Factors influencing investor behavior: an empirical study of Saudi Stock Market

Abstract

PurposeThe objective of the study is to determine the factors influencing the behavior of investor in Saudi Stock Market.Design/methodology/approachThe paper uses correlation analysis, factor analysis, reliability and multiple regression analysis on the primary data collected from 125 investors in Saudi Stock Market through a questionnaire distributed randomly.FindingsThe results indicate that the factors like past performance of the stocks, financial statements, firm status in industry, the reputation of the firm, and expected corporate earnings have significant influence on the behavior of investors. The factor of the image that a certain company has built for itself over the years on the basis of its financial practices is a large influencer of investor decisions as compared to advocate recommendation factors. The investment behavior is not significantly influenced by gender or age; however, it is significantly influenced by educational qualification, professional experience and investment volume.Research limitations/implicationsThis paper limits itself to study the factors that influence the behavior of investors. However, it does not address the issue of investor overconfidence and its implications for Saudi Stock Market.Practical implicationsThis research provides a road map for the investors interested in making their investment decisions by understanding the most influencing factors.Social implicationsThis research has social implications for government agencies to delineate the required legislation to regulate the investors and also to increase market efficiency. The results show that investors are strongly affected by signals from the government.Originality/valueThis research is an original contribution toward the behavioral finance field in Saudi Arabia and can be used as a reference material for investors, companies and government policymakers in Saudi Arabia. This study incorporates investors' individual characteristics and explores factors that influence investor behavior unlike some previous studies using Saudi data.

Modeling of factors affecting investment behavior during the pandemic: a grey-DEMATEL approach

“…Judgment sampling was considered appropriate for selecting the investors. The criteria for selecting the investors were as follows: (a) having an experience of at least five years of investing in financial markets, (b) investments in at least two investment products, (c) knowledge of investment behavior, and (d) they are endowed with the responsibility of making investment decisions in their family, The sample constituted 76% males and 24% females which is similar to the studies stating that most of the financial decisions are taken by male members of the family (Ritika and Kishor, 2020;Khawaja and Alharbi, 2021).…”

Herd Mentality Amongst Equity Investors During COVID-19: Evidences from Saudi Arabia

“…However, Hirshleifer (2001) concluded that it is important to consider alternative factors that are related to human behaviour, such as psychology and sociology. These factors favour the investors' psychological profile rather than their financials (Khawaja and Alharbi, 2021). Researchers have ongoing attempts to contribute to the development of the investors' behavioural aspects of investment decisions.…”

“…GCC markets are considered in the finance literature due to their importance to the global economy (Alnori et al, 2021;Bugshan et al, 2021). Some studies investigated the behavioural factors related to individual investors in the GCC setting (Abdullah and Hilu, 2015;Alsedrah and Ahmed, 2017;Khawaja and Alharbi, 2021;Matoussi and Mostafa, 2016). For instance, Matoussi and Mostafa (2016) examined the behavioural biases that influence Saudi investors in the main stock exchange (TASI).…”

“…Recently, analysed the factors related to individual investors' behaviour in Saudi stock market. After applying alternative methods across the data collected from 125 investors, Khawaja and Alharbi (2021), found that the investors' behaviour was not influenced by gender, but educational qualification and professional experience are importantly relevant to individual investors' behaviour. Another study conducted by Bouri et al (2021) examined the impact of the COVID-19 pandemic on individual investors' herding behaviour based on 49 global stock markets.…”

“…The role of behavioural factors, in investment decisions, is a controversial issue among equity managers, investors and academics (Jagongo and Mutswenje, 2014;Khawaja and Alharbi, 2021). Herding mentality is important behaviour factors that occurs when investors mimic other investors' decisions without considering proper analysis and valuations (Dhall and Singh, 2020).…”