Perceived risk and debt behaviour in the stock market: A survey of investors in Vietnam

Figures & data

Table

Facets of risk	Definitions
Financial risk	:The possibility that investors make a loss in their stock investment portfolio.
Safety risk	:The possibility that investors’ information is leaked by hackers or attacked by viruses.
Social risk	:The possibility that investors are held in low esteem by a certain group because they experience a large loss in stock investments.
Time risk	:The possibility that investors spend much time on stock investments and the results are not what they expected.
Opportunity risk	:The possibility that investors miss out on other financial investment opportunities if they use all their money for stock investments.
Choice risk	:The possibility that investors make a wrong decision in the choice of stocks for their portfolios.
Leverage risk	:The possibility that investors’ investment returns are inadequate to cover their loan interest and principal at maturity.

Figure 1. Conceptual framework of the study.

Table 1. A summary of the variables

Indicators	Variable types	Tests
Perceived risk	Independent variable	H1
Seven facets of risk	Independent variable	H2
Informal debt use	Dependent variable	H1 & H2
Perceived risk and facets of risk	Dependent variable	Further analysis
Personal characteristics	Control/independent	Further analysis and controlling

Table 2. Data statistics of the study

Panel A: Data statistics of investors’ characteristics
Variables		Freq.				%				Freq.			%
1. Gender							6. Investment wealth/year (USD)
Male		258				62	<$10,000			261			62
Female		160				38	$10,000–$25,000			88			21
2. Age							$25,000–$50,000			33			8
18–<25		96				23	$50,000–$150,000			21			5
25–35		238				57	> $150,000			15			4
>35		84				20
3. Education levels							7. Overall perceived risk
Secondary		4				1	Low (<Mean: 88.82)			222			53
High school		13				3	High (>Mean)			196			47
University		360				86
Master’s or higher		41				10
4. Marital status							8. Informal borrowing sources
Single		257				62	No			91			22
Married		161				38	Yes			327			78
5. Investment experience							9. The use of informal debt
<3 years		237				56	No debt			188			45
3–5 years		86				21	<50%			178			43
>5–10 years		51				12	50% or more			52			12
>10 years		44				11
Panel B: Data statistics of perceived risk and informal debt
Variables		Mean			Median			Standard Deviation	Min		Max
Safety risk		13.80			12			6.47	1		25
Social risk		10.77			9			6.47	1		25
Opportunity risk		11.95			12			6.02	1		25
Time risk		13.14			12			5.92	1		25
Choice risk		14.23			15			6.07	1		25
Leverage risk		16.23			16			7.21	1		25
Financial risk		8.70			6			6.24	1		25
Overall perceived risk		16.35			17			2.75	1		22
Use of informal debt		1.67			2			0.69	1		3
Panel C: Data statistics of informal borrowing sources
Borrowing sources	Freq		%	Borrowing sources								Freq		%
I. Family sources				II. Non-family sources
Parents (in-law)	150		36	Friends								144		35
Husband/wife	76		18	Girlfriend/boyfriend								18		4
Brother/sister (in-law)	43		10	Colleagues/coworkers/managers/business partners								38		9
Other relatives	21		5	Other nonfamily sources/neighbours								35		8
I do not borrow	128		31	I do not borrow								183		44

Panel C shows that investors use debt from a number of informal sources, divided into family and nonfamily. Over 50% of investors borrow money for stock investment from family and nonfamily individuals. Family borrowing sources make up 69%, while nonfamily sources constitute 56%. Parents (36%) and friends (35%) are the main borrowing sources of investors.

Figure 2. Financial risk among investors.

This figure shows concern about financial loss and the importance of losing money. The majority of investors are concerned about the loss-to-equity ratio from 10% to 20%, followed by the loss ratio from 20% to 50%. Interestingly, fewer investors are concerned about the loss of less than 10% of equity.

