PSYCHOLOGICAL FACTORS AFFECTING DECISION-MAKING OF INVESTORS POST STOCK MARKET CRASHES IN MALAYSIA

Abstract

The purpose of this research is to investigate the influence of psychological factors on investor’s decision-making post stock market crashes in Malaysia. To achieve this purpose, a questionnaire was used as an instrument to gather primary data from investors of stock exchange in Malaysia using non-probability convenience sampling. Total numbers of responses collected using online questionnaire from investors were 321 from 1.4 million investors according to annual report 2018 of Bursa Malaysia Berhad (BursaMalaysia, 2018).

Factor analysis is used to indicate intercorrelations of independent variables and dependent variables. The KMO value of variables indicated 0.785 which is in the middling category and the findings indicate that there is significant relationship between behavioural factors of herd behaviour, overconfidence and risk appetite and investor’s decision-making. Multiple regression analysis and One-Way ANOVA shows that herd behaviour has negative significant influence on investor’s decision-making while overconfidence and risk appetite have positive significant influence on investor’s decision-making. According to multiple regression analysis 86% investor’s decision-making post stock market crashes can be explained by herd behaviour, overconfidence and risk appetite in Malaysia. Furthermore, recommendation for future study is provided in this research.