Do socio-political factors affect investment performance?

Figures & data

Figure 1. Conceptual framework.

Table 1. Summary of the questionnaire

Factors	Dimensions	Questions	Source
Behavioral Factors (BF)	Heuristic: Representativeness Overconfidence Anchoring Gambler’s fallacy Ability bias	12–13 14 15–16 17 18	Pauschunder, 2017; Subash, 2012; Metawa et al., 2018
	Prospect: Loss Aversion Regret aversion Mental accounting	19–20 21-22 23–24	Rockenbach, 2004
	Market Price changes Market information Past trends of stocks Fundamentals of underlying stocks Customer preference Over-reaction to price Changes	25–30	Nuzula et al., 2019; Barberis & Thaler, 2003; Waweru et al., 2008
	Herding Buying and Selling decisions of other investors Choice of stock to trade of other investors Volume of stock to trade of other investors Speed of herding	31–34	Hoffmann & Broekhuizen, 2009; Espinosa-Méndez & Arias, 2020
Political Factors (PF)		35–39	Hood et al., 2014
Social Factors (SF)		40–42	Son & Nguyen, 2018; Chua et al., 2010
Investment Performance (IP)	Investment performance Return rate and satisfaction of investment decisions	43–45	Abdin et al., 2017; Metawa et al., 2018

Table 2. Demographic profile

Item	Category	Frequency	Percentage
Gender	Male	945	84.06
	Female	178	15.85
Age	36–45	481	42.83
	46–55	320	28.50
	26–35	224	19.95
	Over 55	57	5.08
	18–25	41	3.65
Marital status	Married	972	86.55
	Single	116	10.33
	Divorced	18	1.60
Educational level	Bachelor	489	43.54
	Master	417	37.13
	HSC/ A Level	99	8.82
	Others	76	6.77
	SSC/O Level	36	3.21
	Primary and lower	6	0.53
Working Experience	Over 10 years	622	55.39
	5–10 years	406	36.15
	Under 5 years	95	8.46
Average Income (BDT)	More than 100,000	538	47.91
	50,000- under 70,000	451	40.16
	20,000- under 40,000	123	10.95
	Under 20,000	11	0.98
Stock Trading Experience	Over 10 years	426	37.93
	5- under 10 years	283	25.20
	3- under 5 years	234	20.84
	1- under 3 years	136	12.11
	Under 1 year	35	3.12
Attended Trading Training	Yes	634	56.46
	No	484	43.10
Total amount of investment in DSE	Over 20,00,000	268	23.86
	From 10,00,000 to under 20,00,000	229	20.39
	From 200,000 to under 500,000	222	19.77
	From 500,000 to under 10,00,000	180	16.03
	From 100,000 to under 200,000	143	12.73
	Under 100,000	75	6.68
Last year investment in DSE	From 100,000 to under 200,000	251	22.35
	Under 100,000	246	21.91
	From 200,000 to under 500,000	225	20.04
	From 500,000 to under 10,00,000	165	14.69
	Over 20,00,000	142	12.64
	From 10,00,000 to under 20,00,000	83	7.39

Table 3. Descriptive statistics and correlation analysis

	Heuristic	Prospect	Market	Herding	PF	SF	IP
N	1123	1123	1123	1123	1123	1123	1123
Mean	4.59	4.38	4.76	3.97	3.92	4.56	2.79
Median	4.86	4.33	4.83	3.75	3.60	4.67	2.67
Std. Dev.	0.94	0.98	0.84	1.05	1.10	0.96	1.19
Skewness	−1.03	−0.71	−0.46	0.24	0.32	−0.68	0.38
Kurtosis	1.30	0.63	−0.22	−0.31	−0.63	0.98	−0.50
Heuristic	1
Prospect	0.50**	1
Market	0.36**	0.49**	1
Herding	0.10**	0.42**	0.53**	1
PF	0.21**	0.45**	0.34**	0.42**	1
SF	0.28**	0.34**	0.50**	0.33**	0.41**	1
IP	−0.10**	−0.20**	−0.09**	−0.05	−0.06*	0.01	1

Note: ** Correlations are significant at the 1% level and * Correlations are significant at the 5% level.

Table 4. Reliability and discriminant validity

Latent variables	Items	FL	α	AVE	CR
Heuristic	Hrs1	0.610	0.903	0.586	0.905
	Hrs2	0.948
	Hrs3	0.799
	Hrs4	0.635
	Hrs5	0.813
	Hrs6	0.684
	Hrs7	0.792
Prospect	Prs1	0.883	0.916	0.652	0.916
	Prs2	0.687
	Prs3	0.933
	Prs4	0.713
	Prs5	0.839
	Prs6	0.741
Market	Mrk1	0.617	0.846	0.495	0.856
	Mrk2	0.760
	Mrk3	0.754
	Mrk4	0.901
	Mrk5	0.548
	Mrk6	0.620
Herding	Hrd1	0.809	0.894	0.683	0.896
	Hrd2	0.774
	Hrd3	0.924
	Hrd4	0.794
PF	PF1	0.841	0.886	0.617	0.888
	PF2	0.827
	PF3	0.732
	PF4	0.784
	PF5	0.730
SF	SF1	0.921	0.860	0.690	0.868
	SF2	0.831
	SF3	0.726
IP	IP1	0.743	0.864	0.690	0.870
	IP2	0.919
	IP3	0.825

Figure 2. Structural model.

