THE IMPACT OF PAST BEHAVIOUR AND HERDING EFFECT ON INVESTMENT DECISIONS: AN ANALYSIS OF INVESTOR BEHAVIOUR IN HO CHI MINH CITY

Abstract

The Vietnamese stock market, as an emerging market, has garnered significant attention due to its strong growth potential. Research on individual investment behaviour is particularly relevant, as investment decisions are not only influenced by financial models and portfolio structures but also by psychological factors such as the herding effect and past behavioural patterns. This study employs PLS-SEM to examine the relationship between past behaviour, herding behaviour, and investment decisions. Additionally, it explores the mediating role of herding behaviour in the relationship between past behaviour and investment decisions among investors in the Vietnamese stock market. Based on survey data from 255 stock investors residing in Ho Chi Minh City, Vietnam, the findings indicate that past behaviour exerts the strongest influence on investment decisions among the studied factors, suggesting that investors tend to rely heavily on prior experiences when making investment choices. Moreover, past experiences not only have a direct impact on investment decisions but also an indirect effect through herding tendencies. This finding reinforces the notion that investment decisions are not solely rational but are also shaped by individual and social behavioural factors. Raising awareness of behavioural biases and promoting financial education are essential in helping investors make more informed decisions and mitigate financial risks in the future.