Investor's behavioral factors and stock selection during the COVID-19 pandemic

Abstract

The Covid-19 pandemic resulted in slowing down economic activities for each country. Some investors pull out their money entirely during the pandemic, and some old and new players in the market still find crisis during the pandemic as an opportunity to make a profit rather than anticipating an uncertain recovery. The researcher used an adaptive questionnaire validated by the experts and surveyed to determine if there was a significant relationship between the investors behavioral factors and stock selection based on market capitalization during the Covid 19 pandemic. Subsequently, the data obtained were evaluated statistically using mean and spearman rho to calculate the significant results. The result indicated that investors manifested a highly risk-averse behavior during the Covid-19 pandemic, followed by overconfidence behavior and herd mentality. Investors occasionally manifested the latter two behavioral factors. On stock selection preference in market capitalization, large-cap, mid-cap, and small-cap were highly chosen as investment avenues during the Covid-19 pandemic by investors based on sample size. Overconfidence has a significant relationship when analyzed by mid-cap; thus, hypothesis is rejected; this means that being overconfident plays an essential factor when investing or trading on a mid-cap size; investors can be benefited by spotting potential winners early on with confidence. There is no significant relationship between overconfidence in large-cap and mid-cap; therefore, null hypothesis is accepted. There is no significant relationship between loss aversion in large-cap, mid-cap, and small-cap; therefore, null hypothesis is accepted. There is no significant relationship between large-cap, mid-cap, and small-cap herd mentality. Therefore, null hypothesis is accepted.