AFFECTING INVESTMENT

DECISIONS IN
FACTORS
STOCK
EXCHANGE
INTRODUCTION
BACKGROUND
2
3
1
4
Definitions of Stock Market, Share, Derivative, Share
Role of stock market in the economy
History of the countrys stock market
Purpose of this research
INTRODUCTION
PROBLEMS
1 2
3
Unutilized savings
Companies need for
external financing
Stock Market bridge
between the two
INTRODUCTION
BROAD OBJECTIVE
The objective of this research is to identify the factors
affecting investment decisions in the stock exchange.

INTRODUCTION
SPECIFIC OBJECTIVES
Whether the profile of companies affects investment decisions
Whether the financial performance of the companies affects investment decisions
Whether the conditions of the market affects investment decisions
Whether financial facilities and services affect investment decisions
What extent different types of information affects investment decisions
Whether the role of regulatory bodies affect investment decisions
TO FIND
OUT
INTRODUCTION
HYPOTHESES
To find out whether the profile of companies listed in the
stock exchange affects investment decisions.

Reputation of the board of directors of a company affects investment decisions is not average
Reputation of a company affects investment decisions is not average
Quality of the products or services offered affects investment decisions is not average
Size of a company affects investment decisions is not average
A companys number of years in operation affects investment decisions is not average
Level of investment diversification affects investment decisions is not average
Mean value of
agreement with
the belief that
INTRODUCTION
To find out whether the financial performance of the companies
listed in the stock exchange affects investment decisions
Past financial performance of a company affect investment decisions is not average
Expected earnings from a company share affect investment decisions is not average
Companys dividend policy affect investment decisions is not average
Earnings of a company affect investment decisions is not average
Price Movement of a company stock affect investment decisions is not average
The level of risk associated with a company stock affect investment decisions is not average
The current market price of a company affect investment decisions is not average.
HYPOTHESES

Mean value of
agreement with
the belief that
INTRODUCTION
To find out whether the conditions of the market affects
investment decisions.
Trends in the general price level affect investment decisions is not average
Level of risk in the market affect investment decisions is not average.
The reliability of the market index affect investment decisions is not average
The number of investors in the market affect investment decisions is not average
The number of companies in the market affect investment decisions is not average
HYPOTHESES

Mean value of
agreement with
the belief that
INTRODUCTION
To find out whether financial facilities and services
affect investment decisions
The availability of margin loans from banks affect investment decisions is not average
Taxation policies on gain and/or loss affect investment decisions is not average
The cost of borrowing funds affect investment decisions is not average
The requisition period for withdrawal of funds from the market affect investment
decisions is not average
HYPOTHESES

Mean value of
agreement with
the belief that
INTRODUCTION
To find out to what extent different types of information
affects investment decisions.
Recommendation from financial analysts/experts affects investment decisions is not average.
Opinions of immediate family members affect investment decisions is not average.
Recommendations of stock brokers affect investment decisions is not average.
Insider information on company affect investment decisions is not average.
Recommendation from friends affect investment decisions is not average.
Publicly available information affect investment decisions is not average.
Gut feeling/ guesswork/ speculation affect investment decisions is not average.
HYPOTHESES

Mean value of
agreement with
the belief that
INTRODUCTION
To find out whether the role of regulatory bodies affect
investment decisions
Government holding shares in a company affect investment decisions is not average
Level of trust on the Securities and Exchange Commission (SEC) affects investment
decisions is not average
Efficiency of the SEC in correcting abnormal changes in the market affects
investment decisions is not average
HYPOTHESES

Mean value of
agreement with
the belief that
INTRODUCTION
RATIONALE
Stock market related to economic growth
Stock market crashes of 96 and 10 attributed to unsound investment decisions
Research looks at the factors that affect buying behavior
Aim is to identify which factors are currently being evaluated by investors
Bangladesh needs more research in this avenue
Findings can serve as platform for further research into other avenues
INTRODUCTION
SCOPES & LIMITATIONS
2
3
1
4
This study is confined to the Dhaka Stock Exchange only
The sample only reflects investors in Dhaka City
Due to the slightly complex nature of the study, a limited sample has been taken
Due to time and resource constraints, stock performance could not be incorporated into the study
METHODOLOGY
DATA COLLECTION
80
120
Survey questionnaires were
sent out to different companies
and acquaintances
Completed surveys
were received
METHODOLOGY
Questionnaire survey
Limitation of parameters in estimating
investor perception
Papers published in journals
Textbooks (will be used as reference materials to
understand and relate the relevant concepts our
research findings)
Online investor guides and manuals and other
sources of secondary data.
DATA COLLECTION
PRIMARY DATA SECONDARY DATA
METHODOLOGY
SAMPLING TYPE
Convenient Sampling
Snowball Sampling
2
1
METHODOLOGY
SAMPLE SIZE
, =
(

Population (N) = 779,003 (list of affected investors from DSE)

Proportion of investor whose perception is driven by speculation, p = 0.5
Proportion of investor whose perception is not driven by speculation, p = 0.5
Confidence Interval = 95%
Critical Z score, Z = 1.96 (for two-tailed test)
Precision, d = 5%
,
=
, (.

