How Individual Investors Select Stocks: A Case of Karachi Stock Exchange

Ahmed, Faisal Shamim (2015): How Individual Investors Select Stocks: A Case of Karachi Stock Exchange.

Abstract

The research named as “How Individual Investors Select Stocks: A Case of Karachi Stock Exchange” will examine the individual investor’s views regarding making the decision while selecting the stock. This research will comparatively relate the influencing factors that are technical and fundamental analysis, financial statement information, valuation models, yield and profitability ratio analysis, and referral considered by the individual investors while making decision for the stocks that is to be bought or sell from the stock market. The main objective of this research is to find out the influence of the factors that are mostly concerned by the individual investors while stocks selection from the equity market. And to determine the result and analysis of the research the quantitative method has been used as it deals with the numeric facts and numbers and the data is being collected via survey i.e. questionnaire and deductive approach is applied as conclusion of the report is drawn stepwise i.e. starting from theory construction then building up hypothesis then further observation and finally leading to the conclusion. The result of the five independent and one dependent variables are drawn via the Pearson’s Correlation. The results of the Pearson correlation eventually determine that the all the results of the hypothesis on the bottom line is that the approach for the selecting the stocks varies between the individual investors. But, the most and dominating result in terms of percentage of the Pearson’s correlation test suggest that the financial statements information, yield and profitability ratio analysis and technical and fundamental analysis are mostly concerned and had the greater influence; while valuation models and referrals does not have that much influence on the individual investors while selecting the stocks from the Karachi Stock Exchange.

• Item Type: MPRA Paper
• Language: English
• Keywords: Small Investors; Stock Exchange
• Subjects: G - Financial Economics > G0 - General; G - Financial Economics > G1 - General Financial Markets

References

1. Abdulla J. Y., A. (1992). Disclosure needs of major users of corporate reports in Bahrain. Journal of Economic Administrative Science, 8(1), 135-167.

2. Abu-Nassar, M. a. (1996). External users of financial reports in less developed countries: The case of Jordon. The British Accounting Review, 28(1), 73-87.

3. AFP, (. N. (Aug. 11, 2014). Pakistan stocks drop 4.6 per cent as fears grow over protests. Karachi: DAWN Newspaper. Retrieved from http://www.dawn.com/news/1124647

4. Ahmad, B., & Ali, S. B. (2012). Do Individual Investors in Pakistan Prefer Dividends?

5. Ahmad, M., & Ali, S. B. (2008). Technical Analysis in the Stock Markets of Pakistan: A Case of Commercial Banks.

6. Ali, M., & Ali, S. B. (2014). The impact of working capital management on firm profitability and fixed investment in Pakistan.

7. Ali, S. B., & Ali, S. M. (2011). Factors Affecting the Adoption of Islamic Banking in Pakistan.

8. Ali, S. B., Arif, K., Galani, S. Q., Khan, Z. S., Mubeen, M. (2022). A Review on Valuation and Corporate Finance. In Periodicals of Social Sciences, 2(2)

9. Ali, S. B., Khan, Z. S., Shah, Z. A., Ahmed, H., & Aziz, A. (2021). Quality of Internal Risk Rating Framework at Commercial Banks in Pakistan, Elementary Education Online, 20 (5), 7150-7163.

10. Ali, S. B. (2012). Corporate Governance and Accounting Practices in Pakistan.

11. Ali, S. B., Farooq, K., Shah, Z. A., & Burney, S. (2021). Testing the Evidence on Weak Form EMH at Pakistan Stock Market. Turkish Online Journal of Qualitative Inquiry, 12(8).

12. Ali, S. B., Hussain, B. M., Baig, U., Khan, Z. S., Raza, A., & Murad, H. (2021). The Enigma of Capital Structure Theories: An Empirical Investigation Between Peer Corporations in Pakistan. International Journal of Advanced Research in Engineering and Technology, 113-124.

13. Ali, S. B., & Iqbal, M. F. (2009). Exchange Rate Volatility in Emerging Economies-A Case of Pakistan.

14. Ali, S. B., & Umyani, M. M. (2013). Capital Structure and Financial Performance: Evidence from Pakistan

15. Ali, S. B., & Khalidi, M. A. (2020). Valuation of equity securities, private firms, and startups. IBT Journal of Business Studies (JBS), 16(1).

16. Ali, S. B., Khan, Z. S., Shah, Z. A., & Ahmad, M. (2021). Lean Accounting System: Importance and Successful Implementation. Journal of Contemporary Issues in Business and Government| Vol, 27(3), 2388.

17. Ali Zaidi, S. N., & Ali, S. B. (2006). Risk and Scope of Debit Check Card in Competitive Market of Pakistan.

18. Arshad, M. A., Ali, S. B., Masood, K., Syed, A., Jabeen, N., & Sabir, R. I. (2021). The Nexus between Culture and IT Capabilities and Innovation Capabilities: Focusing on Manufacturing Firms in Pakistan. Multicultural Education, 7(9).

