Determinants of Stock Investment Decisions of Sub-urban Investors in Bangladesh

Abstract

Stock market around the world regarded as one of the most dominant indicators of the economic development of a country. Although the economy of Bangladesh grows to ever apex in the year 2019, its capital markets show the worst condition ever and never represent the economic status of the country. Investors lost their confidence and their all rational investment decisions failed to yield capital gains over the years. Thus, the prime objective of this study is to explore the determining factors which instigate the sub-urban investors of Bangladesh in making their investment decisions in the stock market and to investigate the effects of socio-economic variables on the dominant factors. The study has been pursued through a questionnaire survey to collect data from the stock investors of suburban areas of Bangladesh.  Principal Component Analysis (PCA) has been used as a factor extraction method. Descriptive statistics, independent-samples t-test, ANOVA, and Post-hoc tests were employed as statistical tools. PCA derived eight factors and fundamental analysis becomes the most dominant factor that affects the suburban investors in making decisions about a stock. Factor analysis also indicated that investment training, technical analysis, investment literacy training, investment consultancy, trade house proximity, insider trading mechanism, macro-economic factors determine investment decisions. Results of inferential statistics revealed that gender difference affects technical analysis; education level has a large effect on investment training and investment length has an effect on fundamental and technical analysis. However, factors do not differ based on investors’ occupational background and investment training. Policymakers should give concentrated effort to stabilize the stock market as the investors are more concerned about fundamental and technical analysis as well as investment literacy.

Keywords: Capital Market, Sub-urban Investors, PCA, Fundamental analysis, Socio-economic variables, Bangladesh

DOI: 10.7176/EJBM/12-21-07

Publication date:July 31^st 2020