Individual Investors’ Stock Trading

Behavior at Amman Stock Exchange Nirvana Dominique F. Bulacan B.S. Econ III

Summary:

Several studies were done regarding the effect of behavior of traders and sellers in the
performance of stock markets. A small exchange in Jordan named Amman Stock Exchange
became the main focus of faculty of Economics and Administrative Sciences in Al-Zaytoonah
University of Jordan to do their research about an individual’s trading behavior affecting the
stock trading in the said market.

There are 272 listed firms in ASE and among the Arab stock exchanges it ranked 8th.
Investors in ASE are few thus stocks are not that liquid and stocks are concentrated in small
number of individuals.

Since ASE operates in a small stock exchange compared to those financial markets in
developed countries they still used the conventional face - to – face way when having
transactions. Hence individual’s biases affect decisions. They do not apply the stock trading
programs that required advanced mathematical models thru the help of technology. What this
journal presented is to distinguish the several factors that influence the decision of an investor
that eventually causes movements in the stock market.

It is still a starting point for ASE because using modern technology in their transactions
arose recently. They are used to the usual way of transaction hence their analyst were not capable
enough to utilized this kind of development.

The journal identified psychological factors that affect individual in having decisions if
how much to invest when it comes to stock exchange. These factors include investor’s age, use
of internet, level of formal education and broker variable.

It was stated the relevance of having transaction individually or in an institutional basis.

It was concluded in one of the studies in Taiwan that individual investors are more prone to
difficulty compared to institutional investors - individual trading results to large losses (Barber,
et al 2009).

Individuals are affected by news, abnormal trading etc. when buying stocks but when
they trade it to secondary markets they do not consider those factors thus they are prone to
Individual Investors’ Stock Trading
Behavior at Amman Stock Exchange Nirvana Dominique F. Bulacan B.S. Econ III

inconveniences. Other studies show that stock trading could be addictive and can be compared to
those engaged in illegal activities like gambling (Konstantaras and piperpoulou, 2011).

It could not be denied that modern technology plays a vital role in financial markets.
Most developed countries used automated program trading that based from mathematical rules
and other trading strategies that required more technology on having transactions. Automated
trading will make the trading activity more convenient and reduce transaction cost. It will also
make the stocks more liquid which the financial markets in third world relied upon.

In order for this study to accomplish the researchers used questionnaires to gather data
from the investors in ASE in February 2010. The dependent variable is the total amount of
money allocated for stock trading. While independent variables are age, education, internet and
broker. Multiple Regression was used to analyzed the data.

The results were stated that the four variables take part a great contribution on how much
money to invest. In terms of age older people tend to be more interested in participating in
trading stocks where they become excited to its result. Education affects the investors’
knowledge about financial market thus it will help them at what level they should put in for their
investment. Through internet investors will have enough access to information about exchanges
in stocks. The broker variable which is the relationship between broker and investor was also
important factor because it turned out those investors in the ASE didn’t trust their brokers.

It was evaluated in ASE that behaviors of investors really affect their decisions in stock
trading since they are still engaged in the traditional face – to - face basis. It was concluded in the
journal that investors should be more aware of the financial market through formal education
hence they will understand the essential role of broker which become the mediator in
transactions. This will help economic efficiency to boost in the market.
Individual Investors’ Stock Trading
Behavior at Amman Stock Exchange Nirvana Dominique F. Bulacan B.S. Econ III

Investor’s decisions actually affect behaviors in stock market. The primary reason is
investors are crucial players in the financial world. Their decisions are necessary for a given
transaction. Whatever the stock exchange is either small or big, factors mentioned in the journal
are still taken consideration with regards to carrying out stock exchanges.

The method used in transactions in stock markets really matter. Indeed using modern
technology will yield positive impacts in financial markets. Through technology access to
information will be easy giving financial intermediaries to improve. It could also reduced
transaction cost and expand liquidity.

This journal is an essential tool to understand stock market in a way that several factors
affect an investor s judgment in selling or buying stocks and the method used in stock exchanges.

Giving importance also to the role of technology that promotes wellness in almost all
aspects of society. .Putting the context of financial market improvement and innovation is
accompanied by technology.

It is still essential to consider your own knowledge and know-how about finance through
gains from education. Truly financial market revolves in decision making done by people. Thus
it is significant that people should not be ignorant on the happenings in the society especially in
finance in order to make choices that will affect your life.