Demographic Factors and Herding Behaviour of Investors: Moderating Role of Islamic Religiosity

Authors

  • Saeed Ahmad Sabir PhD Scholar, School of Economics, Finance and Banking, Universiti Utara Malaysia
  • Tasawar Javed Assistant Professor, Department of Management Sciences, The Islmia University of Bahawalpur, Pakistan
  • Waseem Ul Hameed School of Economics, Finance and Banking, Universiti Utara Malaysia
  • Hummaira Qudsia Yousaf Assistant Professor, Department of Management Sciences, Superior University Lahore, Pakistan

DOI:

https://doi.org/10.47067/ramss.v3i2.53

Keywords:

Herding behaviour, Islamic religiosity, Demographic factors, Pakistan stock exchange (PSX)

Abstract

Investors indulge in biases while making investment decision because investment decision making in stock market is a difficult process. One of the factors that affect risk taking behaviour of individual investors is Demographic factor. However, little work has been done to investigate the effect of demographic factors on herding behaviour of individual investors of Pakistan stock exchange. Therefore, the ultimate aim of this study is to highlight the role of the effect of demographic factors on herding behavior of investors with moderating role of Islamic religiosity. Quantitative research method was employed and data collected was collected from 166 individual investors by using survey questionnaires. Convenience sampling method was used to collect the data. Partial Least Squares analysis was conducted to test the hypotheses. The findings of this study directed that Islamic religiosity moderate the relationship of demographic factors with herding behaviour. This study is contributed a new empirical insights on behaviour of Pakistan stock market’s investors, therefore the results of this study have implications for policy makers of Pakistan stock exchange (PSX) while they making the strategies related to investment.

References

Ahmed, A. (2010). Global financial crisis: an Islamic finance perspective. International Journal of Islamic and Middle Eastern Finance and Management, 3(4), 306-320.

Alhouti, S., Gillespie, E. A., Chang, W., & Davis, L. (2015). The thin line between love and hate of attention: The customer shopping experience. Journal of Marketing Theory and Practice, 23(4), 415-433.

Ashiya, M., & Doi, T. (2001). Herd behavior of Japanese economists. Journal of Economic Behavior & Organization, 46(3), 343-346.

Barber, B. M., & Odean, T. (2001). Boys will be boys: Gender, overconfidence, and common stock investment. The quarterly journal of economics, 116(1), 261-292.

Bashir, T., Ahmed, H. R., Jahangir, S., Zaigam, S., Saeed, H., & Shafi, S. (2013). Investment preferences and risk level: Behaviour of salaried individuals. IOSR Journal of Business and management, 10(1), 68-78.

Bosner, K., & Lakehal-Ayat, M. (2008). A comparison of risk tolerance and risk capacity among college finance students. Academy of Accounting and Financial Studies Journal, 12(1), 67.

Caparrelli, F., D'Arcangelis, A. M., & Cassuto, A. (2004). Herding in the Italian stock market: a case of behavioral finance. The Journal of Behavioral Finance, 5(4), 222-230.

Chandra, A., Sanningammanavara, K., & Nandini, A. S. (2017). Does individual heterogeneity shape retail investor behaviour? International Journal of Social Economics, 44(5), 578-593.

Chavali, K., & Raj, P. (2016). Impact of Demographic Variables and Risk Tolerance on Investment Decisions: An Empirical Analysis.

Chevalier, J., & Ellison, G. (1999). Career concerns of mutual fund managers. The Quarterly Journal of Economics, 114(2), 389-432.

Chiang, T. C., Li, J., Tan, L., & Nelling, E. (2015). Dynamic herding behavior in Pacific-Basin markets: Evidence and implications.

Chin, W. W., Gopal, A., & Salisbury, W. D. (1997). Advancing the theory of adaptive structuration: The development of a scale to measure faithfulness of appropriation. Information systems research, 8(4), 342-367.

Das, S. K. (2011). An empirical analysis on preferred investment avenues among rural and semi-urban households. Journal of Frontline Research in Arts and Science, 1, 26-36.

Dash, M. K. (2010). Factors influencing investment decision of generations in India: An econometric study. International Journal of Business Management Economic Res, 1(1), 15-26.

Essoo, N., & Dibb, S. (2004). Religious influences on shopping behaviour: An exploratory study. Journal of Marketing Management, 20(7-8), 683-712.

