జర్నల్ ఆఫ్ బిజినెస్ & ఫైనాన్షియల్ అఫైర్స్

Factors Influencing Individual Investors’ Behavior: An Empirical Study of Pakistan Financial Markets

Abstract

Shafeeq Ahmad

Purpose: The purpose of this study is to determine the factors that influence individual investor behavior in the Pakistani financial markets.
Design/methodology/approach: Cronbach's Alpha, Chi square test, Descriptive statistic and Frequency distribution have been used to find the extent of influence of these 30 variables on the investor's behavior of Pakistan financial market.
Findings: The most influencing factors in terms of order are expected corporate earnings, dividends paid, stock marketability, condition of financial statements, expected dividends, current economic indicators, past performance of the firm stock, broker recommendations, firm status in industry and get rich quick. The least influencing factors by order are religious reasons, political party affiliation, environmental record, perceived ethics of the firm and family member opinions. Two factors are such that they unexpectedly have least influence on the Pakistani investor's behavior that is religious reasons and family member opinions. One factor that is broker recommendation is unexpectedly highly influence Pakistani investors behavior in making their investment decision.
Practical implications: Pakistan is a developing country and due to the volatile nature of market most of the time investors rely on these factors which have been observed in this study. 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 these factors in their decision making in the stock market, thus increasing the rationality of investment decisions for enhanced market efficiency.
Originality/value: Behavioral finance is relatively a new subject in Pakistan. The study examines the factors influencing individual investor's behavior in Pakistan's financial market. The paper is based on a modified questionnaire administered to 102 investors and their response was measured for five groups of thirty variables. The groups are accounting information, firm image/self-image coincidence, neutral information, advocate recommendations and personal financial needs.