Abstract

This thesis investigates the behavior of individual investors in the stock market. It examines the factors that influence the decision-making process of investors, including psychological, cognitive, and economic factors. The study uses a survey-based approach to collect data from individual investors in the US, UK, and Australia. The data were analyzed using descriptive and inferential statistics. The results showed that individual investors tend to be influenced by emotion, have overconfidence in their own ability to make decisions, and have a preference for investing in familiar stocks. The results also indicate that individual investors are prone to overreacting to news, and suffer from the disposition effect.

Introduction

The stock market is a key source of capital for businesses and a major source of income for investors. Over the past few decades, the stock market has seen a large increase in the number of individual investors. The behavior of these individual investors has a significant impact on the overall functioning of the stock market, and understanding these behaviors is important for understanding the stock market's dynamics.

This thesis investigates the behavior of individual investors in the stock market. It examines the factors that influence the decision-making process of investors, including psychological, cognitive, and economic factors. The study uses a survey-based approach to collect data from individual investors in the US, UK, and Australia. The data were analyzed using descriptive and inferential statistics.

Literature Review

The literature on individual investor behavior in the stock market is extensive. A number of studies have examined the psychological and cognitive factors that influence the decision-making process of investors, as well as the economic factors.

Psychological and Cognitive Factors

A number of studies have examined the psychological factors that influence the decision-making process of individual investors. Investors tend to be influenced by emotion, and often make decisions based on intuition rather than rational calculation (Akerlof, 1970). They also tend to be overconfident in their own ability to make decisions (Odean, 1998).

Studies have also examined the cognitive factors that influence decision-making. Investors tend to focus on a few stocks and avoid investing in unfamiliar stocks (Barber & Odean, 2001). They are also prone to overreacting to news (Shefrin & Statman, 2000). Finally, investors tend to suffer from the disposition effect, which is the tendency to sell stocks that have gone up in value and hold on to stocks that have gone down in value (Shefrin & Statman, 2000).

Economic Factors

A number of studies have examined the economic factors that influence the decision-making process of individual investors. Investors tend to be influenced by the size of potential gains and losses (Odean, 1998). They are also influenced by the probability of success, and the expected return on their investments (Barber & Odean, 2001).

Methodology

The study uses a survey-based approach to collect data from individual investors in the US, UK, and Australia. The survey was administered online and included questions on the investor's background, their investment strategies, and the factors that influence their decision-making.

The data were analyzed using descriptive and inferential statistics. Descriptive statistics were used to examine the characteristics of the sample, as well as to describe the investment strategies of the investors. Inferential statistics were used to examine the relationship between the factors that influence the decision-making process of investors and their investment strategies.

Results

The results of the study show that individual investors tend to be influenced by emotion, have overconfidence in their own ability to make decisions, and have a preference for investing in familiar stocks. The results also indicate that individual investors are prone to overreacting to news, and suffer from the disposition effect.

Conclusion

This thesis has investigated the behavior of individual investors in the stock market. It has examined the factors that influence the decision-making process of investors, including psychological, cognitive, and economic factors. The study has shown that individual investors tend to be influenced by emotion, have overconfidence in their own ability to make decisions, and have a preference for investing in familiar stocks. The results also indicate that individual investors are prone to overreacting to news, and suffer from the disposition effect.

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