ndividual investors pay most attention to, in order of frequency, earnings, cash, and revenues.Psychology literature shows that increased communication activity occurs morefrequently under conditions of uncertainty (Newcomb 1953). Likewise, accounting and finance studies suggest that information users spend more effort on information acquisition and processing, by expanding their analysis to additional items and private data, when faced with an inferior information environment(Francis and Schipper 1999; Ely and Waymire 1999; Hope 2003).Financial disclosures of higher quality may be more relevant to investors oreasier to use in analysis. On the other hand, high financial reporting quality may reduce the need foradditional information acquisition or processing efforts.

Howard Snyder (1957) studied that human nature being what it is, they are reluctant to take loss until they are forced into it. He focused on behavioral normalness of investor opposing to the behavioral rationality of investors by Miller and Modignliani (1961). Shefrin and Statman (1985) reintroduced Synders 1957 observation about the ivnestors reluctance towards realization of losses as disposition effect developing a behavioral framework in which normal investors are affected by cognitive biases and emotions. The study was pointed at cognitive bias that leads normal investors to consider their stocks one by one in terms of mental accounts distinct from their overall portfolio which distinguishes paper losses from realized losses. Normal investors are reluctant to realize losses because realization closes mental accounts at a loss, thereby realization extinguishing all hope of receovery and inflicting the emotional pain of regret. Shefrin and Statman (1994) offers behavioral asset-pricing theory that recognizes the cognitive biases of investors cause the mean-variance efficient portfolio to deviate from the market portfolio and cause the resulting behavioral betas, calculated relative to the mean-variance-efficient portfolio deviated from market betas. In support, Fama and French (2004) stated that in addition to money payoffs, investors are more interested in pleasure of holding growth stocks or the virtue of holding socially responsible stocks and thus, their tastes have effect on stock prices. Shefrin and Statman (2000) developed behavioral portfolio theory that introduces investors portfolio as layererd pyramids. This study draws back to the study of Arthur Wiensberger (1952) who listed the layers of portfolio from bottom to top as income, balanced, growth and aggressive growth. He considered bonds were the right securities for the income layer, stocks with generous dividends viz. utility stocks right for the balanced layer, stocks that paid modest dividends for growth layer and stocks that paid no dividends right for aggressive growth layer. This supports the later article of Statman (2004) in which he conceptualized the expressive characteristics of investment at the expense of utilitarian characteristics stating that investors want more as expressive benefits like status and feelings of social responsibility than utilitarian benefits of low risk and high expected returns when they choose investments. The expressive characteristics are those that enable normal people to identify their values, social class and life style and to communicate them to others. In this consequences, Statman (2005) introduces the notion of normal investors irrespective of rational investors subject to cognitive bias and emotions and looking forward to the expressive benefits. Arvid O. I. Hoffmann (2007) bases his research on the utilitarian versus expressive benefits to discover investors need surveying sample of 486 investment website users ranging female and male investors, between younger and older investors, and between less knowledgeable and experienced investors and more knowledgeable and experienced investors. He discovers that potential for financial gain was the most important motive followed by other needs namely, free-time activity, problem analyzing nurtured by new learning constructions, safeguard retirement, investment-related conversations with peer, need to affiliate with others. Individuals' investment behavior has explored through a large body of practical studies over the past few decades. To support multiple objectives theory Katona (1960) observed that savings objectives are related to consumption needs under varying horizons and uncertainty over investors life cycle. Roger E. Potter (1971) provides evidence to support the multiplicity of objectives such as quick profits through investments, rapid growth, and investment for saving purposes, dividends, expert risk operation and long-term sustainable growth that affect individual investors attitudes towards their investment decisions basing the study only on the identifications of objectives to hold one particular asset type, i.e. the common stocks.Nagy and Obenberger (1994) examines the most important factors influencing individual stock investors decisions based on 34 variables surveying 137 experienced shareholders. They observe that most of the investors were self-reliant as far as stock price is concerned and use various criteria (financial-nonfinancial) to evaluate stocks. They grouped variables affecting investment decision into seven categories: (i) neutral-information factor: press, price movements and recommendations by investment advisory services (ii) accounting-information factor: financial statement, annual reports & prospectus, valuation techniques and expected corporate earnings in which financial statement & expected corporate earnings weigh high importance to investors (iii) self-image/firm-image coincidence factor: firm reputation, firm status, feelings about firms product & services and perceived ethics of the firm in which firm ethics rank highly as investment consideration (iv) classic factor: classic wealth maximization criteria i.e. expected dividends, taxes, risk minimization received average ranking to investors; (v) social-relevance factor: firms environment, international operation and this group of factors received significant importance of more than 5% of the total sample; (vi) advocate recommendation: recommendation from brokerage houses, stock brokers, friends and co-workers draws marginal rank and (vii) personal-financial needs factor: financial needs, time horizon and diversification requirements in which diversification needs was ranked 2nd important factor after expected earnings. Infact, their study suggests that classical wealth-maximization criteria is mostly considerable factors to the investors keeping other contemporary factors aside. Nagy Robert A. and Obenberger Robert W., University of Wisconsin-Green Bay, Financial Analysts Journal, Vol. 50, No. 4 (Jul-Aug., 1994), pp. 63-68Baker and Haslem (1973) examine the information requirement of individual investors based on a survey of 775 respondents and argue that the most important information sources for them are stockbrokers and advisory services in opposition to financial statements, magazines and annual reports. They concluded that individual investors possess insufficient knowledge to make investment decision and thus, they rely on analyst advices or use heuristics to lead their choices for investment. They also discovered three factors of greater importance: future economic outlook of the company, quality of management and future economic outlook of the industry in which the firm incorporates and other factors such as reputation of the company, price movement, P/E ratio etc receive moderate importance. Thus, the study highlights that investors rely on other factors than the expected financial return to evaluate stocks.Baker, H. K., & Haslem, J. A. (1973). Information Needs of Individual Investors. Journal of Accountancy, 136(5), 64-69.Study of Ulrike Malmendier and Devin Shanthikumar (2003) analyze (i) navet about distorted information in the market for stocks and (ii) stock recommendations by affiliated and unaffiliated analysts for large and small investors. Analysts are more informed about the value of a stock and have incentives to distort this information especially if their brokerage firm belongs to underwriting activity of an investment bank. Malmendier and Shanthikumar using the quote of Michaely and Womack (1998) that Positive analyst coverage after an equity issuance is often viewed as part of an implicit agreement between underwriter and issuer. The study found that (i) Large investors react positively to buy and strong-buy recommendations of unaffiliated analysts, but do not display any abnormal trading behavior after positive recommendations issued by affiliated analysts. Small traders also react equally positively to buy and strong-buy recommendations of both unaffiliated analysts and affiliated analysts. Such trading behavior hurts small investors and generates significantly lower returns than following unaffiliated analysts advice. Malmendier and Shanthikumar put the reasons behind this fact that small investors are nave and it is too costly for them to find out which analyst is affiliated with respect to a specific stock. The study also investigated that (ii) analysts tradeoff between reputational capital with the incentive to generate portfolio transactions and underwriting business when they are providing recommendations for strong sell to strong buy. Sell-side analysts provide profound security analyses and reliable recommendations to customers for investment which earns trading commissions of the as well as good reputation for the analysts that lead to higher compensation while buy recommendations generate trading business and is a precondition for investment banks to get future underwriting deals implied condition of existing underwriting contracts.

