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Behaviours in the Stock Market: An empirical study

Dispa, Aymeric (2020) Behaviours in the Stock Market: An empirical study. Masters thesis, Dublin, National College of Ireland.

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Abstract

This study has two main purposes. Its first purpose is to analyse the influence of sociodemographic characteristics and investment experience of individual and institutional investors on their investment behaviours in the stock market. The second purpose of the present paper is to study the impact of the investment behaviours on the investment decisions following the market selloff in March 2020 that preceded the emergence of COVID 19. Additionally, this study seeks to analyse the potential impact of the social distancing measures on the herd mentality influencing the investment decision.

Quantitative techniques were used to address those research problems. Firstly, a survey was designed based on existing literature in the field of behavioural finance. Then, the survey was distributed online to more than a thousand investors, of whom 124 completed it. Out of those 124 participants, 104 met the criteria to be selected and be part of the sample studied. Lastly, a data analysis was performed on the collected data using both descriptive and inferential statistics.

This study shows that most of the sociodemographic characteristics of the investors as well as their experience have an impact on the level of influence behavioural biases have on their investment decision. Another finding of the present paper is that institutional investors are not influenced by the same set of behavioural factors than individual investors. This paper proves that institutional investors tend to remain more unbiased and tend to base their investment decisions on the fundamentals of the underlying stock, whilst individual investors are influenced by the availability, the gambler’s fallacy, and the loss aversion biases.

In regard to the influence of the investment behaviours on the investment decisions following the emergence of the coronavirus, several correlations were found between the behavioural factors influencing the investment decision and the decisions taken by the investors. It shows the influence of the behavioural biases on actual investment decisions taken by investors following the market selloff in March 2020. Finally, this study found not significant impact of the social distancing measures on the herding behaviour.

This study fills several gaps in the literature. One of those gaps is that it compares the influence of a wide spectrum of investment behaviours between individual investors and individual investors, which has never been performed for such a wide range of behaviours. A second gap is that it analyses the actual impact of the behavioural factors on the investment decisions that preceded the emergence of the coronavirus.

Item Type: Thesis (Masters)
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance > Investment
H Social Sciences > HG Finance > Investment > Stock Exchange
Divisions: School of Business > Master of Business Administration
Depositing User: Dan English
Date Deposited: 17 Feb 2021 18:11
Last Modified: 17 Feb 2021 18:11
URI: http://norma.ncirl.ie/id/eprint/4792

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