The role of financial advice and word-of-mouth communication on the association between investor personality and stock trading behavior: Evidence from Chinese stock market
Section snippets
PsycINFO classification
3120
3920
Investor personality and trading behavior
In the emerging literature of behavioral finance, a number of studies have documented trading behavior of investors based on various psychological explanations. Odean (1998), Gervais and Odean (2001), and Daniel, Hirshleifer, and Subrahmanyam (1998) proposed theoretical models in which investors cannot accurately assess their investment ability because they are susceptible to behavioral biases. Investors in their models become overconfident about their investment skills over a period of time
Participants
The unit of analysis of the present study was individual investors who are engaged in stock trading for their own accounts in Chinese stock market. Data collection was performed through online sampling technique by emailing each respondent a link of a web-based survey. The web-based survey was considered as an appropriate technique to collect data because it was up to the willingness of respondents to answer the survey questions. This type of survey is less prone to social desirability effects
Assessment of the Big Five
Validity of personality constructs were determined using standard psychometric procedures (see Appendix 1). A confirmatory factor analysis (CFA) was also conducted to assess the goodness-of-fit of the Big Five personality model with the data. Various fitness tests such as CMIN/df: 1.894, CFI: 0.976, GFI: 0.935, AGFI: 0.871, RMSEA: 0.052, TLI: 0.957, NFI: 0.949, IFI: 0.971 yielded values that were recommended by Bentler and Bonett (1980), Byrne (1994), Hu and Bentler (1999), Kline (2005), and
Robustness issues
This section documents the results of the tests that are undertaken to examine the robustness of the key findings of current study.
Conclusion, research implications and limitations
This paper addressed three key questions:
- 1)
Are investor personality traits significantly associated with trading behavior?
- 2)
Do the key sources of information used by investors as the foundation of their financial choices have a significant impact on investor's trading behavior?
- 3)
Do these sources of information moderate the relationship of investor personality traits and trading behavior?
The study utilized the Big Five personality framework from Costa and McCrae (1992) and examined the survey results
Acknowledgements
We are very grateful to the editor and the anonymous reviewers for detailed and constructive comments to improve our article. We are also thankful to the participants of the 9th China Financial Review International Conference 2016 held at Shanghai Jiaotong University for their helpful comments. We are also grateful to Mr. Gao Ming Hao at The University of Westminster, UK for proof-reading and editing this article. Lastly we would like to acknowledge the contribution of our colleagues for their
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