A Portrait Of The Individual Investor: Survey Evidence From 17 Different Provinces In China

Some fun facts in here – not as bad as media portrayal but still yeesh ie “‘main information resources come from public media, friends or other individual investors” and “When the price decreases in percentage, more individual investors choose to sell partly while they tend to sell all if the price decreases over 2 weeks. This may imply that individual investors have some time preferences, i.e., their level of risk aversion increases over time rather than over percentage. ” and ” It shows a clear trend of buying more with the increase of probability of price increase predicted by experts in the public media. ”

Zhixin Dai

GATE CNRS UMR 5824; University of Lyon

Meng Yong

Shanxi Medical University

Nathalie Odin

University of Lyon 1

January 22, 2016

Abstract:

We randomly interviewed 2129 individual investors in 17 different provinces in China to study the individual demographic characteristics of Chinese individual investors. We find that (1) 96.33% individual investors are less than 60 years old and only 11.55% of them are retired or are student, which is in sharp contrast to stories of dowdy grandmothers and college graduates among individual investors in China; (2) they are generally well educated (72.03% of them hold a degree above secondary school level); (3) their investment is mostly lower than $ 15,657 (88.09%) and the ratio of investment/income in the stock market is lower than 0.5 (95.4%), which implies their impact on the price changes of financial market may be exaggerated. More interestingly, we also find a robust gender difference in terms of investor sentiment: compared to female individual investors, male individual investors are more i) rational, ii) loss tolerable, and iii) optimistic, as determined by the questionnaire.

A Portrait Of The Individual Investor: Survey Evidence From 17 Different Provinces In China – Introduction

The Chinese financial market is not only one of the most important components of Chinese economy but also has an increasing influence on the world economy. One of the most important features of the Chinese financial market is its high participation rate of individual investors. Unlike many of the world’s stock markets, most trades on the Chinese stock market are made by individual investors, rather than institutional investors.

Despite the importance of individual investors in the Chinese financial market, there are still some significant gaps in the literature. For example, previous literature usually focuses on individual investor’s investing biases, such as weekend effect (Abraham and Ikenberry,1994), overconfident (Barber and Odean, 2001), local/home bias (Karlsson and Nordén, 2007; Seasholes and Zhu, 2010), individual investors also tend to be attention driven (Barber and Odean, 2008) and incline toward a disposition effect (Barberis and Xiong, 2009), while there is little evidence looking at what the individual demographic characteristics of individual investors are.

We believe it is important to sketch the profile of individual investors, i.e., who they are and what they say which may provide important information in predicting their trading behavior. For this reason, more field data should be collected with real and heterogeneous subjects.  This data collection should be complementary (and not a substitute) to the evidence collected in the laboratory and real trading data.

Individual Investor China

Individual Investor China

The second question we are interested in is whether there are gender differences in terms of self-reported investor sentiment, such as rationality, loss tolerance and optimism level concerning the future stock market. On the one hand, investor sentiment may play an important role in financial markets (Qiu and Welch, 2004; Kumar and Lee, 2006; Schmeling, 2009). On the other hand, although gender differences have been well documented, little is known about the existence of gender differences regarding investor sentiment, in particular, among emerging market investors.

To address the two questions discussed above, we randomly interviewed 2129 individual investors in 17 different provinces in China from February 2015 to March 2015. Our data indicates that (1) 96.33% individual investors are less than 60 years old and only 11.55% are either retired or student, which is in sharp contrast to stories of dowdy grandmothers and college graduates among individual investors in China; (2) they are generally well educated (72.03% of them have a degree that is higher than a secondary degree); (3) their investment scale is mostly lower than $ 15,657 (88.09%) and the ratio of investment/income is lower than 0.5 (95.4%), which implies their impact on financial market may be exaggerated. We also find a robust gender effect: male individual investors are more i) rational, ii) optimistic and iii) loss tolerable. Our findings may have important implications for both researchers and practitioners.

The remainder of this paper is organized as follows: In section 2, we will present our method and data. In section 3, we will set out the results. Finally, in section 4, we will discuss and conclude.

Individual Investor China

Method and data

We randomly interviewed a total of 2129 subjects during the period of February 2015 and March 2015 in 17 different provinces in China in order to collect a representative sample of individual investors. We used over 300 students from the department of statistics of Shanxi University of finance and economics to help collecting our data. One advantage of using students from the department of statistics is that they have a good knowledge of survey techniques. Our survey consists of four parts. Part A is designed to discriminate whether the surveyed subject is an individual investor. Part B focuses on questions like the reasons of participating in the stock market and how they make their decisions. Part C investigates how individual investors make subjective judgments according to some hypothetical situations. The last part asks some conventional social demographic questions, such as age, gender, income, education, etc. In addition, we have questions in order to measure their rationality, loss tolerance and optimism level. The advantage of our approach is that it provides a direct measure of investor sentiment that can produce a very precise indicator (Burghardt, 2011).

Individual Investor China

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