. . )
, .

+.

. .
, =
*No. of people reached = 80 (actual sample size)
METHODOLOGY
QUESTIONNAIRE DEVELOPMENT
2
3
1
4
Developed using 6 complex variables to measure buying behavior
Based on a 5-point Likert Scale
Designed to record investors opinion on the factors
Designed with respondents convenience in mind: only tick based responses
METHODOLOGY
VALIDITY AND RELIABILITY
High face validity
Statements relate logically
to the variables measured
PRIMARY DATA SECONDARY DATA
Reliability test conducted
Cronbachs Alpha value 0.828
Shows high reliability
METHODOLOGY
PRE TESTING
2
3
1
10 surveys sent out to investors
Initial investor pool taken from immediate family and friends
Questionnaire was simple and easy to comprehend
METHODOLOGY
DATA ANALYSIS
For the hypothesis testing, data was collected using Likert scale
We used T-tests to accept or reject the claims. We tested them to see if the mean was significantly
above or below the average i.e. three
Simple analysis of mean and variance was carried out to rank the factors
All the tests concerning mean value of perception of a variable were done using t-tests. T-Critical value
is 1.653 for 95% confidence interval and degree of freedom of 79.
We performed Factor Analysis
We have carried out a frequency analysis of our sample demographics (to see the overall
characteristics of our sample: age, income, marital status) and of our responses
RESPONDENT DEMOGRAPHICS
GENDER
8
72
RESPONDENT DEMOGRAPHICS
AGE
42
3
22
13
RESPONDENT DEMOGRAPHICS
EDUCATION LEVEL
7
2
25
37
5
RESPONDENT DEMOGRAPHICS
INCOME
16
31
3
9
6
15
COMPANY
INFORMATION
The board of directors can be described as the face of the company and thus it is not surprising to see that 53.8% of the
interviewees agree. . An even larger percentage (66.3%) has come to agree with the fact that the company in itself and its goodwill
is what truly determines the stocks worth and 68% believe size matters the most in terms of the companys scale of business
Variable Mean Std.
Deviation
Level of
Sig.
T-Calc. Conclusion
Reputation of board 3.36 1.150 0.00% 2.819 Reject Null Hypothesis
Reputation of the company 3.80 1.277 0.00% 5.604 Reject Null Hypothesis
Quality of the product or service 3.36 1.139 0.60% 2.847 Reject Null Hypothesis
Size of the company 3.68 1.053 0.00% 5.735 Reject Null Hypothesis
Years in operation 3.45 1.124 0.10% 3.581 Reject Null Hypothesis
Investment Diversification 3.20 1.287 16.8% 1.390 Not Reject Null Hypothesis
Reputation of the company ( Mean: 3.8 )
Reputation of board ( Mean: 3.36)
Size of the company ( 3.68)
FINANCIAL PEFORMANCE
OF THE COMPANY
Nothing says great returns than the financial performance of any given company and to start off in this path, most investors go for
historical data analysis as they scourge through a companys financial databank. Given to this point of view, 61%of the total sample agree
that past financial performance is an important factor that affects their investment patterns and only a mere 1%is strongly against this idea
. 49% believe expected earnings from companys share is relevant. This is the CORE COMPLEX VARIABLE
Variable Mean Std.
Deviation
Level of
Sig.
T-Calc. Conclusion
Past financial performance
4.10 1.051 0.00% 9.365 Reject Null Hypothesis
Expected earnings from share
3.65 1.192 0.00% 4.878 Reject Null Hypothesis
Dividend policy
3.61 1.142 0.00% 4.798 Reject Null Hypothesis
Earnings of a company
3.60 1.269 0.00% 4.229 Reject Null Hypothesis
Price Movement
3.46 1.292 0.20% 3.202 Reject Null Hypothesis
Level of risk
3.36 1.245 1.10% 2.604 Reject Null Hypothesis
Current Market price
3.50 1.147 0.00% 3.898 Reject Null Hypothesis
Past financial performance ( Mean: 4.10)
Expected earnings from share ( Mean: 3.65)
Dividend policy ( Mean: 3.61)
Earnings of a company ( Mean: 3.60)
MARKET
CONDITION
Not considered to be an important factor by investors. Whatever the trend in the general price level, it will not have any impact on the
stock price of the company an investor is investing into and thus only 35%agree to this being a factor. Although one of the most reliable
form of indicator is often considered to be the market index, only 24%think it is of any value. . Same goes for the number of companies
in the market where only a mere 21% think it is of any value.
Variable Mean Std.
Deviation
Level of
Sig.
T-Calc. Conclusion
Trends in the general price
3.16 1.141 20.7% 1.274 Not Reject Null Hypothesis
Risk in the market
3.43 1.339 0.60% 2.840 Reject Null Hypothesis
Reliability of market index
2.82 1.163 18.0% -1.354 Not Reject Null Hypothesis