Fernández, B., Garcia-Merino, T., Mayoral, R., Santos, V., & Vallelado, E. (2011). Herding, information uncertainty and investors' cognitive profile. Qualitative Research in Financial Markets, 3(1), 7-33.

G?bka, B., & Wohar, M. E. (2013). International herding: Does it differ across sectors? Journal of International Financial Markets, Institutions and Money, 23, 55-84.

Geen, A. (2013). Risk in the background: how men and women respond: Working Paper, Ramous University Rotterdam, Netherlands.

Geetha, N., & Ramesh, M. (2012). A study on relevance of demographic factors in investment decisions. Perspectives of Innovations, Economics and Business, 10(1), 14-28.

Grable, J., Lytton, R., & O'Neill, B. (2004). Projection bias and financial risk tolerance. The Journal of Behavioral Finance, 5(3), 142-147.

Grable, J. E. (2000). Financial risk tolerance and additional factors that affect risk taking in everyday money matters. Journal of Business and Psychology, 14(4), 625-630.

Hair, Black, W. C., Babin, B. J., Anderson, R. E., & Tatham, R. (2010). Multivariate data analysis (Vol. 7): Pearson.

Harikanth, D., & Pragathi, B. (2012). Role of Behavioural Finance in Investment Decision Making-A Study on Select Districts of Andhra Pradesh, India. International Journal in Multidisciplinary and Academic Research (SSIJMAR), 1(4), 1-15.

Heath, C., & Tversky, A. (1991). Preference and belief: Ambiguity and competence in choice under uncertainty. Journal of risk and uncertainty, 4(1), 5-28.

Hoffmann, A. O., Post, T., & Pennings, J. M. (2013). Individual investor perceptions and behavior during the financial crisis. Journal of Banking & Finance, 37(1), 60-74.

Hon-Snir, S., Kudryavtsev, A., & Cohen, G. (2012). Stock market investors: who is more rational, and who relies on intuition? International Journal of Economics and Finance, 4(5), 56.

Husain, F., & Mahmood, T. (2001). The stock market and the economy in Pakistan. The Pakistan Development Review, 107-114.

Jaiyeoba, H. B., & Haron, R. (2016). A qualitative inquiry into the investment decision behaviour of the Malaysian stock market investors. Qualitative Research in Financial Markets, 8(3), 246-267.

Jamaludin, N. (2013). Religion and individual investment choice decision: the case of Malaysia. International Journal of Business and Social Science, 4(1).

Kaleem, A., Wajid, R. A., & Hussain, H. S. (2009). Factors Affecting Financial Advisor’s Perception in Portfolio Management: With Reference to Pakistan. Paper presented at the 2009 Oxford Business and Economics Conference Program, June.

Kaur, I., & Kaushik, K. (2016). Determinants of investment behaviour of investors towards mutual funds. Journal of Indian Business Research, 8(1), 19-42.

Khan, M. T. I., Tan, S.-H., & Chong, L.-L. (2016). Gender differences in preferences for firm characteristics across different groups of investors. Qualitative Research in Financial Markets, 8(1), 2-15.

Kline, R. B. (2011). Convergence of structural equation modeling and multilevel modeling: na.

Korniotis, G. M., & Kumar, A. (2013). Do portfolio distortions reflect superior information or psychological biases? Journal of Financial and Quantitative Analysis, 48(1), 1-45.

Kumar, S., & Goyal, N. (2016). Evidence on rationality and behavioural biases in investment decision making. Qualitative Research in Financial Markets, 8(4), 270-287.

Levine, S. S., Apfelbaum, E. P., Bernard, M., Bartelt, V. L., Zajac, E. J., & Stark, D. (2014). Ethnic diversity deflates price bubbles. Proceedings of the National Academy of Sciences, 111(52), 18524-18529.

Lin, H.-W. (2011). Elucidating rational investment decisions and behavioral biases: Evidence from the Taiwanese stock market. African Journal of Business Management, 5(5), 1630.

Loibl, C., & Hira, T. K. (2007). New Insights into Advising Female Clients on Investment Decisions. Journal of Financial Planning, 20(3).

Lütje, T. (2009). To be good or to be better: asset managers’ attitudes towards herding. Applied Financial Economics, 19(10), 825-839.

Mohanta, G., & Debasish, S. S. (2011). A study on investment preferences among urban investors in Orissa. Prerna Journal of Management Thought and Practice, ISSN, 974, 1-9.

