HOW DOES PERCEPTION OF PROFIT OR LOSS AFFECT AN INDIVIDUAL'S INVESTMENT DECISION? A CASE STUDY IN VIETNAM
Recently, although behavioral finance is one of the most interesting topics, there is still a lack of empirical research in Vietnam. This study aims to analyze the influence of feelings after winning or losing on individual investment decisions. The research is practiced based on prospect theory and overconfidence. The experiment was conducted with 50 students of diverse disciplines, ages, and spending levels. They participate in the game of drawing a ball with 12 rounds. They have a chance to win 2.5 times the bet amount or lose nothing at each round. The Mann-Whitney test of two independent samples was employed to test the hypotheses. The results support the prospect theory that individuals feel more dissatisfied when they lose than they are satisfied when they win. This conclusion is supported by different genders, disciplines, and spending levels. However, when making new investment decisions, women are more affected by the previous results (winning or losing) than men. Furthermore, participants tend to invest more after each losing round. Thus, investors should cultivate financial knowledge and minimize personal emotions when making investment decisions to avoid wrong behaviors.
Behavioral Finance, Prospect Theory, Perception, Individual's Investment, Experimental Research.