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Investor Rationality for Stock Market Decisions


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1 Rohtak, Haryana, India
     

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The Efficient Market Hypothesis (EMH), the central proposition of fmance for the last thirty five years rests on assumption of rationality. But it has been proved that people are ruled as much by emotion as by logic and selfishness. As behavioral finance suggests, everyone makes the best of a bad situation and the situation in the stock market has never been ideal for anyone. The study is based on the primary data to study investor behavior for rationality in financial decision making. In order to test the investor rationality, the factor analysis is used on the data collected through questionnaire filled by the investor for extracting the different behavior characteristics of investors. Some investors were given the questionnaire to fill out in personal and the data from some investors were collected through the e-mail. A total of 100 subjects were included in the survey selected randomly from different places as Rohtak, Sonepat and Jhajjar according to convenient approach. The survey instrument included 44 questions on the devise aspects of investor rationality for fmancial decision making. After collected the data through a five point scaled questionnaire, the scoring is done on the scale and the factor analysis was used to reduce the variables in fewer factors reflecting homogeneous characteristics variables.

Keywords

Investors, Rationality, Irrational, Market Efficiency, Behavior
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  • Investor Rationality for Stock Market Decisions

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Authors

Supriya Dhankhar
Rohtak, Haryana, India
Sanjeet Kumari
Rohtak, Haryana, India

Abstract


The Efficient Market Hypothesis (EMH), the central proposition of fmance for the last thirty five years rests on assumption of rationality. But it has been proved that people are ruled as much by emotion as by logic and selfishness. As behavioral finance suggests, everyone makes the best of a bad situation and the situation in the stock market has never been ideal for anyone. The study is based on the primary data to study investor behavior for rationality in financial decision making. In order to test the investor rationality, the factor analysis is used on the data collected through questionnaire filled by the investor for extracting the different behavior characteristics of investors. Some investors were given the questionnaire to fill out in personal and the data from some investors were collected through the e-mail. A total of 100 subjects were included in the survey selected randomly from different places as Rohtak, Sonepat and Jhajjar according to convenient approach. The survey instrument included 44 questions on the devise aspects of investor rationality for fmancial decision making. After collected the data through a five point scaled questionnaire, the scoring is done on the scale and the factor analysis was used to reduce the variables in fewer factors reflecting homogeneous characteristics variables.

Keywords


Investors, Rationality, Irrational, Market Efficiency, Behavior