Mbathesis-Pham Cong Tai

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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

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Mbathesis-Pham Cong Tai