UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Trang Nguyen Thanh Phuong

DETERMINANTS OF BEHAVIOR
INTENTION TO USE DERIVATIVE
SECURITIES. A STUDY ON
INDIVIDUAL INVESTOR'S
BEHAVIORS IN STOCK MARKET
OF VIETNAM

MASTER OF BUSINESS (honours)

Ho Chi Minh City – Year 2018


UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Trang Nguyen Thanh Phuong

DETERMINANTS OF BEHAVIOR
INTENTION TO USE DERIVATIVE
SECURITIES. A STUDY ON
INDIVIDUAL INVESTOR'S
BEHAVIORS IN STOCK MARKET
OF VIETNAM
MASTER OF BUSINESS ADMINISTRATION

means of structural equation modeling. The results show that perceived behavior
control has the strongest impact on the three main factors affecting behavior
intention to use derivative securities with a coefficient of 0.426. The other two
factors, including attitude towards behavior, subjective norm, have a direct impact
on behavior intention to use derivative securities with coefficients of 0.356 and
0.216 respectively. On the other hand, overconfidence, excessive optimism, herd
behavior and risk aversion have direct effect on attitude towards behavior.
However, herd behavior and aversion effect attitude towards behavior with positive
coefficient while overconfidence, excessive optimism affect with negative
coefficient. Finally, age and education play an important role in behavior intention
to use securities derivatives while there is no difference between men and women
who intend to use derivative securities.

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Table of Contents
Acknowledgement ............................................................................................................. 1
Abstract ............................................................................................................................. 2
List of figures .................................................................................................................... 5
List of tables ...................................................................................................................... 6
List of abbreviations .......................................................................................................... 7
1.

Introduction................................................................................................................ 8

2. Theoretical background and hypotheses ....................................................................... 13
2.1. Foundational Theory ............................................................................................. 13
2.2. Research model and hypotheses ............................................................................ 16
2.2.1. Attitude towards behavior (ATB) .................................................................... 17

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4.5.3 Age .................................................................................................................. 53
4.6. Hypothesis testing results ...................................................................................... 54
5. Discussion & conclusion ............................................................................................. 55
5.1. Discussion............................................................................................................. 55
5.2. Implications for managers..................................................................................... 57
5.3. Conclusion ............................................................................................................ 58
5.4. Limitations and directions for future research ....................................................... 59
REFERENCES................................................................................................................ 60
APPENDICES ................................................................................................................ 63
Questionnaire (English version) ................................................................................... 63
Questionnaire (Vietnamese) ......................................................................................... 67
A. Frequencies .......................................................................................................... 71
C. Reliability ............................................................................................................. 73
D. Factor Analysis ..................................................................................................... 81
E. Confirmatory Factor Analysis ............................................................................... 87
F.

Structural Equation Modeling ............................................................................... 93

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List of figures
Figure 1. The theory of planned behavior – (Ajzen, 1991) ............................................... 14
Figure 2. Research model ................................................................................................ 17
Figure 3. Main steps of research process .......................................................................... 28
Figure 4. First Measurement Standardized Modelling ...................................................... 47


List of abbreviations
No. Abbreviation
1

Meaning

AVE

Average Variance Extracted

ATB

Attitude Towards Behavior

2

CFA

Confirmatory factor analysis

3

CR

Composite Reliability

5

EFA


Theory of Planned Behavior

SN

Subjective Norm

SEM

Structural Equation Modeling

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1. Introduction
Derivatives are a valuable financial instrument that depends on the price of
the underlying asset. Basically, derivatives can be understood as a type of contract
for a future but predefined transaction. Derivative instruments are conduct as a tool
used to manage and control risk. Specifically, derivative products are used to
prevent risk when asset values fluctuate. In addition, derivatives are considered as
hedging instruments against volatility of commodity prices. In the derivatives
market, there are two main markets: the financial derivative market and commodity
derivatives market. In this study, the author will focus on the financial derivatives
market on the stock market, exactly the Vietnam stock market.
To date, Vietnam stock market has been established for quite a long time, but
just over 11 years the stock market of Vietnam has a significant development; Two
stock exchanges have been established, namely the Ho Chi Minh City Stock
Exchange (HOSE) and the Hanoi Stock Exchange (HNX), a stock exchange

financial market, the behavioral intentions have been examined in a plenty of
studies such as Berry, Parasuraman & Zeithaml (1996), Athanassopoulos (2000),
Auh, Bell, McLeod & Shih (2007), Keh & