Institutional Repository | Satya Wacana Christian University: The Empirical Study on the Influence of Investors' Demographic Features and Personality Traits Towards Stock Preference T2 912011036 BAB IV

CHAPTER IV

RESULT AND DISCUSSION

In this chapter, descriptive analyses were used to identify the respondents’ big five personality. Frequencies were computed for the independent as well as the dependent variables, the two stock categories, value stock and growth stock. It also provided the results of the hypothesis tests. The results from regression analyses were used to identify the investors’ stock preference.

A. RESULT

1. Descriptive Statistics

Respondents’ Big Five Personality Types

The big five personality types consisted of neuroticism, extravert, openness to experience, conscientiousness, and agreeableness. However, among five personalities, agreeableness would not be investigated in this study since the previous research found that agreeableness did not influence the tendency to prefer certain stocks. There were about twelve statements, which represented the indicators

of big five personality types. The result of investors’ big five personality types could be seen in table 4.1.

Among twelve statements, the total average was 3.39. It meant that most of the investors are in the medium of all personality types. For the neuroticism, there were 58.7% investors at the level of low neuroticism. Thus, most of investors did not really worry about their investment, which would influence their decision making process. In addition there were 61.9% of the investors were in the high level of extraversion. Individual in this level indicated that they are highly motivated and risk takers. While for openness to experience, there were a slightly different percentage of low and high openness, 49.2% of low openness and 50.7% for high openness. With this result, it could be stated that the investors did not have any tendency to be low or high openness. Furthermore, 41.3% high level of openness, which meant that only a few of the investors had creative idea and enjoy new experience. Finally, 53.9% were in the low level of conscientiousness, which meant that most of the investors had a mature planning of their investment and also good management of their own investment.

Table 4.1

Descriptive Statistics of Respondents’ Big Five Personality Types

Variable Indicator Average*

Std. Dev Neuroticism My emotion is stable

when I face failure in stock investing.

3.447 1.076 In heading uncertainty of

stock investment, I often worry.

3.237 1.031 I easily give up when I

face difficulty in stock investing.

2.618 1.019

Total Average of Neuroticism 3.101 0.846

Extraversion In facing the challenge of stock investing, I always full of enthusiasm.

3.632 0.846

When I take the decision of stock investment, I feel optimistic to obtain profitable return in the future.

3.737 0.900

I dare to face uncertainty

in stock investment. 3526 0.945

Total Average of Extraversion 3.632 0.622

Openness to experience

I enjoy my job, which previously I have not done before.

3.316 1.048

In doing my jobs, I always have creative ideas.

3.421 0.698

More often, I look for the information about the investment by myself.

3.658 0.903

Variable Indicator Average*

Std. Dev

Agreeable-ness

I tend to easily trust someone when he/she offers me the stock investment.

2.803 1.071

The excessive money I have will be better to be invested than to help others.

3.408 1.009

Before deciding to invest, I

often argue with others. 3.289 1.017 Total Average of Agreeableness 3.167 0.685

Conscien-tiousness

I always examine the risk as well as the profit of stock investment I will take.

3.671 0.900

Before deciding to invest in stocks, I do not need a lot of time to think of.

3.303 0.994

I have well-done planning

in stock investment 3.724 0.826

Total Average of Conscientiousness 3.566 0.566 Source: Primary Data, 2013

Note: * The answers’ interval categories: 1.00-1.80 (very low); 1.81-2.60 (low); 2.61-3.40 (medium); 3.41-4.20 (high); 4.21-5.00 (very high).

The data above explained that mostly investors were at the medium level of neuroticism, openness to experience and agreeableness. It was explained by the average result, which was around the interval 2.61-3.40. While for extraversion and Conscientiousness, the investors were at the level of high conscientiousness.

Stock Preferences

Stock preference itself were divided into two categories, value and growth stocks. There were six statements, which represented the indicators of both stocks. The distribution of the answer could be seen in the following table.

Table 4.2

Descriptive Statistics of Respondents’ The Stock Preference

Variable Indicator Average* Std.

dev Stock

Preferen-ce

I tend to purchase the

undervalued stocks. 3.263 1.147

I tend to choose the stocks

with low price earnings ratio. 3.224 1.138 I tend to choose the stocks

with negative media coverage but the prospects are good.

3.145 0.962

I tend to purchase the stocks with high sales growth and high earnings.

2.513 0.986

I tend to purchase the

popular stocks. 2.737 0.971

I tend to purchase the stocks with the profit per share, which continually increase consistently.

2.474 0.901

Total Average of Stock Preference 2.839 0.541 Source: Primary Data, 2013

Note: * The answers’ interval cetegories: 1.00-1.80 (strongly disagree); 1.81-2.60 (disagree); 2.61-3.40 (neutral); 3.41-4.20 (agree); 4.21-5.00 (strongly agree).

The above data showed that most of the investors were at the level of neutral. In other world, there were slightly similarities in stock preference, because the average of both growth stocks and value stocks were in the level of neutral criteria.

Previously, stock preferences as dependent variables could be divided into two categories, in particular: value stocks and growth stocks. Out of seventy-six investors, there were 39.47% preferred value stocks to growth stocks. Mostly investors, 60.53% preferred growth stocks to value stocks. Chart 4.3 showed the investors’ tendencies whether prefer value stocks, growth stocks and combination of both and growth stocks.

Table 4.3

The Stock Preference Distribution

Stock Preference Frequency Percentage

Value Stock 29 39.47

Growth Stock 47 60.53

Total 76 100

Source: Primary data, 2013

2. Goodness of Fit

Prior the hypotheses testing, the regression model’s goodness of fit should be measured. There were four criteria of goodness of fit should be

measured, in particular: normality, absence of multicollinearity, and the absence of autocorrelation.

Normality was a test to see whether there was normal distribution or not. The result of Kolmogorov-Smirnov test showed that the score was 0.676 and significant at the level of 0.750. It meant that the Kolmogorov-Smirnov Z was less than the significance, which meant that the data normally distributed.

The absence of multicollinearity test used to test the model whether any correlation inter-independent variables. The coefficient correlation showed that the variable extraversion had the highest correlation above all -.430 or 43%. This correlation was under 95%, so the multicollinearity was not serious. From the coefficient table (see appendix 8) the tolerance score was under 0.10 and the Variance Inflation Factor (VIF) was under 95%. Thus this model was adequate to see the influence of the independent variables towards the dependent variable.

Then, to see the absence of autocorrelation, this study would see the Durbin-Watson score. The score was 1.992. This score was greater than 1.227 from the Durbin-Watson table. Thus, there was no autocorrelation among independent variable.

However, since the result of some goodness of fit did not show the good result, in the following subchapter provided three kinds of analyses. The analyses consisted of numerical, logs, and binary analyses.

3. Hypotheses Testing

To test the hypotheses, regression was used. Below was provided the result of the regression for numerical, logs and binary analyses. The log data was used to examine the model, which were not normally distributed. Whereas, binary data was used to examine the model in which this analysis was used to see equates numbers of respondents of each category.

Table 4.4

Regressions of Stock Preference on Demographic and Personality Variables

Variables Num Log Num Bin

B Sig t-value B Sig t-value B Sig t-value

Constant 25.712 .000 5.543 3.312 .000 4.949 23.198 .000 5.016

Demography

Gender -.022 .950 .024 .000 .997 .000 -.024 .979 -.022

Age -.094 .043* -1.986 -.006 .047* -1.273 -.985 .027* -1.031

Education -.690 .244 -.941 -.022 .377 -1.73 -1.224 .229 -.993

Personality

Neuroticism -.017 .916 -.053 -.001 .909 -.158 -.001 .994 -.100

Extraversion -.768 .004** -2.938 -.045 .005** -1.790 -.666 .011** -2.578

Openness .100 .073** .345 .005 .043** .569 .084 .072** .278

Conscientiousness .289 .256 1.161 .019 .221 1.651 .248 .338 .953

Adjusted R² _{.143 .140} .120

F test 1.401 1.366 1.141

Source: Primary Data, 2013

Note: * Significant Value at 5% ** Significant Value at 10%

The table above showed the result of the regression with three analyses in particular: numerical, log and binary. The adjusted R² _{was in the} range of 12% up to 14.3%, meant that the variability of dependent variable could be explained 12%-14.3% by the variability of independent variables. While, 85.7 % of the variability would be explained by other variables outside the demographic factors and personality traits, in particular the excessive cash flow the investors owned and the emotion stability. Although the R² _{value was relatively small, the F test} for this model showed the result 1.401 up to 1.366 and significant at .000. That meant that the independent variable simultaneously influence the income. Furthermore, the result of F-test showed the linearity of the model, where the F-test were bigger than F-table (1.27), meant that this model was linear.