Table 3. Results of correlation test

	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16
1.Informal debt	0.04	0.11	0.07	0.06	0.07	0.12	0.11	0.16	−0.05	−0.08	−0.01	−0.13	−0.20	−0.23	0.38
2.Safety risk		0.21	0.23	0.24	0.24	0.17	0.06	0.52	−0.14	−0.09	−0.02	−0.02	−0.20	−0.14	0.06
3.Social risk			0.33	0.36	0.22	0.26	0.03	0.62	−0.05	−0.02	−0.11	0.05	−0.10	−0.04	0.03
4.Opportunity risk				0.43	0.25	0.18	0.00	0.59	−0.08	0.00	0.03	0.05	−0.09	−0.10	0.12
5.Time risk					0.54	0.38	0.02	0.70	−0.10	−0.18	−0.03	−0.13	−0.14	−0.06	0.09
6.Choice risk						0.37	0.05	0.63	−0.12	−0.12	−0.03	−0.05	−0.09	−0.05	0.04
7.Leverage risk							0.03	0.59	−0.10	−0.15	−0.04	−0.08	−0.08	−0.10	0.22
8.Financial risk								0.36	−0.04	0.07	0.02	0.04	0.02	−0.03	0.00
9.Perceived risk									−0.15	−0.11	−0.05	−0.02	−0.16	−0.13	0.14
10.Gender (Male = 1)										0.19	0.10	0.07	0.15	0.13	−0.03
11.Age											0.17	0.57	0.53	0.44	−0.03
12.Education												0.17	0.19	0.16	−0.03
13.Marital status													0.44	0.40	−0.06
14.Investment experience														0.57	−0.10
15. Investment wealth															−0.11
16.Borrowing sources															1.00

The text in bold indicates that correlation is significant at the 1% and 5% level

Table 4. Results of the reliability of perceived risk and its facets

Variables	Scale Mean if Item Deleted	Scale Variance if Item Deleted	Corrected Item-Total Correlation	Squared Multiple Correlation	Cronbach’s alpha
Safety risk					0.684
SAF1	3.97	0.972	0.521	0.272
SAF2	3.36	1.151	0.521	0.272
Social risk					0.833
SOC1	3.14	1.118	0.714	0.510
SOC2	3.16	1.265	0.714	0.510
Opportunity risk					0.802
OPP1	3.36	0.921	0.671	0.450
OPP2	3.39	1.047	0.671	0.450
Time risk					0.798
TIM1	3.59	0.855	0.664	0.441
TIM2	3.51	0.877	0.664	0.441
Choice risk					0.705
CHO1	3.87	0.859	0.545	0.297
CHO2	3.59	0.876	0.545	0.297
Leverage risk					0.861
LEV1	4.00	1.111	0.756	0.572
LEV2	3.88	1.139	0.756	0.572
Financial risk					0.835
FIN1	2.90	1.368	0.718	0.516
FIN2	2.68	1.226	0.718	0.516
Perceived risk					0.629
SAFR	13.8752	6.114	0.315	0.109
SOCR	14.2139	5.426	0.390	0.192
OPPR	14.0422	5.782	0.389	0.232
TIMR	13.9028	5.654	0.561	0.425
CHOIR	13.8181	5.863	0.466	0.334
LEVR	13.7318	5.715	0.376	0.202
FINR	14.4890	6.593	0.046	0.006

Figure 3. Borrowing sources, perceived risk and informal debt using the SEM approach.

SEM model fit criteria: Chi-square: 0.18, Df: 1, GFI: 1.000, TLI: 1.057, CFI: 1.000, RMSEA:0.044

Table 5. Perceived risk and informal debt use

Independent variables	MLR	OLR	SEM	Hypothesis supported
	(1)	(2)	(3)
Perceived risk	0.02		0.01	Yes (H1)
	(1.85)*		(1.73)*
Perceived risk (low vs high)		−0.32
		(2.69)*
Gender (Male = 1)	−0.01		−0.003
	(−0.21)		(−0.13)
Gender (Female = 0)		0.04 (0.03)
Age	0.09		0.03
	(1.44)		(1.62)
Age less than 25 (vs Age > 35)		−0.15
		(0.14)
Age 25–35 (vs Age > 35)		0.12
		(0.14)
Education levels	0.07		0.03
	(0.87)		(0.98)
High-school degree (vs master degree or higher)		−0.84
		(2.09)
University degree (vs master degree or higher)		−0.49
		(1.96)
Marital status (married = 1)	−0.10		−0.03
	(−1.26)		(−1.14)
Marital status (single = 0)		0.07
		(0.09)
Investment experience	−0.06		−0.04
	(−1.54)		(−2.79)***
Less than 3 years of investment experience (vs > 10 years)		0.82
		(2.9)*
3–5 years of investment experience (vs > 10 years)		0.30
		(0.37)
Less than 5 to 10 years of investment experience (vs > 10 years)		0.65
		(1.77)
Informal borrowing sources (Borrowing = 1)	0.56		0.12
	(7.49)***		(5.09)***
Informal borrowing sources		−2.65
(No borrowing = 0)		(59.7)***
Annual investment wealth	−0.09		−0.03
	(−2.51)**		(−2.27)**
Less than $10,000 (vs > $150,000)		1.53
		(5.08)**
$10,000–$25,000 (vs > $150,000)		0.70
		(1.06)
More than $25,000—$50,000 (vs > $150,000)		1.06
		(2.11)
More than $50,000–$150,000 (vs > $150,000)		0.45
		(0.27)
Intercept/ Intercept (−2 Log Likelihood)	0.87***	1071.75***
Adj. R square/ Pseudo R-Square	0.18	0.28	0.15
F Change/Chi-square	12.27***	131.38***	0.88**
Df	8	15	1

