The Determinants of Investment Strategy: An Empirical Assessment of Behavioural Factors in the Omani Context

Abstract

This paper examines the behavioural factors influencing investment decisions and strategy in the Sultanate of Oman. Investors’ decision-making process is thought to be influenced by a wide range of factors directly or indirectly (Kusev et al. 2017). The rational approach considers only the mathematical results thereby failing to recognize the investor’s related psychological and sociological factors, categorized in the paper as heuristic factors, prospect factors and herding factors. This study attempts to identify the behavioural factors that influence individual investors’ decision in the Muscat Securities Market (MSM). Specifically, the study was designed to identify the factors which are mostly influencing the investment decisions of investors. Employing descriptive research design; data were collected from individual investors who had traded in the MSM during the fourth quarter of 2018. The primary collected through structured questionnaire and the secondary data is collected from various sources from stock brokers, Journals and other sources respectively. The simple random sampling technique was applied and the collected data covering 16 variables of behavioural factors were analyzed using the factor analysis, principal component analysis with varimax rotation, and Analysis of Variance tools. The anchoring, mental accounting, movement of prices, volume of trade and market information factors emerged as the five principal determinants of investment strategy are the major findings of the study. The results might make investors and advisors to understand the optimal ways to improve on strategy for structuring optimum portfolio selection and how far this can be optimised further in terms of managing their investment behaviour.