Nga, J. K., & Ken Yien, L. (2013). The influence of personality trait and demographics on financial decision making among Generation Y. Young Consumers, 14(3), 230-243.

Ngoc, L. T. B. (2014). Behavior pattern of individual investors in stock market. International Journal of Business and Management, 9(1), 1.

Nguyen, T., & Schuessler, A. (2012). Investment decisions and socio-demographic characteristics–empirical evidence from Germany. International Journal of Economics and Finance, 4(9), 1.

Nofsinger, J. R., & Sias, R. W. (1999). Herding and feedback trading by institutional and individual investors. The Journal of finance, 54(6), 2263-2295.

Pak, O., & Mahmood, M. (2015). Impact of personality on risk tolerance and investment decisions: A study on potential investors of Kazakhstan. International Journal of Commerce and Management, 25(4), 370-384.

Parisi, D. R., Sornette, D., & Helbing, D. (2013). Financial price dynamics and pedestrian counterflows: A comparison of statistical stylized facts. Physical Review E, 87(1), 012804.

Prieto, P. M., & Perote, J. (2017). Agents’ Behavior in Market Bubbles: Herding and Information Effects. Economics, 5(1), 44-51.

Prosad, J. M., Kapoor, S., & Sengupta, J. (2015). Behavioral biases of Indian investors: a survey of Delhi-NCR region. Qualitative Research in Financial Markets, 7(3), 230-263.

Sabir, S. A., Mohammad, H. B., & Shahar, H. B. K. (2018). The Effect of Illusion of Control and Self Attribution on Herding Behaviour with A Moderating Role of Information Availability: A Case of Retail investors of Pakistan Stock Exchange. Opción, 34(86), 16.

Sang, S., Lee, J.-D., & Lee, J. (2010). E-government adoption in Cambodia: a partial least squares approach. Transforming Government: People, Process and Policy, 4(2), 138-157.

Sekaran, U., & Bougie, R. (2003). Research methods for business: A skill building approach. Singapore: Willey.

Sham, F. M., & Yusof, S. (2015). Religiosity of Muslim adolescents from single parent families living in government-subsidised settlement. Global Journal Al-Thaqafah, 5(2), 31-42.

Shukor, S. A., & Jamal, A. (2013). Developing scales for measuring religiosity in the context of consumer research. Middle-East Journal of Scientific Research, 13(1), 69-74.

Singhapakdi, A., Vitell, S. J., Lee, D.-J., Nisius, A. M., & Grace, B. Y. (2013). The influence of love of money and religiosity on ethical decision-making in marketing. Journal of Business Ethics, 114(1), 183-191.

Spyrou, S. (2013). Herding in financial markets: a review of the literature. Review of Behavioral Finance, 5(2), 175-194.

Sultana, R., & Butterfield, D. A. (2010). Role of oxidative stress in the progression of Alzheimer's disease. Journal of Alzheimer's Disease, 19(1), 341-353.

Tahir, I., & Brimble, M. (2011). Islamic investment behaviour. International Journal of Islamic and Middle Eastern Finance and Management, 4(2), 116-130.

Talha, M., Ramanakumar, K., & Neelakantan, P. (2015). Investor Psychology and its Influence on Investment Decisions.

Tversky, A., & Kahneman, D. (1973). Availability: A heuristic for judging frequency and probability. Cognitive psychology, 5(2), 207-232.

Wang, H., & Hanna, S. D. (1997). Does risk tolerance decrease with age?

Welch, I. (2000). Herding among security analysts. Journal of Financial Economics, 58(3), 369-396.

Ysseldyk, R., Matheson, K., & Anisman, H. (2010). Religiosity as identity: Toward an understanding of religion from a social identity perspective. Personality and Social Psychology Review, 14(1), 60-71.

Zaidi, F. B., & Tauni, M. Z. (2012). Influence of investor’s personality traits and demographics on overconfidence bias. Institute of Interdisciplinary Business Research, 4(6), 730-746.

Downloads

Published

2020-09-30

How to Cite

Sabir, S. A. . ., Javed, T. ., Hameed , W. U. ., & Yousaf , H. Q. . (2020). Demographic Factors and Herding Behaviour of Investors: Moderating Role of Islamic Religiosity. Review of Applied Management & Social Science, 3(2), 193-203. https://doi.org/10.47067/ramss.v3i2.53