*: p < 10%, **: p < 5%, ***: p < 1%, t-statistics, Wald test and Critical in parentheses. MLR: Multiple linear regression. OLR: Ordinal logit regression. SEM: Structural equation modelling approach. SEM model fit criteria: GFI: 1.000, TLI: 1.057, CFI: 1.000, RMSEA:0.044. Use of informal debt is the dependent variable.

This table shows the main relationship between perceived risk and informal debt use using three methods: MLR, OLR and SEM. The results indicate that perceived risk has a significantly positive association with informal debt use.

Table 6. Facets of risk and informal debt use

Facets of risk	MLR	OLR	SEM	SEM	Hypotheses supported
	(1)	(2)	(3)	(4)
Financial risk	0.09
	(2.374)**				Yes (2.1)
Financial risk (low vs high)		−0.62
		(9.64)***
Safety risk	−0.04
	(−0.819)				No (H2.2)
Safety risk (low vs high)		0.26
		(1.66)
Social risk	0.09		0.003
	(2.016)**		(2.165)**		Yes (H2.3)
Social risk (low vs high)		−0.52
		(6.32)**
Time risk	−0.04
	(−0.615)				No (H2.4)
Time risk (low vs high)		−0.13
		(−0.33)
Opportunity risk	−0.01
	(−0.148)				No (H2.5)
Opportunity risk (low vs high)		−0.01
		(0.002)
Choice risk	0.06			0.003
	(0.894)			(1.712)*
Choice risk (low vs high)		0.00			Yes (H2.6)
		(0.0004)
Leverage risk	−0.0004
	(−0.008)				No (H2.7)
Leverage risk (low vs high)		−0.01
		(0.001)
Including seven control variables	Yes	Yes	Yes	Yes
Intercept/ Intercept (−2 Log Likelihood)	0.95***	1493.44***	Model fit	Model fit
Adj. R square/ Pseudo R-Square	0.18	0.30	0.15	0.15
F Change/Chi-square	7.61***	146***	3.22*	0.32*
Df	14	21	1	1

*: p < 10%, **: p < 5%, ***: p < 1%, t-statistics and Wald test in parentheses. MLR: Multiple linear regression. OLR: Ordinal logit regression. SEM: Structural equation modelling approach. SEM (3) model fit criteria: GFI: 0.998, TLI: 0.901, CFI: 0.996, RMSEA:0.073. SEM (4) model fit criteria: GFI: 1.000, TLI: 1.041, CFI: 1.000, RMSEA:0.061. Use of informal debt is the dependent variable. Four models include seven personal characteristics.

This table shows that social risk is significantly associated with informal debt use, and it is robust using three methods: MLR, OLR and SEM. Financial risk also has an impact on informal debt use using two methods: MLR and OLR. Choice risk significantly relates to the informal debt use using SEM approach.

