Factors Affecting Individual Equity Investors Behavior in Pakistan

Adeel Tariq1, Asad Afzal

1

u!ayon", Ayesha zahid#, I!ran Ali 1,$1,

COMSATS Institute of Information Technplogy Lahore Campus, PAKISTAN. COMSATS Institute of Information Technology !ehari Campus, PAKISTAN. " Superior #ni$ersity Lahore, PAKISTAN. 4 Ph% &Can'i'ate(, I)ra #ni$ersity Islama*a', PAKISTAN.

A%stract Behavioral finance is concerned with the influence of various factors on investor behavior. Behavioral finance investigates the effects of various economic, psychological and demographic factors on investor decision making. The nature and significance of these variables on investor behavior can be different and interesting in various countries. This study therefore examines the influence of economic, and behavioral, factors in shaping the investment behavior of individual equity investors in Pakistan. The factor includes classical wealth maximization, accounting information, self image!firm image coincidence, neutral information, advocate recommendation and personal financial needs. The study found strong influence of self image!firm image coincidence, neutral information, and advocate recommendation on individual equity investor decision making. "hereas, no influences of factors like classic wealth maximization, accounting information and personal financial needs is found on individual equity investor#s decision making in the context of Pakistan. &ey 'ords( In'i$i'ual e)uity in$estor, *eha$ioral finance, Pa+istani e)uity mar+ets. )E* +lassification( ,-., ,--, N . 1, Introduction /inancial mar+et 'i$ersification ena*les institutional an' in'i$i'ual in$estors to in$est in a greater range of financial pro'ucts. It also facilitates in$estors to 'eci'e an' choose among $arious in$estment options. To 'eci'e *et0een 'ifferent in$estments options, the 'ecision of in$estor is *ase' on economics as 0ell as *eha$ioral factors. These *eha$ioral factors are ta+en into consi'eration of the fiel' of *eha$ioral finance. 1eha$ioral finance gaine' remar+a*le attention in recent years in e2plaining in$estor *eha$ior an' its influence on in$estment 'ecision ma+ing. Stu'ies e2plaining the in'i$i'ual in$estor3s *eha$ior 0ere firstly emerge' a*out -45.3s. 1eha$ioral finance in$estigates the 'ecision ma+ing process that 'eals in *uying or selling of financial assets an' pro$i'es the rational *ehin' 'ecision ma+ing process. Its main focus is on psychological principals use' *y in$estor to ma+e in$estment 'ecision instea' of follo0ing tra'itional finance theories. Tra'itional finance theories as gi$en *y 1ro0n et al. &-446(, 0ho suggests that in$estors are rational in their 0ealth ma2imi7ation an' gui'e' *y financial consi'erations. They are *elie$e' to choose an in$estment 'epen'ing on its ris+8return characteristics as compare' 0ith other suita*le in$estments. 9hereas Theory 0hich 'efines *eha$ioral finance is gi$en *y Khneman an' Tye$s+y &-454(: an' Kahneman &-46 ( states that in$estor may not al0ays appear as rational for in$estment as suppose'. These 1eha$iorists are of the opinion that in$estors may *eha$e irrationally 0hile ma+ing in$estment 'ecisions. 1eha$ioral finance is relati$ely a ne0 concept that has challenge' many ol' hel' *eliefs of tra'itional finance. Shefrin &-444( 'efine' *eha$ioral finance as ;a rapi'ly 'e$eloping area that contracts 0ith the influence of psychology on the *eha$ior of financial professionals<. Num*er of stu'ies in *eha$ioral finance has e2amine' the factors that influence in$estor *eha$ior. %ifferent set of factors ha$e *een use' in $arious stu'ies that influence e)uity selection process of in'i$i'ual in$estor. /or instance Meri+s et al. & ..=( use' fi$e categories namely> accounting information, su*?ecti$e@personal, neutral information, a'$ocate suggestion, an' personal monetary nee's to e2plain the factors that influence in'i$i'ual in$estor *eha$ior. Nagy an' O*en*erger &-44=( use' se$en classifications> social rele$ance, selfAimage@firmAimage coinci'ence, neutral information, classic 0ealth ma2imi7ation, accounting information, a'$ocate recommen'ation, an' personal financial nee's. 9hereas AlATamimi & ..B( use' fi$e categories inclu'ing> self an' firmAimage coAinci'ence, personal financial nee's, neutral information, accounting information, an' a'$ocate recommen'ations to analy7e' the in'i$i'ual in$estor *eha$ior in #AC financial mar+ets. Other stu'ies inclu'e research on in'i$i'ual in$estor in$estigates the effects of cogniti$e *ias on in$estor 'ecision ma+ing e. g. O'ean &-444( fin's that in'i$i'ual in$estor lean to tra'e aggressi$ely, ta+e more ris+s, an' ma+e poor
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Correspon'ing Author. Tel.> D4 A" -AB.=-4 B, $ mail address> imranalinimEgmail.com

