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Factors influencing investor behavior: an empirical study of Saudi Stock Market

Author

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  • Muhammad Junaid Khawaja
  • Zainab Nasser Alharbi

Abstract

Purpose - The objective of the study is to determine the factors influencing the behavior of investor in Saudi Stock Market. Design/methodology/approach - The paper uses correlation analysis, factor analysis, reliability and multiple regression analysis on the primary data collected from 125 investors in Saudi Stock Market through a questionnaire distributed randomly. Findings - The results indicate that the factors like past performance of the stocks, financial statements, firm status in industry, the reputation of the firm, and expected corporate earnings have significant influence on the behavior of investors. The factor of the image that a certain company has built for itself over the years on the basis of its financial practices is a large influencer of investor decisions as compared to advocate recommendation factors. The investment behavior is not significantly influenced by gender or age; however, it is significantly influenced by educational qualification, professional experience and investment volume. Research limitations/implications - This paper limits itself to study the factors that influence the behavior of investors. However, it does not address the issue of investor overconfidence and its implications for Saudi Stock Market. Practical implications - This research provides a road map for the investors interested in making their investment decisions by understanding the most influencing factors. Social implications - This research has social implications for government agencies to delineate the required legislation to regulate the investors and also to increase market efficiency. The results show that investors are strongly affected by signals from the government. Originality/value - This research is an original contribution toward the behavioral finance field in Saudi Arabia and can be used as a reference material for investors, companies and government policymakers in Saudi Arabia. This study incorporates investors' individual characteristics and explores factors that influence investor behavior unlike some previous studies using Saudi data.

Suggested Citation

  • Muhammad Junaid Khawaja & Zainab Nasser Alharbi, 2021. "Factors influencing investor behavior: an empirical study of Saudi Stock Market," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 48(4), pages 587-601, February.
    • Handle: RePEc:eme:ijsepp:ijse-07-2020-0496
    DOI: 10.1108/IJSE-07-2020-0496
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    Citations

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    Cited by:

    1. Ritika & Himanshu & Nawal Kishor, 2023. "Modeling of factors affecting investment behavior during the pandemic: a grey-DEMATEL approach," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 28(2), pages 222-235, June.
    2. Faisal Alnori & Moid U. Ahmad, 2022. "Herd Mentality Amongst Equity Investors During COVID-19: Evidences from Saudi Arabia," International Journal of Economics and Financial Issues, Econjournals, vol. 12(4), pages 40-46, July.

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