Snyder, W. Howard T. 1957. How to take a loss and like it. Financial Analyst Journal, vol. 35, no. 2 (June): 127-151.Miller, Merton, and Franco Modigliani, 1961. Dividend Policy, Growth and the Valuation of Shares. Journal of Business, vol. 34, no. 4 (October): 411-433.Katona, G. (1960). The powerful consumer. McGraw-Hill, New York.Potter, R.E. (1971). An empirical study of motivations of common stock investors. Southern Journal of Business 6(1) 41-48.

In behavioral perspective, investors use the experience of past trends reversals as an indicator of the likelihood of future reversals (Barberis et al. (J. Financial Econ. 49 (1998) 307). Individual investors tend to choose stocks to be growth based on a history of consistent earnings growth.

Nicholas Barberis, Andrei Shleifer, and Robert Vishny (1998) proposed a economical model of investor sentiment of how investors form beliefs that is consistent with the results of Tversky and Kahneman (1974) on the important behavioral heuristic known as representativeness, [People give too much weight to recent patterns in the data and too little to the properties of the population that generates the data] focusing on common psychological factor conservatism, i.e. the slow updating of models in the face of new evidence (Edwards, 1968). The study shows that investors believe the fact of fluctuation of earnings between two states in which earnings are mean-reverting in one state and in other state, earnings tend to raise further followed by an increase. At Each state the investor observes earnings, and uses this information to update his beliefs about which state he is in. The paper concluded that positive earnings surprised followed by another positive surprise retrenches the investor to the second state while positive surprises followed by negative surprise tends the investor to the mean-reverting state.

A Model of Investor SentimentNicholas Barberis, Andrei Shleifer, and Robert VishnyUniversity of Chicago, Harvard University, and University of ChicagoFirst Draft: October 1996This Draft: March 1998_

Thus, the under reaction to market information in particular is consistent with conservatism. Kadiyala Padmaja and Rau P. Raghavendara (2004) studied investor reaction to corporate event announcements: underreaction or overreaction? They identified behavioral bias in the long-run abnormal returns considering four different corporate events namely, share repurchases, seansoned equity offerings, finance acquisition (stock/cash). The study shows that (i) incase of underreaction to information by the investors, company that announces corporate events after release of negative information underperform relative to company that announces the event after the release of positive information and (ii) overreaction to information of the investors, firms announcement after the release of positive information postulates underperformance. Their findings did not support investors overreaction to information. Though, Lack of evidence for a common behavioral explanation bolsters Famas (1998) argument that, on average, investors are unbiased in their reaction to information. In this paper, we are trying to sort out how belief [behavioral factors] can form investment decision by the individual investors.

[Fama, EugeneF.1998.Marketefficiency,long-termreturnsandbehavioralfinance. Journal of Financial Economics 49:283306.].

Padmaja Kadiyala and P. Raghavendra Rau, Purdue University, (Journal of Business, 2044, vol. 77, no. 2, pt. 1) 2004 by the University of Chicago.