in$estment 'ecisions. Similarly, Fhu & .. (: I$+o$ic an' 9eis*enner & ..B(: an' 1ar*er an' O'ean & ..G( hol' that that in'i$i'ual e)uity in$estor e2hi*it local *ias in ma+ing in$estment 'ecisions. !ery little research focus has *een gi$en to i'entify the attri*utes that in'i$i'ual in$estor $alue in their e)uity selection process &Murphy an' Soutar, ..=> Murphy an' Soutar, ..B: Aspara an' Ti++anen, ..6(. Hesearchers stresse' the importance of i'entification of stoc+ attri*utes that influence in'i$i'ual e)uity in$estor *eha$ior. Lee et al. & .--( also hol' that e2isting metho'ologies of stoc+s in$estment incorporates fun'amental, technical an' institutional in$estor analysis an' lac+s in$estigation of the influence of +ey fun'amental factors on e)uity in$estor 'ecision ma+ing. Ma?or focuses of the pre$ious stu'ies are on institutional in$estor, an' less attention has *een gi$e to retail e)uity in$estor *eha$ior &Ali an' Hehman, .-"(. Moreo$er, ma?ority of these stu'ies are in the conte2t of on 'e$elope' countries 0ith limite' focus on 'e$eloping countries. This stu'y fills this gap *y analy7ing the factors that influence the 'ecision ma+ing process of retails e)uity in$estors in Pa+istan. This stu'y 0ill help to un'erstan' these factors an' 0ill ena*le the policy ma+ers to un'erstan' the in'i$i'ual in$estor *eha$ior an' 'ra0 their future policies in the light of the fin'ings of this stu'y. The follo0ing research )uestions 0ill *e a''resse' in this stu'y> To 0hat e2tent classic 0ealth ma2imi7ation factors effects in'i$i'ual in$estor 'ecision ma+ing in Pa+istanI To 0hat e2tent accounting information factors li+e financial statement con'ition an' stoc+ mar+eta*ility effects in'i$i'ual in$estor 'ecision ma+ingI To 0hat e2tent self image@ firm image factors effects in'i$i'ual in$estor 'ecision ma+ing of retails e)uity in$estors in Pa+istanI To 0hat e2tent neutral information factors effects in'i$i'ual in$estor 'ecision ma+ing. To 0hat e2tent a'$ocate recommen'ation factors li+e opinions of the firm3s ma?ority stoc+hol'er an' 1ro+er3s recommen'ation effects in'i$i'ual in$estor 'ecision ma+ingI To 0hat e2tent personal financial nee's factors li+e 'i$ersification nee's an' attracti$eness of nonA stoc+ in$estment effects in'i$i'ual in$estor 'ecision ma+ing in Pa+istanI