Among three demographic factors, which consisted og age, gender and education, only age was significantly influence the stocks preference. With the significant value expected was less than 5%, the numeric analysis’ result showed that age was significant towards the stock preference, with the significant value 0.043. Both numeric and logs showed that age was significant to determine the

stock preference. Even though it was significant, the coefficient was negative, which meant that the elder investors tend to prefer growth stocks instead of value stocks. Thus, the hypothesis H1a that the elder investors tend to prefer value stocks was not acceptable. In addition, gender and education did not significantly influence to stock preference because gender had significant value at 0.950 and Education 0.244, which more than 5%.

Furthermore, the personality types, which were tested, consisted of neuroticism, extraversion, openness, and conscientiousness. With the significant value expected was less than 10%. Among five personality being tested, extraversion and openness was significantly influence the stock preference. Extraversions had significant value at 0.004. The expected significant value was 10%. It meant that extraversions were significant toward stock preferences. The coefficient was -0.768. The negative coefficient showed that the extraversions tend to prefer growth stocks. Thus, the hypothesis

H3: Investors with extraversions tend to prefer

growth stocks, was acceptable. Openness had significant value at 0.073. The coefficient was positive, meant that investors with openness tend to

prefer value stocks. Therefore, H4: Investors with openness tend to prefer value stocks, was acceptable.

B. Discussion

In making a choice such as stock preference, investors were led by some aspects. One of them was demographic features. Mayfield, Perdue and Wooten (2008) stated that demographic features provide the explanation of investment management decisions. This study explored the influence of demographic features, for instance: age, gender, and education toward the investors’ stock preference, whether they prefer value or growth stocks.

Age described their actual number of age as well as how long the investors experiencing stock investment, level of certainty and emotional stability the investors possessed. However, this study only focused on the actual number of investors’ age. Normally, the elder investors would prefer the value stocks. Moreover, Deaves and Bhandari (2006) stated that the investors who closely to the retirement will hold the long-term investment. It meant that the elder investors supposed to prefer value stocks. The result of this study showed that age was significantly influence the investors’ stock preference, but it had

positive impact towards growth stocks. This could happen because their experience was not adequate to predict the value stock prospects. Their lack of experience might be influenced by how long they were engaged in stock investment, which mostly not more than two years. Most of the investors involved in this study were beginners. Those investors started the investment after 2012 (27%).

Moreover, in this study, gender and education were not significantly influence the stock preference. Though in previous studies such as Bhandari & Deaves (2006) who stated that women had less certainty, but men were more overconfident than women, proved that men supposed to hold growth stocks. However, according to Mayfield, Perdue, and Wooten (2008), men tend to prefer both short-term and long-term investment. In other words, men were likely to engage in either value or growth stocks.

The result of this study showed that gender did not influence the stock preference, which might happen because of their investors’ marital status, which 44% of them were men and married. The hypothesis that men tend to prefer growth stocks were not proven because married men tended to avoid risk. Additionally, the result of cross tabulation

explained that the amount of both gender were not balance. Women investors, who preferred value stocks were 9.2%, while for men investors 30.2%. Women investors, who preferred growth stocks were 13.1%, while men investors 47.4%.

The third one of demographic features involved in this study was education. Education also played important role in decision-making process. According to Bhandari & Deaves (2006), higher education levels were associates with certainty. The more highly educated the investors, the more certain they are, the more risk takers they are. Unfortunately, this study showed that education did not significantly influence the stock preference. The cross tabulation data showed that most of the investors were in the group of bachelor degree, which were 51.3%. While, the group of investors not included in the group of bachelor degree were in the small percentage. Thus, the result did not significant. Another factor of education, which might play important role to prove that education was not significant, was that the investors came from various background of the study. Their background of education was probably not sufficient to support the investors’ ability in stock investing.

