Determinants of the possibilities by investors’ risk-taking: Empirical evidence from Vietnam

Abstract

This paper focuses on determining the factors influencing investors’ risk-taking through empirical evidence from Vietnam. This study investigates risk perception, expected return and herding behavior, and other determinants such as historical volatility and subjective financial risk attitude; according to previous studies, these are the main components affecting risk-taking behavior among investors. Overconfidence (better than average, miscalibration, and excessive optimism) is also taken into consideration. We employ pooled-OLS and quantile regression to overcome the shortage of research models in this field. In addition, we demonstrate how risk-taking behavior can be affected by those factors with the application of measures across four different investment channels. This study suggests implications for investors who wish to control risk.

Keywords:

• Risk perception
• risk preference
• overconfidence
• herding
• risk-taking

Subjects:

• D01
• D03
• G02

PUBLIC INTEREST STATEMENT

This paper explains the relationship between the determinants and risk-taking behaviors in the Vietnamese sample. By collecting 85 response surveys from investors, we explored three main findings. First, risk perception, expected return and herding behavior, and other determinants such as historical volatility and subjective financial risk attitude contribute to the risk-taking behavior. Second, Overconfidence (better than average, miscalibration, and excessive optimism) is the important factor. Finally, our results hold robust when replacing the different econometric models, suggesting to confirm what we found before.

Acknowledgements

The authors would like to thank Thong Trung Nguyen, Phuoc Huu Le, Tuyet Anh Vuong, Hanh Thi Dinh, and Nga Thi Thanh Nguyen for their helpful comments, suggestions, and encouragement. The first author acknowledges the support from Foreign Trade University (Vietnam). The third author would like to thank Robert B. Miller and Howard E. Thompson for their continuous guidance and encouragement. This research is funded by Foreign Trade University, University of Economics Ho Chi Minh City, Asia University, China Medical University Hospital, The Hang Seng University of Hong Kong, the Research Grants Council of Hong Kong (Project Numbers 202809, 12502814, and 12500915), and Ministry of Science and Technology (MOST, Project Numbers 106-2410-H-468-002 and 107-2410-H-468-002-MY3), Taiwan.

Additional information

Funding

This work was supported by the Ministry of Science Research and Technology [106-2410-H-468-002 and 107-2410-H-468-002-MY3]; The Hang Seng University of Hong Kong, the Research Grants Council of Hong Kong [Project Numbers 202809, 12502814, and 12500915].

Notes on contributors

Linh Duy Bui

Linh Duy Bui is the lecturer of Foreign Trade University (Hanoi). His research area is Supply Chain and Logistics, International Trade and Microeconomics. He published on the Asian Journal of Shipping and Logistics, International Journal of Economics and Business Research. Chi Trung Le graduated Faculty of Finance, Banking University and Anh Huynh Ngoc Quang is staff at School of Banking, University of Economics Ho Chi Minh City (Vietnam). He published a paper at International Journal of Economics and Business Research. Professor WONG, Wing Keung obtained his PhD from the University of Wisconsin-Madison, USA with major in Business Statistics (Statistics and Finance) and obtained his Bachelor’s degree from the Chinese University of Hong Kong, Hong Kong, with major in Mathematics and a double minor in Economics and Statistics. Currently, he is a Chair Professor at the Department of Finance, Asia University. He was Full Professor at the Department of Economics, Hong Kong Baptist University and Deputy Director in at Risk Management Institute, National University of Singapore.