Hest of the paper is organi7e' as follo0s: section contains re$ie0 of literature, conceptual mo'el an' research hypothesis. Section " ela*orates the research metho'ology inclu'ing sample an' sampling, measurement an' instrumentation an' proce'ure. Section = pro$i'es results an' 'iscussions in the light of pre$ious researches. /inally, conclusion is pro$i'e' alongA0ith some policy implications. ", +once-tual Fra!e.ork and /evelo-!ent of y-otheses Numerous stu'ies ha$e focuse' on the importance of factors on the in'i$i'ual e)uity in$estor 'ecision ma+ing process an' *eha$ioral finance starte' to recei$e consi'eration of researchers *ecause of its importance to e2plain 'ifferent anomalies of the mar+et. C'0ar's &-46"( fin' that pro$i'es that humans are e2pose' to *iases an' errors in their analysis processes &C'0ar's, -4G6: Philips an' C'0ar's, -4GG: Kahneman an' T$ers+y, -45" an' -45 : T$ers+y an' Kahneman, -45=: Phillips et al. -4GG( conclu'es that these result 'o not essentially simplify to situation in 0hich e2perience' 'ecision ma+ers ta+e familiar 'ecisions e.g. &Cinhorn, -45G: Murphy an' 9in+ler, -455: C**esen an' Konecni, -46.: Jogarth, -46-: 1er+eley an' Jumphreys, -46 : /ischoff, -46 an' -465: an' /un'er, -465(. Cohn et al. &-45B( pro$i'e tentati$e e$i'ence on in$estors3 ris+ assumption attitu'es an' hol' that ;as in$estor 0ealth increases his ris+ a$ersion ten' to 'ecrease<. Le0ellen et al. &-455( foun' capital gain, o$erall return an' 'i$i'en' yiel' preferences of in$estor 'iffers 0ith age, e'ucation, se2 an' income le$els. 1lume an' /rien' &-456( ga$e goo' inferences a*out e)uity in$estor preferences. %e 1on't et. al. &-46B( 0or+e' on *eha$ioral finance an' pro$i'e' e$i'ence in support of pre$ious stu'ies regar'ing cogniti$e *ias resulting in stoc+s mispricing at NKSC. 1arn0ell &-465( pro$i'es that lifestyle characteristics> occupation, ris+Aa$ersion an' control orientation are helpful in pre'icting in'i$i'ual in$estor *eha$ior. Statman an' Cal'0ell &-465( also connecte' *eha$ioral factors to capital *u'geting. There are also 'ifferent stu'ies focuses on in$estor as consumer, an' these stu'ies pro$i'e that 'ifferent in$estor segments sho0s $alue 0ith 'ifferent share attri*utes. /our factions recogni7e' &The His+AA$erse in$estors, The C2plorers, The Tra'ers, an' The Contrarian In$estors( ha' 'istinct approaches an' preferences, an' financial professionals 0oul' nee' to un'erstan' these 'ifferences 0hile han'ling such clients. Thaler &-46.( pro$i'es that