Table 5. Model fitness indices

Models	p	CFI	TLI	GFI	AGFI	RMSEA	SRMR
Model 1	0.00	0.96	0.95	0.97	0.96	0.05	0.07
Model 2	0.00	0.95	0.95	0.96	0.96	0.06	0.07
Model 3	0.00	0.96	0.95	0.97	0.96	0.05	0.06
Model 4	0.00	0.95	0.95	0.96	0.95	0.06	0.07
Acceptable Range	< 0.05	≥ 0.90	≥ 0.90	≥ 0.90	≥ 0.80	≤ 0.08	< 0.08

Table 6. Hypothesis testing

				Estimate (SE)	Results	Analysis
Before the inclusion of the mediator
Hypothesis-1	IP	←	Heuristic	0.04* (0.02)	Significant	Accepted
	IP	←	Prospect	−0.23* (0.02)
	IP	←	Market	−0.07* (0.03)
	IP	←	Herding	0.08* (0.02)
After the inclusion of the mediator (PF)
Hypothesis-2	IP	←	Indirect Effect	0.01* (0.00)	Significant	Accepted
	IP	←	Total Effect	−0.06* (0.00)
After the inclusion of the mediator (SF)
Hypothesis-3	IP	←	Indirect Effect	0.02* (0.01)	Significant	Accepted
	IP	←	Total Effect	−0.05* (0.00)
After the combined inclusion of the mediator (PF & SF)
Hypothesis-4	IP	←	Indirect Effect	0.02* (0.00)	Significant	Full Mediation
	IP	←	Total Effect	−0.07* (0.01)

*Significant Coefficients (p-value <0.2), SE = Standard Error in brackets

Table 7. Control variables estimation

			Estimate (SE)	Results	Analysis
IP	←	Gender	−0.05 (0.08)	Insignificant	No Control Effect
IP	←	Age	0.00 (0.04)	Insignificant	No Control Effect
IP	←	Trading Experience	0.03 (0.03)	Insignificant	No Control Effect
IP	←	Monthly Income	0.00 (0.06)	Insignificant	No Control Effect
IP	←	Investment at Stock Exchange	0.00 (0.02)	Insignificant	No Control Effect

Note(s): *Significant Coefficients (p-value <0.2), SE = Standard Error in brackets

Table A1. Survey instrument

Questions	FC	Alpha	AVE	CR
Heuristic		0.90	0.59	0.90
12. You try to avoid buying stocks that have underperformed in the recent past and buy “hot” stocks.	0.61
13. For making investment decisions for all stocks that you invest; you use trend analysis of some similar stocks.	0.95
14. You believe that the skills and knowledge you possess about the stock market can help you outperform the market.	0.80
15. You depend on your previous experiences while making your next investment.	0.64
16. Your forecasting of the changes in stock prices in the future is basically based on the recent stock prices.	0.81
17. You are generally able to anticipate the end of good or poor market outcomes at the Dhaka Stock Exchange.	0.68
18. While making your investment decisions you consider the information from your kit and kin as the reliable reference.	0.79
Prospect		0.92	0.65	0.92
19. After a prior gain, you become more risk seeker that usual.	0.88
20. After having a prior loss you have a tendency to become more risk averse.	0.69
21. You abstain from selling shares that have diminished in worth and promptly sell shares that have increased in value.	0.93
22. You feel more distress about holding losing stocks excessively long than about selling winning stocks too early.	0.71
23. You in general treat every component of your investment portfolio independently.	0.84
24. You ignore the relation between various investment possibilities.	0.74
Market		0.85	0.50	0.86
25. You carefully consider how the price of stocks changes.	0.62
26. You tend to over-respond when there are price changes of stocks.	0.76
27. You consider market information to be important for your stock investment.	0.75
28. You put the past trends of stocks under your consideration for your investment.	0.90
29. You analyze the companies’ customer preferences before you invest in their stocks.	0.55
30. You study about the market fundamentals of underlying stocks before making investment decisions.	0.62
Herding		0.89	0.68	0.90
31. Other investors’ decisions of choosing stock types have impact on your investment decisions.	0.81
32. Other investors of the stock volume have impact on your investment decisions.	0.77
33. Other investors’ decisions of buying and selling stocks have impact on your investment decisions.	0.92
34. You usually react quickly to the changes of other investors’ decisions and follow their reactions to the stock market.	0.79
Political Factors		0.89	0.62	0.89
35. You consider political stability of the country before making investment decisions.	0.84
36. You avoid buying shares during general election.	0.83
37. You tend to avoid trading during strike/ hartals.	0.73
38. You try to avoid buying stocks during government change.	0.78
39. You prefer economic stability.	0.73
Social Factors		0.86	0.69	0.87
40. You want to reciprocate greetings, favors and gifts.	0.92
41. You want to maintain your family or social status.	0.83
42. You focus on quick return from investment.	0.73
Investment Performance		0.86	0.69	0.87
43. The return rate of your recent stock investment meets your expectation.	0.74
44. Your rate of return is equal to or higher than the average return rate of the market.	0.92
45. You feel satisfied with your investment decisions in the last year (including selling, buying, choosing stocks, and deciding the stock volumes).	0.83

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