Table 7. Demographic predictors of perceived risk

Independent variables	MLR (1)	OLR (2)	SEM1 (3)
Gender (Male = 1)	−0.69(−2.48)**		−6.687(−2.596)***
Gender (Female = 0)		0.55 (8.91)***
Age	−0.20(−0.75)		−4.377(−1.752)*
Age less than 25 (vs Age > 35)		0.54 (2.38)
Age 25–35 (vs Age > 35)		0.56 (4.21)**
Education levels	−0.07(−0.19)		Not applicable
High-school degree (vs master degree or higher)		0.53 (1.06)
University degree (vs master degree or higher)		0.09 (0.08)
Marital status (married = 1)	0.51 (1.49)		4.048(1.286)
Marital status (single = 0)		−0.35 (2.51)
Investment experience	−0.31 (−1.82)*		−2.233 (−1.404)
Less than 3 years of investment experience (vs > 10 years)		0.42 (1.26)
3–5 years of investment experience (vs > 10 years)		0.13 (0.11)
Less than 5 to 10 years of investment experience (vs > 10 years)		0.54 (1.94)
Informal borrowing sources (Borrowing = 1)	0.81 (2.51)**		6.973 (2.332)**
Informal borrowing sources (No borrowing = 0)		−0.49 (5.325)**
Annual investment wealth	−0.11 (−0.70)		−0.908 (−0.623)
Less than $10,000 (vs. > $150,000)		0.19 (0.15)
$10,000–$25,000 (vs. > $150,000)		−0.19 (0.15)
More than $25,000–$50,000 (vs. > $150,000)		0.06 (0.01)
More than $50,000–$150,000 (vs. > $150,000)		−0.30 (0.25)
Intercept/(−2 Log Likelihood)	17.23***	2779.61***	Model fit
Adj. R square/ Pseudo R-Square	0.05	0.08	0.15
F Change/Chi-square	3.95***	35.50***	0.88**
Df	7	14	1

*: p < 10%, **: p < 5%, ***: p < 1%, t-statistics/ Wald test in parentheses. MLR: Multiple linear regression. OLR: Ordinal logit regression. SEM: Structural equation modelling approach. SEM1 model fit criteria: GFI: 1.000, TLI: 1.057, CFI: 1.000, RMSEA:0.044. Perceived risk is the dependent variable. Education is not significant to explain perceived risk, and therefore, this factor was not included in the SEM model to ensure a model fit. This table shows gender, age, investment experience and informal borrowing sources are significantly associated with perceived risk.

Table 8. Determinants of facets of risk

Independent variables	Safety risk		Social risk		Opportunity risk		Choice risk		Leverage risk		Time risk	Financial risk
	MLR	BLR	MLR	BLR	MLR	BLR	MLR	BLR	MLR	BLR	BLR	BLR
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)
Informal source (Borrowing = 1)	0.06	−0.15	0.04	0.24	0.17	0.37	0.05	0.34	0.38	0.45	0.15	0.001
	(0.76)	(0.38)	(0.42)	(0.9)	(2.11)**	(2.19)	(0.69)	(1.9)	(4.56)***	(2.98)*	(0.36)	(0.00)
Gender (Male = 1)	−0.14	−0.41	−0.05	−0.12	−0.10	−0.37	−0.12	−0.57	−0.11	−0.04	−0.30	−0.32
	(−2.21)**	(3.89)**	(−0.57)	(0.34)	(−1.46)	(2.95)*	(−2)**	(7.24)***	(−1.49)	(0.04)	(2.03)	(2.34)
Ages	−0.01	0.16	0.003	0.13	0.03	0.09	−0.09	−0.18	−0.15	−0.69	−0.59	0.33
	(−0.12)	(0.59)	(0.04)	(0.38)	(0.50)	(0.18)	(−1.48)	(0.82)	(−2.17)**	(10.33)***	(8.03)***	(2.67)*
Education levels	0.03	−0.45	−0.22	−0.50	0.09	0.09	−0.002	−0.28	−0.03	−0.29	0.46	−0.16
	(0.32)	(2.44)	(−2.02)**	(2.89)*	(0.99)	(0.1)	(−0.03)	(0.98)	(−0.26)	(0.93)	(2.59)*	(0.32)
Marital status (Married = 1)	0.13	0.02	0.22	0.22	0.15	0.33	0.02	0.14	0.01	0.24	−0.07	0.02
	(1.65)*	(0.01)	(2.13)**	(0.71)	(1.74)*	(1.57)	(0.31)	(0.3)	(0.12)	(0.84)	(0.07)	(0.01)
Investment experience	−0.12	−0.23	−0.11	−0.20	−0.06	−0.24	−0.02	−0.05	0.03	0.13	−0.03	−0.04
	(−2.97)	(3.13)*	(−2.09)**	(2.15)	(−1.38)	(3.22)*	(−0.61)	(0.15)	(0.68)	(0.83)	(0.04)	(0.11)
Investment wealth	−0.03	−0.06	0.004	−0.14	−0.06	−0.35	0.01	0.01	−0.02	−0.07	0.03	−0.10
	(−0.84)	(0.21)	(0.07)	(1.24)	(−1.45)	(7.88)***	(0.39)	(0.02)	(−0.45)	(0.28)	(0.07)	(0.75)
Constant	2.68***	1.45***	2.68***	0.74	2.12***	0.65	2.8***	1.12*	2.71***	0.93	0.14	−0.02
Adjusted R-square/ Pseudo R-Square	0.05	0.05	0.02	0.04	0.03	0.09	0.01	0.05	0.06	0.06	0.07	0.02
Chi-square	3.78***	14.5***	2.01***	12.4**	2.51***	30.02***	1.59	14.70***	4.80***	18.52***	20.74***	5.90**
Df	7	7	7	7	7	7	7	7	7	7	7	7