there is a clear relation *et0een choices of financial instruments an' *eha$ior of consumers. 9ilco2 &-444( pro$i'es that ;financial mar+ets gi$e a 0ellAoff en$ironment to stu'y *eha$ior of consumer. 9arren et. al, &-44.( also e2amine' the in$estment choices of in'i$i'ual in$estors3 *ase' upon 'emographic characteristics an' lifestyle attri*utes. Shleifer &-444( $ie0e' mar+et efficiency in the conte2t of in$estor3s *eha$ioral factors. Hiley an' Cho0 &-44 ( hol' that as income, age, e'ucation an' 0ealth increases ris+ a$ersion ten' to 'ecreases. Le1aron et al. &-44 ( fin's that ris+ a$ersion of in'i$i'ual in$estor is *ase' on intuiti$e instea' of rational reflections. Nagy an' O*en*erger &-44=( also analy7e' factors affecting *eha$ior of in'i$i'ual in$estor an' pro$i'e' that in$estor prefer 0ealth ma2imi7ation. They also hol' that attri*utes such as firm3s ethical *eha$ior, international an' local *usiness, trac+ recor' relating to en$ironment are gi$en cursory attention *y in'i$i'ual e)uity in$estors. Moreo$er, recommen'ations of family mem*ers, frien's, co0or+ers, *ro+erage houses an' stoc+*ro+ers are also not gi$en much attention *y in$estors. Cpstein &-44=( pro$i'e' that in'i$i'ual in$estors consi'er social information gi$en in the annual general report or CSH report regar'ing corporation pro'uct )uality an' safety information, an' acti$ities relate to en$ironment in their in$estment 'ecision ma+ing. Iyengar an' Lepper L ...M 0ere the first to empirically chec+ choiceAset si7e effects on 'ecision ma+er3s *eha$ior. 9arnery' & ..-( presents a comprehensi$e re$ie0 of premise in *oth fiel' finance an' psychology that may lea' to0ar's *etter consi'eration of the in$estment relate' 'ecisions ma+ing an' its financial mar+ets impact. Jo0e$er, he notice' that people3s choice a*out financial assets is limite'. Peterson & .. ( in$estigate' the cogniti$e psychology an' e2tracte' e$i'ence that has central role to affect in inspiring *eha$ior of the in$esting. Je *riefly pro$i'es an in$estment policy for 'e$eloping the e$entA relate' safety price pattern e2presse' *y the in$esting strategy ;*uy on the rumor an' sell on the ne0s.< Krishnan an' 1oo+er & .. ( pro$i'e' that in$estor3s 'ecision to ma+e a 'ecision to sell or retain stoc+ using analyst3s recommen'ations. Meri+as et al. & .."( also chec+e' the factors affecting *eha$ior of in$estor on Athens e)uity mar+et an' conclu'e' that in'i$i'uals ma+e their 'ecisions of stoc+ purchase using economic $aria*les com*ine' 0ith other 'ifferent $aria*les. The results of Meri+as et al. & .."( in'icate' that the factors are correlate' to each other as pro$i'e' in pre$ious empirical stu'ies on *eha$ioral finance. Malmen'ier an' Shanthi+umar & .."( institute' that ma?or in$estors of stoc+ mar+et create e2traor'inary $olumes of tra'es using positi$e recommen'ations of associate' analyst. Small in$estors apply irregular *uying forces after all helpful recommen'ations, an' also utili7e affiliate' analysts recommen'ations. Jo'ge & .."( e2amine' in$estor3s insight of au'itor in'epen'ence, the *enefits of au'ite' financial statements, an' earnings )uality. Je pro$i'e' that lo0er o*ser$ation of earnings is relate' 0ith larger 'epen'ence on au'ite' financial reports of the firm an' analysis of reports 0hen 'eci'ing a*out in$estment. Ka'iyala an' Hau & ..=( analy7e' tra'ers3 response to organi7ation e$ent 'eclarations an' pro$i'e' that in$estors un'er$alue pre$ious information an' information pro$i'e'. Murphy & ..B( C2amines in$estor3s 'ifferent in$estment preferences for their retirement an' suggests that in$estor sample comprises four significant su*group an' ha$e 'ifferent in$estment preferences 0ith 'ifferent goal. Al Tamimi & ..B( con'ucte' stu'y on #AC stoc+ mar+et an' pro$i'e that the 0ealth ma2imi7ation an' accounting information are the most prefera*le factors for the #AC e)uity tra'er3s *eha$ior. #AC in$estor *eha$ior is least affecte' *y neutral information, religious reasons an' family mem*ers opinion. Nagy an' O*en*erger &-44=( e2plaine' that classic 0ealth ma2imi7ation factors recei$e' normal ratings from in$estors, in spite of their supremacy of the economic *asics of most theories of in'i$i'ual in$estor *eha$ior in their stu'y. Al Tamimi & ..B( pro$i'es accounting information cause an influence on the #AC in$estors3 *eha$ior. So 0hat is relati$e importance of these factors on in'i$i'ual in$estor *eha$iorI Nagy an' O*en*erger &-44=( pro$i'e' that most of the in$estors in the mo'el gi$e importance to factors relate' to accounting information. They also e2plaine' that most of the in$estors select stoc+s on the *asis of )ualitati$e criteria. This presents an alarming challenge to an in$estment society familiari7e' to )uantitati$e analysis an' announcement of the comparati$e prices of the securities. Murphy & ..=( in$estigates a*out the significance of in'i$i'uals in$estment 'ecisions an' stu'y pro$i'es that ma?ority of in$estors ha$e mo'est interest in gam*ling an' are mostly *y nature, longAterm in$estors an' conclu'e' in their stu'y that most of the in$estors rely on e2pertise of the professionals, *ut many in$estors are also cautious of this +in' of information sources. Al Tamimi & ..B( also use' factors lin+e' to selfAimage@firmAimage coAinci'ence to chec+ influence on the #AC in$estor *eha$ior. If it is, 0hat relati$e importance these factors ha$eI Je use' neutral information to chec+ its influence on the #AC in$estor *eha$ior an' pro$i'es a'$ocate recommen'ations as a factor that influences the #AC in$estor *eha$ior. Meri+as et al. & .."( also e2amine' the influence of accounting information, su*?ecti$e@personal, neutral information, a'$ocate recommen'ation, an' personal financial nee's on in$estor *eha$ior in the conte2t of ,ree+

