Investment Behavior and Stock Preference of an Individual Investor: Evidence from Karachi Stock Exchange

Abstract

The purpose of the research is to study the individual investor’s behavior in Karachi Stock Exchange. In this study data was collected from individual clients at Karachi Stock Exchange. Type of the study is descriptive and deductive approach was used.  The data was collected from 389 respondents at Karachi Stock Exchange with the help of designed questionnaire. The individual behavior is tested with the help of regression analysis. There are three regression models developed to study the relationship and impact of Independent variables (Accounting information & financial literacy, overconfidence, irrationality and biasness in decision making) on three different dependent variables (Preference of capital gain, preference of dividend and gambling). Results explain no relationship toward preference of capital gain but the significant relationships found toward preference of dividend and gambling. So it can be easily concluded that the investors at Karachi Stock Exchange do not prefer capital gain but they want better payout and speculation in the market. There were also studied that the accounting information & financial literacy increase the behavior toward preference of dividend and decrease toward gambling. There have been the evidences found that the investors at Karachi Stock Exchange have irrational behavior and this behavior influences the preference of dividend and gambling.

Keywords:Investment behavior, Capital gain, Dividend, Gambling, Financial Literacy, Overconfidence, Irrationality and Biasness in Decision Making.