The other aspects, which might influence stock preference, were the investors’ personality, which was measured by using the big five personality traits. The big five personality traits was a viable approach for examining economic behavior (Mayfield, Perdue, and Wooten, 2008). This study only used four of them to determine whether the personality traits influence the stock preference or not.

Two personalities, neuroticism and conscientiousness did not significantly influence the stock preference, though it had positive impact towards growth stock preference. Mayfield, Perdue, and Wooten (2008), and Jamhidinavid, Chavoshani, and Amiri (2012) stated that investors with neuroticism were indicated by having anxiety, unstable emotion, moodiness, and tenseness. Investors in this type surely would avoid risk as well short-term investment in order to avoid nervous and tenseness. Thus, investors with neuroticism would probably tend to prefer value stock. However, the result of this study did not prove the previous studies. It might be influenced by the unstable emotion triggered the feeling of avoid loss.

In addition, conscientiousness was indicated by having well-organized plan, seeking for excellence

and strong willed (Mayfield, Perdue and Wooten, 2008). Furthermore, Jamhidinavid, Chavoshani, and Amiri (2012) stated that investors in this type believed that their own performance in investments were better than the other investors. Thus, the investors with conscientiousness supposed to prefer growth stocks. The analysis of this study proved conversely, where the investors prefer value stocks to growth stocks. It might happen because the investors in this type were seeking for excellence, so they could predict the undervalue stocks and its potential to rise up.

The rests personality, extraversions and openness to experience clearly gave significant influence towards stock preference. Extraversion, according to Mayfield, Perdue, and Wooten (2008) and Peterson (2011), agreed that extraversion was people who had characteristics as enthusiasm, optimistic, seeking excitement, social and emotional ability to achieve positive feelings. Investors in this type were more likely to be risk averse. In addition, Larson (2005) found that investors with extraversions

engaged to long-term investing. While,

Jamshidinavid Chavoshani, and Amiri (2012) stated that investors with extraversion who seeking for

excitement tend to be very confidence to take risk. Thus, investors in this type tend to prefer growth stocks. This study’s result showed the same premise with previous studies that extravert investors prefer growth stocks.

At the final was openness to experience is characterized by both imagination and intellectual expression (John and Srivastava, 1999). Furthermore, Mayfield, Perdue, and Wooten (2008) stated that investors who are categorized in openness were likely engaged in long-term investing. While, Jamshidinavid, Chavoshani, and Amiri (2012) stated that the investors with openness meant that individuals interested in novelty and new experiences, action-oriented, and curious about others’ ideas buy and sell their shares because of their high confidence. Investors in this type of personality trait might engage in long-term investment, which referred to value stocks. Thus, the hypothesis that investors with openness tend to prefer value stock was proven.

Some of demographic factors and personality traits did not adequately prove the hypotheses. It was probably because most of the investors were followers. The data (see the appendix 2) showed that

most of investors were getting information from their friends or colleagues. It meant that the social interaction may influence the investors stock preference. Nofsinger and Hirschey (2008) emphasized that people often leant by interacting with others. When investors learn what others think, herding happened. Consequently, when herding movement happened, most of investors took decision based on what happen in their group. The demographic factors and investors’ personality seemed not play important role in decision-making process.

positive impact towards growth stocks. This could happen because their experience was not adequate to predict the value stock prospects. Their lack of experience might be influenced by how long they were engaged in stock investment, which mostly not more than two years. Most of the investors involved in this study were beginners. Those investors started the investment after 2012 (27%).

Moreover, in this study, gender and education were not significantly influence the stock preference. Though in previous studies such as Bhandari & Deaves (2006) who stated that women had less certainty, but men were more overconfident than women, proved that men supposed to hold growth stocks. However, according to Mayfield, Perdue, and Wooten (2008), men tend to prefer both short-term and long-term investment. In other words, men were likely to engage in either value or growth stocks.