in$estors. Lo L ..BM ma+e an attempt to reconcile efficient mar+ets hypothesis 0ith *eha$ioral finance, 0ith intro'ucing ;A'apti$e Mar+et Jypothesis.< /rame0or+ of his stu'y is 'epen' on some 0ell esta*lishe' 'ifferent principles of competition , mutation, natural selection an' repro'uction an' he pro$i'es the influence of these factors on financial institutions an' efficiency of mar+ets is 'etermine' *y mar+et participants. Kim & ..5( test 0hether in'i$i'uals3 *eha$ior an' preferences for stoc+ ris+, past returns an' *oo+AtoAmar+et assessment are 'ifferent 'epen'ing upon mar+et con'itions. They also in$estigate' in'i$i'uals3 in$esting preferences. They pro$i'e some main 'ifferences in tra'ing *eha$ior in *ull an' *ear mar+et. !asiliou & ..4( in$estigates 0hether 'ecision of capital structure an' firm financing 'e$iate from neoclassical para'igm of tra'itional theories. Their results support timing approach of the mar+et an' opinion of the managers an' their *eha$ior on matters concerning 'eterminants of capital structure. They also sho0s that capital structure an' relationship of stoc+ prices are *etter e2plaine' in *eha$ioral finance an' 0ithin the post Keynesian para'igm. Ki'a & .-.( chec+e' in'i$i'uals3 in$estment 'ecisions of in'i$i'ual3s are influence' *y factors as choiceAset si7e &i.e., e2tensi$e $s. limite' choices set( an' 0hether the influences is minimi7e' 0ith e2perience' in$estment 'ecisions. They pro$i'e that para'o2 of choice is most apparent for less e2perience' in$estor an' not for more e2perience' in$estors. More recently Chan'ra an' Kumar & .--( also hol' that factors li+e a'$ocate recommen'ation, accounting information an' neutral information influence in'i$i'ual in$estor *eha$ior. 2.1 Hypothesis Development 1ase' on research gap an' research )uestions the follo0ing research hypotheses are constructe' for this stu'y> 1( In'i$i'ual e)uity in$estor 'ecision ma+ing in Pa+istan is influence' *y classical 0ealth ma2imi7ation theorem. "( In'i$i'ual e)uity in$estor 'ecision ma+ing in Pa+istan is influence' *y accounting information. #( In'i$i'ual e)uity in$estor 'ecision ma+ing in Pa+istan is influence' *y selfAimage@firmAimage coinci'ence. $( In'i$i'ual e)uity in$estor 'ecision ma+ing in Pa+istan is influence' *y neutral information. 0( In'i$i'ual e)uity in$estor 'ecision ma+ing in Pa+istan is influence' *y a'$ocate recommen'ation. 1( In'i$i'ual e)uity in$estor 'ecision ma+ing is influence' *y personal financial nee's in Pa+istani e)uity mar+ets. 2.2 Research Model 222222222222222222222222222222222222 Insert Figure I here 222222222222222222222222222222222222 #, 3ethodology 3.1 Sample and Sampling Target population in the stu'y is the in'i$i'ual in$estor participating in three 'ifferent stoc+ e2changes of Pa+istan. There are three stoc+ mar+ets in Pa+istan namely: Karachi Stoc+ C2change &KSC(, Lahore Stoc+ C2change &LSC( an' Islama*a' Stoc+ C2change &ISC(. KSC is the largest stoc+ e2change of Pa+istan, 0hich 0as a0ar'e' *est stoc+ e2change of the 0orl' in ..=. In or'er to collect 'ata =.. )uestionnaires 0ere 'istri*ute' to in'i$i'ual in$estors in all these three stoc+ e2changes, B= )uestionnaires 0ere recei$e' an' "4 )uestionnaires 0ere usa*le lea$ing a response rate of aroun' G.N. The lists of in'i$i'ual e)uity in$estors 0ere o*taine' from stoc+ *ro+ers an' sur$ey )uestionnaires 0ere maile' to the respon'ents. Personally a'ministere' sur$ey 0as also con'ucte' to enhance the response rate. In$estors from 'i$erse *ac+groun's 0ere incorporate' in or'er to generali7e the fin'ings of the stu'y. 3.2 Measurement and Instruments A mo'ifie' )uestionnaire is use' to e2amine the influence of 'ifferent economic, *eha$ioral an' 'emographic factors on in'i$i'ual in$estor e)uity selection process in Pa+istan e)uity mar+ets. Si2 factors inclu'e' in the )uestionnaire are> classical 0ealth ma2imi7ation, accounting information, selfAimage@firmAimage coinci'ence, neutral information, a'$ocates recommen'ation an' personal financial nee's. The in'epen'ent $aria*les use' in this stu'y are classic 0ealth ma2imi7ation 0hich consists of four items, accounting information consists of four items, self image@ firm image consists of eight items, neutral information consists of se$en items, a'$ocate recommen'ation consist of four items an' personal finance nee's consists of four items. All these items are measure' on a BApoint Li+ert scale &-O least influential to BO most influential(. These items 0ere ta+en from

