Hoang Thanh Hue Ton ¹ & Trung Kien Dao²

¹ School of Management, Shanghai University, Shanghai 200444, China

² School of Economics and Management, Hanoi University of Science and Technology, Hanoi, Vietnam

Correspondence: Hoang Thanh Hue Ton, School of Management, Shanghai University, Shanghai 200444, China. Tel: 86-21-15921373-032. E-mail: ththue14@gmail.com

Abstract

This paper uses the theory of behavioral finance to examine the factors of individual investors’ psychology as well as their effects on investment decisions in the Vietnam Stock Exchange (VSE). This is an empirical study which based on a survey of 422 investors. All of them have had the deep knowledge about finance investment and worked many years in VSE. The final results show that five factors of psychology which are overconfidence, optimism, herd behavior, psychology of risk and pessimistic have influence on investment decisions. To be more detailed, excessive optimism, psychology of risk and excessive pessimistic affect positively on long-term investment of investors while overconfidence and herd behavior have the negative impact. Based on the theory of behavioral finance, this study explains factors of individual investors’ psychology. However, one of the limited of this paper is that it does not mention about negative outcomes of psychology factors on investment decisions. This is considered as a new path to do research in the future for emerging markets like Vietnam.

Keywords: behavioral finance, stock market, overconfidence, optimism, herd behavior, psychology of risk and pessimistic