Assessment of Students' Behavioral in FX Trading

Bahate Maidiya

Master's thesis

Abstract:

Behavioral finance is the field of finance that proposes psychology-based theories to explain market anomalies such as herding effect, overconfidence, January effect. Behavioral finance studies could give us the explanations about some irrational trading and the underpriced or overpriced situations. Herding effect explains that investors would get influenced by other inventors’ behavioral when they make decisions. In this thesis we introduced all of them and especially we test the herding effect between the students. This thesis is to test herding effect took place between students or not. The herding effect is studied using the data of students from our faculty specifically, students traded with virtual exchange currencies during the academic year 2015/2016 as a part of their study curricula. For trading purposes, the demo version of OANDA platform is used by all students. Thus, it enabled us to collect historical data of trades such as account balances, trade units, type of currency and the time of the trade. Then, the collected data are used to prepare the samples for statistical analyses. The modification of the data samples included the identification of the type of trade (buy or sell), buying frequencies, number of units and number of active students each day of the trading period. The empirical study of herding effect is conducted using the methods of linear regression analysis. Finally, two regression models are estimated, a buying and selling herding model. According to the statistic and econometric verification, we can consider the buying herding model as a statistically significant model. On the other hand, the selling model is not statistically significant. Based on our findings, we can conclude that there is a presence of the herding effect among the students. It implies that students could be influenced by each other’s buying behavioral. The selling activity model is no statistically significant. We cannot find enough correlated relations between the numbers of selling activity students with other component. As long as we are not alone and living in the people society. More or less you will get influenced by the surrounding environment. Herding effect is not only about behavioral but also the finance and the economic.

Abstract:

Behavioral finance is the field of finance that proposes psychology-based theories to explain market anomalies such as herding effect, overconfidence, January effect. Behavioral finance studies could give us the explanations about some irrational trading and the underpriced or overpriced situations. Herding effect explains that investors would get influenced by other inventors’ behavioral when they make decisions. In this thesis we introduced all of them and especially we test the herding effect between the students. This thesis is to test herding effect took place between students or not. The herding effect is studied using the data of students from our faculty specifically, students traded with virtual exchange currencies during the academic year 2015/2016 as a part of their study curricula. For trading purposes, the demo version of OANDA platform is used by all students. Thus, it enabled us to collect historical data of trades such as account balances, trade units, type of currency and the time of the trade. Then, the collected data are used to prepare the samples for statistical analyses. The modification of the data samples included the identification of the type of trade (buy or sell), buying frequencies, number of units and number of active students each day of the trading period. The empirical study of herding effect is conducted using the methods of linear regression analysis. Finally, two regression models are estimated, a buying and selling herding model. According to the statistic and econometric verification, we can consider the buying herding model as a statistically significant model. On the other hand, the selling model is not statistically significant. Based on our findings, we can conclude that there is a presence of the herding effect among the students. It implies that students could be influenced by each other’s buying behavioral. The selling activity model is no statistically significant. We cannot find enough correlated relations between the numbers of selling activity students with other component. As long as we are not alone and living in the people society. More or less you will get influenced by the surrounding environment. Herding effect is not only about behavioral but also the finance and the economic.

Keywords

Behavioral Finance, Herding Effect, Linear Regression Model, Ordinary Least Squares Regression, Statistical Verification, T-test, F-test, Econometric Verification, Economic Verification

Keywords

Behavioral Finance, Herding Effect, Linear Regression Model, Ordinary Least Squares Regression, Statistical Verification, T-test, F-test, Econometric Verification, Economic Verification

Language used: English

Date on which the thesis was submitted / produced: 27. 4. 2018

Thesis defence

• Date of defence: 29. 5. 2018
• Supervisor: Martina Novotná
• Reader: Lucie Chytilová

VŠB - Technical University of Ostrava

Ekonomická fakulta

Master programme / field:
Hospodářská politika a správa / Finance