Number of investors
3.08 1.077 53.5% 0.623 Not Reject Null Hypothesis
Number of companies
2.76 0.997 3.60% -2.131 Reject Null Hypothesis
For the market, the only factor that is considered to
be of importance is the risk in the market ( Mean :
3.43). At a significance of 0.6% ( two-tailed) it is still
not a very strong factor compared to many others but
within this complex variable, it is the strongest
ACCESS TO FINANCIAL
FACILITIES AND SERVICES
Be it the availability of loans ( Agree: 18%) , taxation policies( Agree: 28%) or the cost of borrowing (37%),
compared to most other factors, they are not of significant relevance to the investment decision making
process given the data set
Variable Mean Std.
Deviation
Level of
Sig.
T-Calc. Conclusion
Loans from merchant banks
2.74 0.978 1.9% -2.402 Reject Null Hypothesis
Taxation policies
2.98 1.242 85.8% -0.180 Not Reject Null Hypothesis
Cost of borrowing funds
3.21 1.328 15.6% 1.431 Not Reject Null Hypothesis
Requisition period
3.20 1.130 11.7% 1.584 Not Reject Null Hypothesis
In terms of taxation policies (Mean: 2.98),
cost of borrowing funds (Mean: 3.21) and the
length of the requisitions period (Mean: 3.20),
investors are not too sure if they play any role
at all or not
ROLE OF
REGULATORY BODIES
It is seen that only a mere 16%feel that whether or not the government has stock in any particular company they want to invest into will affect
their investment decision whereas a staggering 56% do not perceive it to be a factor at all, which may very well be the case. As for the SEC
and the level of trust that investors place in it, it is barley there which suggests investors distrust in the regulatory body as a whole. 30%
think level of trust in the SEC is an important factor and an almost equal 31%believe the efficiency of the SEC is a factor
Variable] Mean Std.
Deviation
Level of Sig. T-Calc. Conclusion
Government holding shares
2.63 1.100 0.90% -2.685 Reject Null Hypothesis
Trust on the SEC
2.96 1.214 71.3% -0.369 Not Reject Null Hypothesis
Efficiency of the SEC
2.96 1.235 71.7% -3.63 Not Reject Null Hypothesis
TYPE OF INFORMATION
AVAILABLE TO INVESTORS
Variable Mean Std.
Deviation
Level of
Sig.
T-Calc. Conclusion
Recommendation from analysts 3.45 1.03 0.00% 3.908 Reject Null Hypothesis
Immediate family members 2.90 1.269 48.3% -.705 Not Reject Null Hypothesis
Stock Broker 3.35 1.069 0.40% 2.93 Reject Null Hypothesis
Insider Information 3.84 1.096 0.00% 6.835 Reject Null Hypothesis
Recommendation from friends 2.98 1.031 82.9% -2.17 Not Reject Null Hypothesis
Public Information 3.21 0.910 4.00% 2.089 Reject Null Hypothesis
Guesswork 2.99 1.217 92.7% -.92 Cannot Reject Null
Hypothesis
Insider Information ( Mean: 3.84)
Recommendation from analysts ( Mean: 3.45)
Stock Broker ( Mean: 3.35)
Public Information ( Mean: 3.21)
A lot of importance is place in the opinion of an expert as 42%agree to the fact that recommendation from a financial advisor is an
important factor affecting the decision making process. However, the most important form of information is that from an insider,
someone who knows the company inside- out and a staggering 52%believe so too.
ADDITIONAL
FINDINGS
Factor Analysis:
Through factor analysis we were able identify ten factors:
1. Market condition and company profile
2. Company Performance
3. Government and regulatory bodies
4. Expert opinion and investment environment
5. Quality of the product and taxation
6. Public Information and peer opinion
7. Intermediaries and fund withdrawal time period
8. Number of companies
9. Size of the company
10. Guess work and availability of margin loans
ADDITIONAL
FINDINGS
Variable Factor Loading
The level of risk associated with the company stock affects my investment decision
.844
Price Movement of the company stock affects my investment decisions
.787
Level of risk in the market is an important factor that affects my investment choices
.773
Trends in the general price level affects my investment decisions
.759
Earnings of the company plays an important role in my investment decision
.563
The reliability of the market index affects my investment decisions
.532
Reputation of the board of directors affects my investment decisions
.480
Factor 1: Market condition and company profile
Variable Factor Loading
Past financial performance is an important factor that affects my investment decisions
.801
Reputation of the company affects my investment decisions .720
Expected earnings from a company share is an important factor that affects my investment decisions
.678