19. Arshad, M. A., Ali, S. B., Jafri, S. K. A., Arshad, M. H., & Sabir, R. I. (2021). Effect of Organizational Culture and Information Technology Capabilities on Innovation Capabilities: A Case of Manufacturing Firms. Elementary Education Online, 20(5), 6388-6388.

20. Arshad, M. Z., Ali, S. B., Sabir, R. I., Shahidan, A. N., & Arshad, M. A. (2021). The interrelationship between Orientations and SME’s Performance. Turkish Online Journal of Qualitative Inquiry, 12(7).

21. Asheville. (2013, August 13). Ramsey Library at UNC Asheville. Retrieved from UNC Asheville: http://library.unca.edu/lr/resstrat.html

22. Baker H. K., H. J. (1974). Toward the Development of Client-Specified Valuation. Journal of Finance, 29(4), 1255-1263.

23. Baker K B H, H. J. (1973). Information needs of individual investors. Journal of Accountancy, 5(2), 64-69.

24. Bhatt, D. K. (May-June 2013). Investment and Trading Pattern of Individuals Dealing in Stock Market, 1.

25. Cameron, J. M. (2010). The Application of Mixed Methods in Organisational Research: A Literature Review. Electronic Journal of Business Research Methods, 8(2), 95-105.

26. Charlie, S. (2010, August 18). Buzzle. Retrieved from http://www.buzzle.com/articles/retail-investors-vs-institutional-investors.html

27. Collins, H. (2011). Creative Research: The Theory and Practice of Research for the Creative Industries. AVA Publications. Retrieved from Research Methodology: http://research-methodology.net/research-philosophy/positivism/

28. Creswell, J. W. (2003). Research Design: Qualitative, Quantitative, and Mixed Method (2nd ed.). California: SAGE Publications.

29. Das, S. K. (2012). Small Investor’s Behaviour on Stock Selection Decision: A Case of Guwahati Stock Exchange. International Journal of Advanced Research in Management and Social Sciences, 1.

30. Ewing, P. R. (1970). Motivating Factors Guiding the Common Stock Investor. Dissertation Abstracts International, 31(5), 1975.

31. Fisher K L and Statman M. (1997). The mean-variance optimization puzzle: Security portfolios and food portfolios. Financial Analysis Journal, 53(4), 41-50.

32. Gilbert, N. (2007). Researching Social Life (Research, Theory and Method).

33. Harvey, C. R. (2012). Yield ratio. Retrieved from The Free Dictionary: http://financial-dictionary.thefreedictionary.com/Yield+Ratio

34. Hussain, Z., & Ali, S. B. (2009). Implementation of Operational Risk Regime: A Case of Commercial Banks in Pakistan.

35. Investopedia. (n.d.). Stock Valuation Overview. Capital Market Lab.

36. KSE Stocks Dot Com. (2014, October 27). Retrieved from KSE Stocks Dot Com: http://ksestocks.com/AboutKSE

37. Larsen, J. I. (June, 2010). Predicting Stock Prices Using Technical Analysis and Machine Learning.

38. Maditinos D, S. Z. (2007). Investo’rs behaviour in the Athens stock exchange. Student’s Economics & Finance, 24(1), 32-50.

39. McClure, B. (2014). Fundamental Analysis: Introduction to Financial Statements. Retrieved from Investopedia: http://www.investopedia.com/university/fundamentalanalysis/fundanalysis4.asp

40. Mohammad Reza Tavakoli Baghdadabad, F. H. (2011). A study on small investors’ behavior in choosing stock case study: Kuala-Lumpur stock market, 5(27).

41. Morgan, R. V. (1970). Determining Sample Size for Research Activities. Educational and Psychological Measurement. Retrieved from http://opa.uprrp.edu/InvinsDocs/KrejcieandMorgan.pdf

42. Murad, H., Ali, S. B., Baig, U., Raza, A., Ali, S., & Abdullah, A. (2021). Comparative study: conventional and Islamic banking performance in Pakistan. International Journal of Management (IJM), 12(3), 448-459.

43. Murphy, J. J. (1999). Technical analysis of the financial markets: a comprehensive guide to. Prentice Hall Press, 2.

44. Odean, B. M. (September, 2011). The Behaviour of Individual Investors.

45. Potter R., E. (1971). An empirical study of motivations of common stock investors. Southern Journal of Business, 6(1), 41-44.

46. Profitability Ratios. (2014). Retrieved from Investopedia: http://www.investopedia.com/terms/p/profitabilityratios.asp

47. Rizvi, A., & Ali, S. B. (2011). Risk Taking Behavior of Investors of Pakistan

48. Trochim, W. M. (2006, October 20). Research Method Knowledge Base . Retrieved from Socia Research Methods: http://www.socialresearchmethods.net/kb/dedind.php