pre$ious stu'ies of &Nagy an' O*en*erger -44=, Meri+as et al. .." an' Al Tamimi ..B( %epen'ent $aria*le use' in this stu'y is in'i$i'ual 'ecision ma+ing 0hich consists of fi$e items measure' on a BApoint Li+ert type scale &-O strongly 'isagree to B O strongly agree(. The instrument to measure in'i$i'ual e)uity in$estor 'ecision ma+ing is a'opte' from Muhamma' an' Ismail & ..4(. 3.3 Procedure This is an e2ploratory stu'y *ase' on primary 'ata. The 'ata has *een collecte' from in'i$i'ual e)uity in$estors. The 'ata 0as collecte' through structure' sur$ey )uestionnaire 0hich 0ere maile' an' personally a'ministere'. The collecte' 'ata 0as entere' into SPSS sheet for on0ar' analysis. The relia*ility analysis 0as con'ucte' through SPSS. Structural e)uation mo'eling &SCM( techni)ue is a'opte' to test the hypotheses. AMOS latest $ersion is use' for path analysis an' structural e)uation mo'eling approach. SCM is $ery popular techni)ue o0ing to its 'ata sensiti$ity an' o*?ecti$ity. SCM allo0s 'e$elopment of conceptual mo'el, 'e$elopment of hypotheses an' testing of hypotheses to scientifically pro$e the stu'y. $, 4esults and /iscussion This section contains the interpretation of 'ata analysis an' 'iscussions of these results in the light of pre$ious literature. The analysis use' in this stu'y inclu'es, relia*ility analysis to chec+ the health of 'ata for analysis an', regression analysis to test hypotheses. The regression analysis is con'ucte' through structural e)uation mo'eling techni)ue. SCM techni)ue incorporates results of mo'el fit, path analysis an' the mo'el. The result of relia*ility analysis sho0s the $alue of Cron*ach3s alpha .5-G, 0hich is )uite satisfactory. The 'ata is consi'ere' relia*le is the $alue of Cron*ach3s alpha is e)ual or greater than .5.. The 'ata for relia*ility analysis consiste' on total of "G items of *oth in'epen'ent $aria*les an' the 'epen'ent $aria*le. 222222222222222222222222222222222222 Insert Ta%le I here 222222222222222222222222222222222222 The results of mo'el fit analysis also pro'uce' satisfactory results. Although $alues of mo'el fit 'o not meet all re)uire' stan'ar's, *ut mo'el can *e accepte' o$erall. The results o*taine' from the mo'el fit in this research 'epicts the pro*a*ility le$el as . "-, 0hich confirms the mo'el fit as a'e)uate, as the $alue of P shoul' *e > ..-. The Ta*le I pro$i'es the regression 0eights an' acceptance or re?ection of the 'e$elope' hypotheses. In or'er to accept any hypothesis the $alue of P shoul' *e < ..B. Our %& states that in'i$i'ual in$estor3s 'ecision ma+ing in influence' *y class 0ealth ma2imi7ation factor, *ut analysis 'o not statistically appro$e this hypothesis. The $alue of P is . "4, 0hich is far greater than ..B 0e, therefore re?ect our %&. Nagy an' O*en*erger &-44=( also foun' the me'iocre influence of classic 0ealth ma2imi7ation on in$estor *eha$ior. Accounting information also 'o not influence on in$estor *eha$ior as $alue of P is . 64, therefore, 0e re?ect our %' as 0ell. This fin'ing also 'epict that in$estor 'o not *eha$e rationally in the e)uity mar+ets of Pa+istan. Hational in$estors ten' to incorporate accounting information such as financial statements, higher 'i$i'en's, e2pecte' corporate earnings in their in$estment 'ecision ma+ing. The stu'y foun' significant influence of self image@firm image coinci'ence on in$estor 'ecision ma+ing as $alue of P is .. 4, 0e therefore accept our %(. Neutral information li+e current economic con'itions, financial press reports, price tren's of securities an' corporations3 an' commitment to0ar's social responsi*ility is also ha$ing significantly positi$e influence on in$estor3s 'ecision ma+ing. Nagy an' O*en*erger &-44=( also foun' neutral information ha$ing strong influence on in$estor *eha$ior in their stu'y. The $alue of P is .. -, lea$ing our %) as accepte'. Interestingly a'$ocate3s recommen'ations inclu'ing recommen'ations from family mem*ers, frien's an' coA0or+ers an' stoc+ *ro+ers is also ha$ing strongest an' significant influence on in'i$i'ual in$estor3s 'ecision ma+ing. The $alue of P in this case is ..-4, resulting acceptance of our JB as 0ell. Al Tamimi & ..B( pro$i'es a'$ocate recommen'ations as a factor that influences the #AC in$estor *eha$ior. Chan'ra an' Kumar & .--( also hol' that in$estor *eha$ior is influences *y a'$ocate3s recommen'ation. /inally, personal financial nee' is ha$ing no influence on in'i$i'ual e)uity in$estor3s 'ecision ma+ing 0ith $alue of P .6-B: 0e re?ect our JG, therefore. Meri+as et al. & .."( also hol' that in'i$i'ual in$estor consi'ers they are )uite in'epen'ent of personal financial nee's $aria*le. The results are )uite logical an' are in line 0ith many of pre$ious stu'ies on in$estor *eha$ior. /igure II sho0s the structural mo'el of this stu'y, the mo'el sho0s the nature of relationship *et0een the in'epen'ent $aria*les i.e. the factors affecting in'i$i'ual e)uity in$estor3s 'ecision ma+ing, the 'epen'ent $aria*le of this stu'y.