The number of years in operation of a company affects my investment decisions
.638
The current market price of a company stock is an important determinant in my investment decision
.619
A companys dividend policy is an important factor that affects my investment decisions
.534
To what extent does insider information on company stock affect which stocks to invest in
.397
Factor 2: Company Performance
ADDITIONAL
FINDINGS
Variable Factor Loading
Whether the government has shares in a company plays a significant role in my investment
decision
.811
Level of trust on the Securities and Exchange Commission (SEC) is an important factor affecting
investment decisions
.649
How efficiently the SEC can correct abnormal changes in the market plays a significant role in how
I invest in the stock market
.629
Factor 3: Government and regulatory bodies
ADDITIONAL
FINDINGS
Variable Factor Loading
The number of investors in the market is a factor that determines my investment decisions .756
To what extent does recommendation from financial analysts/experts affect your investment choices .669
The level of investment diversification of a company affects my investment decisions .557
The cost of borrowing funds has an impact on my investment decision .419
Factor 4: Expert opinion and investment environment
ADDITIONAL
FINDINGS
Variable Factor Loading
Quality of the product or service offered by the company affects my investment decisions .676
Taxation policies on gain and/or loss is a major factor affecting investment decisions .666
To what degree do the opinions of immediate family members matter while making investment
choices
.477
Factor 5: Quality of the product and taxation
ADDITIONAL
FINDINGS
Variable Factor Loading
To what extent does publicly available information on websites, gazettes etc. affect your
investment choices
.759
How do you rate the recommendation from friends in making investment choices
.668
Factor 6: Public Information and peer opinion
ADDITIONAL
FINDINGS
Variable Factor Loading
To what extent do you take the recommendations of stock brokers into account when making
choice of investments
.745
The requisition period for withdrawal of funds from the market has an impact on my
investment choices
.661
Factor 7: Intermediaries and fund withdrawal time period
ADDITIONAL
FINDINGS
Variable Factor Loading
The number of companies in the market affects my investment decisions .676
Factor 8: Number of companies
ADDITIONAL
FINDINGS
Variable Factor Loading
Size of the company (scale of operations) affects my investment decisions .708
Factor 9: Size of the company
ADDITIONAL
FINDINGS
Variable Factor Loading
To what degree does gut feeling/ guesswork/ speculation drive your choice of investment .716
The availability of margin loans from merchant banks plays an important role in determining
my investment choice
.490
Factor 10: Guess work and availability of margin loans
ADDITIONAL
FINDINGS
Component Rotation Sums of Squared Loadings
Total % of
Variance
Cumulative
%
Market condition and company profile 4.568 14.275 14.275
Company Performance 4.066 12.705 26.980
Government and regulatory bodies 2.110 6.594 33.574
Expert opinion and investment environment 2.093 6.541 40.115
Quality of the product and taxation 1.990 6.218 46.333
Public Information and peer opinion 1.894 5.920 52.253
Intermediaries and fund withdrawal time period 1.717 5.367 57.620
Number of companies 1.624 5.075 62.695
Size of the company 1.432 4.474 67.169
Guess work and availability of margin loans 1.279 3.997 71.166
Table: Total Variance Explained
From the table above we can see that
71% of the total variance is explained
by the ten principal components.
It should also be taken into account
that around 47% of the variance is
explained by the first five principal
components.
ADDITIONAL
FINDINGS
Five major factors:
ADDITIONAL
FINDINGS
Company
Performance
Expert
opinion and
investment
environment
Market
condition and
company
profile
Government
and
regulatory
bodies
Quality of the
product and
taxation
Past Financial Performance (4.10)
Insider Information (3.84)
Company Reputation (3.68)
Expected earnings from stock (3.65)
Dividend Policy (3.61)
Company earnings (3.60)
Market Risk (3.46)
Expert opinion (3.45)
Reputation of Board of directors (3.36)
Cost of borrowing funds (3.21)
Analysis of means Factor analysis
Level of risk of company stock (0.844)
Price Movement of stock
Market risk
Past financial performance
Company Reputation
Expected earnings
Insider information
Level of trust on SEC
LIST OF FACTORS IDENTIFIED
FINAL
CONCLUSION
THANK YOU