buying of foreigninvestors
First choice
Intention of buying
Buying laterHigh probability of
buying
Possibly buying in
addition
Valid N (listwise)
N Minimum Maximum
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320 1 5
320
Mean Deviation
3.06 1.112
2.84 1.053
2.92 0.984
2.84 1.190
2.33 0.986
3.79 0.813
3.73 0.890
3.88 0.808
3.44 0.858
3.56 0.897
3.83 0.838
3.74 0.887
3.08 0.867
3.51 0.903
3.61 0.853
3.35 0.7893.49 0.845
3.18 0.992
3.63 0.838
3.38 0.932
3.52 0.892
3.34 0.912
3.21 1.032
3.48 0.899
3.74 0.811
3.71 0.822
3.59 0.840
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The descriptive statistics of observed variables measuring determinants of buying
decision is described in table 4.1.
The impacting of observed variables range from 1 to 5, it expresses the aware level of
investors on factors impacting on their selections. There are individuals who
completely agree with statement, but some investors have absolutely disagree
The mean of these variables are ranging between 2 and 4, and the standard deviation is
about 1. The impacting of variable on each investor was big difference; there are many
factors impacting on the choice of investors. So depending on their own perception
and situation, whether investor will be influenced or not and the level of influence will
be different. Further analysis will be implemented by multiple regression in next part.
4.1.7.2 Buying decision
Table 4.2 shows the measurement of buying decision, the range of choice was from 1 to 5,
the mean of investors choice was above 3, standard deviation is around 1. It indicates
that there is difference in stock selection of each investor; generally investors have intention to
choice stock following their influencers.
4.2 Assessment of measurement scale
Table 4.2 Descriptive Statistics
Std.
First choice
Intention of buying
Ready to buy
High probability ofbuying
Possibly buying in
addition
Valid N (listwise)
N Minimum Maximum Mean Deviation
320 1 5 3.21 1.032
320 1 5 3.48 0.899
320 1 5 3.74 0.811
320 1 5 3.71 0.822
320 1 5 3.59 0.840
320
To reduce measurement error can follow several paths, validity and reliability of
measure must be applied to assess the degree of measurement error in any measure.
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Validity is the degree to which a measure accurately represents what it is supposed to.
Reliability is the degree to which the observed variable measures the true value and is
error free. Determinants influencing on the stock selection of individuals are measured
by 5 dimensions: (1) Social factors, (2) Good news, (3) Stocks stimuli, (4) Personal factors,
(5) psychological factors.
4.2.1 Assessment of reliability
4.2.1.1 Reliability of constructs scales
The analysis of constructs scale showed acceptable reliability with Cronbach alpha
higher than 0.6 (See Table 4.2): (1) Cronbach alpha of Advice factors is 0.8031, (2)
good news: 0.7287, (3) stocks stimuli: 0.749 after deleted SSF16 variable, (4)
knowledge factors: 0.7285, (5) the herd behaviour: 0.8251. Furthermore, all of
corrected item-total correlation are higher than 0.3 except SSF16 variable to be
eliminated. After tested reliability, all observed variables can be used for next analysis.
4.2.1.2 Reliability of buying decisions scale
Buying decisions scale consists of 5 observed variables, Cronbach alpha: 0.8076 > 0.6 (see
table 4.2). Corrected item-total correlation is also higher than 0.3. So buying decisions
scale can be reliable with our sample.
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Table 4.3 Result of reliability test
Observe Scale Scale Corrected
Variables Mean Variance Item- Squared Alpha
if Item if Item Total Multiple if Item
Deleted Deleted Correlation Correlation Deleted
Advices: Alpha = .8031
SFA01 10.9156 10.3408 .6105 .4122 .7577
SFA02 11.1406 10.5037 .6352 .4278 .7503
SFA03 11.0625 10.6669 .6710 .4585 .7416
SFA04 11.1406 10.2717 .5585 .3161 .7770
SFA05 11.6531 11.7570 .4757 .2370 .7970
Good News : Alpha = .7287
GIF06 14.6156 6.0179 .5174 .4043 .6719
GIF07 14.6719 5.7572 .5142 .3954 .6721
GIF08 14.5281 6.0682 .5081 .2676 .6755
GIF09 14.9656 6.2402 .4122 .2199 .7115
GIF10 14.8438 5.7937 .4967 .2707 .6794
Stock's stimuli : Alpha = .6376(Alpha = 0.7490 if deleted SSF16)