222222222222222222222222222222222222 Insert Figure II here 222222222222222222222222222222222222 0, +onclusion The main o*?ecti$e of this research is to e2amine the influence of prescri*es factors on in'i$i'ual in$estor3s 'ecision ma+ing process. The factor inclu'es classical 0ealth ma2imi7ation, accounting information, selfAimage@firmAimage coinci'ence, neutral information, a'$ocate recommen'ation an' personal financial nee's. There is $ery less amount of literature a$aila*le on in$estor *eha$ior in the conte2t of Pa+istan. Therefore, this stu'y pro$i'es a gui'eline for future researchers in this fiel'. It also pro$i'es some policy implications for corporations, an' in$estment professionals an' the in$estors of course. The stu'y foun' significantly positi$e influence of selfAimage@firmAimage coinci'ence, neutral information, an' a'$ocate recommen'ation on in'i$i'ual in$estor3s 'ecision ma+ing process. 9hereas, no influence is foun' for classical 0ealth ma2imi7ation, accounting information, an' personal financial nee's. This 'epicts that in'i$i'ual e)uity in$estors3 in Pa+istan are not rationale as they *ase on their 'ecision ma+ing on the recommen'ations of family, frien's, coA0or+ers an' stoc+ *ro+ers rather on accounting information. This fin'ing is ha$ing certain implication, for stoc+ e2change authorities, 0ho shoul' acti$ely 0or+ for in$estors3 e'ucation regar'ing in$estment. The higher the in$estor3s inclination to0ar's recommen'ations of others, the higher 0ill *e chances of mar+et manipulation an' speculation. Similarly, the higher the speculation in the mar+et the less the chances that or'inary person in$est in such stoc+ mar+et. In or'er to ma+e stoc+ e2change a true representati$e of the economy that *ri'ges the gap *et0een sa$er an' the *orro0er. The speculati$e image of stoc+ e2change prohi*its or'inary citi7ens of the country to in$est their sa$ings in such stoc+ mar+et. 4eferences Ali, I., an' Hehman, K.#., Stoc+ selection *eha$ior of in'i$i'ual e)uity in$estors in Pa+istan. *iddle $ast +ournal of ,cientific -esearch, 10567, - 4BA-".. 5"81#7 Al Tamimi, J. A., /actors Influencing In'i$i'ual In$estor 1eha$ior> An Cmpirical Stu'y of #AC /inancial Mar+ets. Proceeding of the .nternational Business -esearch /onference, 0thens, 1reece. 5"8807 Aspara, P. an' Ti++anen, J., Interactions of In'i$i'uals3 CompanyAHelate' Attitu'es an' Their 1uying of the Companies3 Stoc+s an' Pro'ucts. +ournal of Behavioral 2inance, 65"7, 6B84= 5"8897 1ar*er, 1: an' O'ean, T., All that ,litters> The Cffect of Attention an' Ne0s on the 1uying 1eha$ior of In'i$i'ual an' Institutional In$estors, "orking Paper. %aas ,chool of Business, 3niversity of /alifornia at Berkeley. 5"8817 1arne0ell, M. M., Psychographic /haracteristics of the .ndividual .nvestor, in 0sset 0llocation for the .ndividual .nvestor. Jome0oo', Ill.> %o0 PonesAIr0in 5169:7 1er+eley, %. an' Jumphreys, P., Structuring %ecision Pro*lems an' the Q1ias Jeuristic. 0cta Psychologica, 08, .-8 B 5169"7 1lume, M. C. an' /rien', I., The /hanging -ole of the .ndividual .nvestor, Pohn 9iley an' Sons 516:97 Cohn, H. A., Le0ellen, 9. ,., Lease, H. C. an' Schlar*aum, ,. ,., In'i$i'ual In$estor His+ A$ersion an' In$estment Portfolio Composition, +ournal of 2inance. #85"7, G.BAG . 516:07 Chan'ra, A: an' Kumar, H., %eterminants of In'i$i'ual In$estor 1eha$ior> An Orthogonal Linear Transformation Approach. *P-0 Paper 4o. '56' 5"8117 /ischoff, 1., 7ebiasing. .n +udgment 3nder 3ncertainty8 %euristics and Biases. Ne0 Kor+> Cam*ri'ge #ni$ersity Press, = 8=== 5169"7