*: p < 10%, **: p < 5%, ***: p < 1%, t-statistics in parentheses. MLR: Multiple linear regression. BLR: Binary logit regression.

This table shows the results of demographic predictors of the facets using two methods of MLR and BLR. The facets of risk are the dependent variables and seven demographics are independent variables. The results show most of the independent variables are significant to explain the facets of risk.

Table 9. Borrowing sources and informal debt use

Independent variables	All investors (1)	Male investors (2)	Female investors (3)
Family borrowing sources (vs. other family sources)
Non-borrowing	−0.76 (2.31)	−1.18 (4.19)**	1.003 (1.27)
Parents	0.91 (3.70)*	0.46 (0.74)	2.68 (4.63)**
Brothers or/and sisters	0.61 (1.35)	0.47 (0.57)	1.73 (1.85)
Husband or wife	0.62 (1.56)	0.21 (0.13)	2.35 (3.43)*
Nonfamily borrowing sources (vs. other nonfamily sources)
Non-borrowing	−0.18 (0.20)	0.27 (0.29)	−1.30 (3.41)*
Friends	0.75 (3.96)**	1.24 (6.81)***	−0.38 (0.31)
Colleagues or coworkers	0.73 (2.47)	1.14 (3.99)**	−0.39 (0.21)
Low perceived risk (vs. high perceived risk)	Yes	Yes	Yes
Intercept	310.24***	237.59***	154.39***
Pseudo R-Square	0.23	0.25	0.23
N	418	258	160

*: p < 10%, **: p < 5%, ***: p < 1%, t-statistics in parentheses. The use of informal debt is the dependent variable. This table presents informal borrowing sources as predictors of the use of informal debt using ordinal logit regression. The results indicate that parents and friends are the key informal lenders for investors to invest in stocks. Interestingly, nonfamily sources are the main sources for male investors, while family sources are the main sources for female investors.

Table

The total money for stock investment:	%
Borrowing from informal sources
Borrowing from formal sources
My equity
Total	100%

Table

Facets of risk	Levels of concerns/importance (1 2 3 4 5)
1. Safety risk
-How concerned are you about your confidential information being leaked to others if you trade shares online or you ask someone else (e.g., brokers, individuals or institutions) to trade for you?	1 2 3 4 5
-How important is it to you if your confidential information is leaked to others?	1 2 3 4 5
2. Social risk
-How concerned are you about a negative impact on your social standing if you experience a large loss in share investments?	1 2 3 4 5
-How important is it to you if you are held in lower esteem due to large losses in share investments?	1 2 3 4 5
3. Opportunity risk
-How concerned are you about missing out on other financial investment opportunities if you use all your available money for share investments?	1 2 3 4 5
-How important is it to you if you miss out on other financial investment opportunities?	1 2 3 4 5
4. Time risk
-How concerned are you about spending much time on share investment and the results are not what you expect?	1 2 3 4 5
-How important is it to you if you spend much time on share investment and the results are not what you expect?	1 2 3 4 5
5. Choice risk
-How concerned are you about making wrong choices when choosing shares for your portfolio?	1 2 3 4 5
-How important is it to you if you make a wrong decision on choosing shares for your portfolio?	1 2 3 4 5
6. Leverage risk
For those who borrow to invest in shares: -How concerned are you about your investment returns being inadequate to cover your loan interest and principal at maturity?	1 2 3 4 5
-How important is it to you if your investment results cannot cover your debt?	1 2 3 4 5
7. Financial risk
-At what percentage of loss of equity would you become concerned? □ ≤ 10% □ 10% to 20% □ 20% to 30% □ 30% to 50% □ > 50%	1 2 3 4 5
-What percentage of loss of equity would be important to you? □ ≤ 10% □ 10% to 20% □ 20% to 30% □ 30% to 50% □ > 50%	1 2 3 4 5