SSF11 16.4906 6.7272 .5125 .3161 .5395
SSF12 16.5719 6.2769 .5838 .3793 .5053
SSF13 16.7844 7.3609 .3261 .4235 .6100
SSF14 17.2344 6.7380 .4817 .2522 .5498
SSF15 16.8031 6.5411 .4987 .2825 .5407
SSF16 17.6937 9.5172 -.1096 .2352 .7490
Knowledge: Alpha = .7285
PFA17 10.0156 4.0405 .5705 .3334 .6377
PFA18 10.2781 4.7030 .4081 .2052 .7260PFA19 10.1375 3.9936 .5964 .3580 .6229
PFA20 10.4531 3.7596 .5142 .3078 .6761
The herd behavior: Alpha = .8251
IPF21 10.2281 5.3177 .6140 .4155 .7957
IPF22 10.4875 4.6519 .7151 .5272 .7483
IPF23 10.3469 4.8981 .6839 .4748 .7639
IPF24 10.5250 5.1216 .5910 .3688 .8067
Buying decision: Alpha = .8076
TBF28 14.5219 6.8898 .5724 .4115 .7822
TBF29 14.2563 7.2006 .6312 .4555 .7585TBF30 13.9969 7.5454 .6397 .4447 .7583
TBF31 14.0219 7.4760 .6458 .4628 .7561
TBF32 14.1406 7.9645 .5028 .3059 .7965
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4.2.2 Factor analysis
4.2.2.1 Assessment of unidimensionality of construct.
Before performing principal component analysis, inspection correlation matrix andadequacy of factors were implemented. The Kaise Meyer value was 0.757 exceeding
the recommended value of 0.6 (Kaise, 1970, 1974), this level of adequacy can be used
for next analysis. The Bartletts test of sphericity (Bartlett, 1994) reached statistic
significance, supporting the factorability of the correlation matrix. The table 4.3 shows
the reliability statistics.
Table 4.4 Reliability statistic
KMO and Bartlett's TestKaiser-Meyer-Olkin Measure of Sampling Adequacy.
Bartlett's Test of Sphericity Approx. Chi-Square
Df
Sig.
0.757
2,197.650
231
0.000
4.2.2.2 Assessment of convergence and discriminant valid
Variance explained and cumulative variance explained for the factor solution.
Determination of factors was based on eigenvalue, factors with eigenvalue higher than 1 can
be used for factor analysis. There are five factors which have eigenvalues bigger than 1 and
explained 57.592 % total variance (Table 4.4).
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Table 4.5 Total Variance Explained
Component
Initial Eigenvalues
% of Cumulative
Rotation Sums of Squared
Loadings
% of CumulativeTotal
1 4.246
2 2.717
3 2.253
4 1.821
5 1.633
Variance %
19.298 19.298
12.351 31.649
10.243 41.892
8.275 50.167
7.425 57.592
TotalVariance %
2.887 13.124 13.1242.684 12.199 25.323
2.540 11.544 36.867
2.284 10.382 47.249
2.275 10.343 57.592
After preliminary analyses and consideration, we proceeded the extraction the factor
by using principal components with Varimax rotation method. To assure that factor
loading had the practical and statistical significance, the variables with loading less
than 0.4 or several loading were eliminated. After several rotations, variable of SSF13
was deleted because of their small loading (0.4. This factor is related to theimpacting of surrounding people on the selection of individuals. Factor 2 is called
The herd behaviour having eigenvalues 2.717 explained 12.351 % of total variance,
all variables composed the function influencing on the herd behaviour of investor and
had the minimum loading 0.735. Factor 3 is called Good news to consist of variables
that was components of the functioning Good news of stock; these variables had
loading range 0.512 to 0.741. Factor 3 had eigenvalues 2.253 to explain 10.243% of
total variance. Factor 4 is named Stocks stimuli, it comprises variables that revealed
the attractive characteristic of stock, eigenvalues 1.821 explained 8.275 % of total
variance; the lowest loading of these variables was 0.656>0.4. Factor 5 is called
Knowledge factor to comprise variables that express investors competence, the
loading of variables was range 0.657 to 0.756. Factor 5 had eigenvalues 1.633
explained 7.425 % of total variance.
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Table 4.6 Rotated Component Matrix(a)
Component
Advice from colleages
Advice from relatives
Advice from my friends
Advice from family
members
Advice from broker
Buying of many investors
High volume buying
Insider's buying
Buying of foreign investors
Good news of dividends
Good news of equity offer
Good news of earning
forecast
Good news of expansionGood news of bid offer
High liquidity
High profitability
Good trend of price
Company's reputation
Predictability
Understanding
Training
Experience
1 2
0.807 0.106
0.786
0.772
0.7230.631
0.844
0.781
0.743
0.735
-0.150 0.203
0.175
0.1620.186 0.177
0.120
0.139
0.107
0.228
3 4 5
-0.101
0.162
0.105
0.123
0.255 0.106
0.229
0.175 0.129
0.741
0.726
0.725 0.159
0.612 0.1290.512 0.222 0.103
0.754
0.155 0.752
0.668
0.667 0.166
0.793
0.189 0.226 0.743
0.160 0.738
-0.288 0.659
% of Variance 19.298 12.351 10.243 8.275 7.425
Initial Eigenvalues 4.246 2.717 2.253 1.821 1.633
Cronbach Alpha 0.8031 0.7287 0.7490 0.7285 0.8076
The result of reliability and factor analysis indicated that all variables were reliability
and validity. Cronbach alpha of all constructs satisfied the requirement of coefficient
of reliability (>0.6), variables belong to each construct had the high correlation.
Validity also adapted for study because the scale (1) conforms to its conceptual
definition, (2) in unidimensional, (3) meets the necessary levels of reliability.
Legendre (1805)and Gauss (1809) puplished and developed linear regression, the
earliest form of linear regression was the method of least squares. However, Gauss
claimed that he had known the method since 1795. To identify and to test the
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relationship between determinants affecting investors and their buying decision and their
significant level, linear regression was applied.
4.3.1 Model assessment and testing.
The research model has four factors as independent variables and buying decision as
dependent variable, independent variables consist of social factors, good news, stocks
stimuli, personal factor and psychological factor, dependent variable is buying
decision.
Table 4.7 Model Summary(b)
Model R R Square
1 0.352 0.124
Adjusted R Std. Error of the
Square Estimate
0.110 0.62723
Coefficient of determination (R2) is 0.124, its mean that independent variables can
measure 12.4