The result of this study showed that gender did not influence the stock preference, which might happen because of their investors’ marital status, which 44% of them were men and married. The hypothesis that men tend to prefer growth stocks were not proven because married men tended to avoid risk. Additionally, the result of cross tabulation

explained that the amount of both gender were not balance. Women investors, who preferred value stocks were 9.2%, while for men investors 30.2%. Women investors, who preferred growth stocks were 13.1%, while men investors 47.4%.

The third one of demographic features involved in this study was education. Education also played important role in decision-making process. According to Bhandari & Deaves (2006), higher education levels were associates with certainty. The more highly educated the investors, the more certain they are, the more risk takers they are. Unfortunately, this study showed that education did not significantly influence the stock preference. The cross tabulation data showed that most of the investors were in the group of bachelor degree, which were 51.3%. While, the group of investors not included in the group of bachelor degree were in the small percentage. Thus, the result did not significant. Another factor of education, which might play important role to prove that education was not significant, was that the investors came from various background of the study. Their background of education was probably not sufficient to support the investors’ ability in stock investing.

The other aspects, which might influence stock preference, were the investors’ personality, which was measured by using the big five personality traits. The big five personality traits was a viable approach for examining economic behavior (Mayfield, Perdue, and Wooten, 2008). This study only used four of them to determine whether the personality traits influence the stock preference or not.

Two personalities, neuroticism and conscientiousness did not significantly influence the stock preference, though it had positive impact towards growth stock preference. Mayfield, Perdue, and Wooten (2008), and Jamhidinavid, Chavoshani, and Amiri (2012) stated that investors with neuroticism were indicated by having anxiety, unstable emotion, moodiness, and tenseness. Investors in this type surely would avoid risk as well short-term investment in order to avoid nervous and tenseness. Thus, investors with neuroticism would probably tend to prefer value stock. However, the result of this study did not prove the previous studies. It might be influenced by the unstable emotion triggered the feeling of avoid loss.

In addition, conscientiousness was indicated by having well-organized plan, seeking for excellence

and strong willed (Mayfield, Perdue and Wooten, 2008). Furthermore, Jamhidinavid, Chavoshani, and Amiri (2012) stated that investors in this type believed that their own performance in investments were better than the other investors. Thus, the investors with conscientiousness supposed to prefer growth stocks. The analysis of this study proved conversely, where the investors prefer value stocks to growth stocks. It might happen because the investors in this type were seeking for excellence, so they could predict the undervalue stocks and its potential to rise up.

The rests personality, extraversions and openness to experience clearly gave significant influence towards stock preference. Extraversion, according to Mayfield, Perdue, and Wooten (2008) and Peterson (2011), agreed that extraversion was people who had characteristics as enthusiasm, optimistic, seeking excitement, social and emotional ability to achieve positive feelings. Investors in this type were more likely to be risk averse. In addition, Larson (2005) found that investors with extraversions

engaged to long-term investing. While,

Jamshidinavid Chavoshani, and Amiri (2012) stated that investors with extraversion who seeking for

excitement tend to be very confidence to take risk. Thus, investors in this type tend to prefer growth stocks. This study’s result showed the same premise with previous studies that extravert investors prefer growth stocks.

At the final was openness to experience is characterized by both imagination and intellectual expression (John and Srivastava, 1999). Furthermore, Mayfield, Perdue, and Wooten (2008) stated that investors who are categorized in openness were likely engaged in long-term investing. While, Jamshidinavid, Chavoshani, and Amiri (2012) stated that the investors with openness meant that individuals interested in novelty and new experiences, action-oriented, and curious about others’ ideas buy and sell their shares because of their high confidence. Investors in this type of personality trait might engage in long-term investment, which referred to value stocks. Thus, the hypothesis that investors with openness tend to prefer value stock was proven.

Some of demographic factors and personality traits did not adequately prove the hypotheses. It was probably because most of the investors were followers. The data (see the appendix 2) showed that

most of investors were getting information from their friends or colleagues. It meant that the social interaction may influence the investors stock preference. Nofsinger and Hirschey (2008) emphasized that people often leant by interacting with others. When investors learn what others think, herding happened. Consequently, when herding movement happened, most of investors took decision based on what happen in their group. The demographic factors and investors’ personality seemed not play important role in decision-making process.