Impact of Investing Characteristics on Financial Performance of Individual Investors: An Exploratory Study

Paper: arXiv 2311.00384

Authors: Poompak Kusawat, Nopadol Rompho

Abstract

This exploratory study examines which investing characteristics determine success in an equity market. Based on data from 403 respondents, exploratory factor analysis results in 13 factors: middle/long time horizon, qualitative analyst, open-minded/disciplined, organized, emotional stability, naïve, growth stock, concentrated portfolio, contrarian, value stock, globalized, intrinsic value, and price-independent. Multiple linear regression of individual investors’ excess return on these factors show statistically significant relationship. These results deepen our knowledge on what sort of investing characteristics are required to survive in equity markets.

Complexity vs Empirical Score

• Math Complexity: 2.5/10
• Empirical Rigor: 5.0/10
• Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: The paper uses standard statistical techniques (Exploratory Factor Analysis and OLS regression) on survey data from 403 retail investors to identify behavioral traits linked to excess returns. While it offers useful descriptive insights into individual investor performance, it lacks mathematical density and advanced econometric modeling to address self-reporting biases.

Research Flowchart

  flowchart TD
    A[Research Goal: Identify investor characteristics driving excess return] --> B[Data Collection: 403 Individual Investor Responses]
    B --> C[Exploratory Factor Analysis]
    C --> D[Extracted 13 Factor Characteristics]
    D --> E[Multiple Linear Regression Analysis]
    E --> F[Statistically Significant Relationship Found]
    F --> G[Outcome: Key investing traits identified for market survival]