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9arren, 9. C., Ste$ens H. C. an' McCon+ey, C. 9., #sing %emographic an' Lifestyle Analysis to Segment In'i$i'ual In$estors, 2inancial 0nalysts +ournal. $15"7, 5=A55 516687 9arnery', K.C., ,tock market psychology8 %ow people value and trade stocks. Cheltenham> C'0ar' Clgar 5"8817 Fhu, N., The Local 1ias of In'i$i'ual In$estor. :ale ./2 "orking Paper, 4o <' (<. :ale ,chool of *anagement, #SA 5"88"7

Figure I( In'i$i'ual C)uity In$estor %ecision Ma+ing Mo'el Classical Wealth Maximization

Accounting Information

Self-Image/Firm-Image Coincidence

Neutral Information

Small "#uit$ Investor %ecision Ma&ing !rocess

Advocate

ecommendation

!ersonal Financial Needs

Figure II( Structural C)uation Mo'el

CWM
.72

.60

AI
.23 .08 .03 .28 .07 .08

.08 1

.38

e1

SI NI
.45

IDM
.01

AR
.66

PF

10

Ta%le I( Hegression Analysis y-otheses %& %' %( %) %A %; /; I%M I%M I%M I%M I%M I%M /irection TAAA TAAA TAAA TAAA TAAA TAAA I; C9M AI SI NI AH P/ Esti!ate .-". .-.5 ."4 .=." . 44 A.. B <,E, .--.-..-54 .-6B .- 6 .-.B +,4, -.-56 -..G.-4. .-54 ."=B A. "" P . "4 . 64 . . 4 . . . .-4 . 6-B /ecision He?ect He?ect Accept Accept Accept He?ect

11