How Do Bangladeshi Investors Take Decisions? An Ethnographic Decision Tree Model of Stock Selection

Chowdhury, Ashiqul Haq and Priyo, Asad Karim Khan (2019): How Do Bangladeshi Investors Take Decisions? An Ethnographic Decision Tree Model of Stock Selection. Published in: North South Business Review , Vol. 10, No. 2 (June 2020): pp. 107-132.

Abstract

The study explores the decision making process of Bangladeshi stock market investors. We interview 31 investors currently holding stock portfolio in the Dhaka Stock Exchange (DSE) to understand their choices and decision making process. Based on the findings, we develop an Ethnographic Decision Tree Model (EDTM) of Stock Selection. We find that a stock usually comes to an investor’s attention through news/ rumors or suggestions received from family/ friends/ broker or on the basis of past experience. Information use often depends on trust and the necessity to act on it immediately. In an active search process, ‘filter’ criteria are used to reduce the choice set of stocks for further evaluation. The nature of evaluation depends on whether investors look to invest for the long or the short term. Finally, stock selection depends on whether investors perceive the stock to be undervalued and whether the stock fits her/ his investment strategy. We also find that collective intelligence affects an individual’s investment decision and trustworthiness of the information source is a key factor in determining her/ his investment behavior.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bangladesh Stock Market, Investor Information Collection Process, Investor Decision Making Process, EDTM of Stock Selection, Collective Intelligence
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading

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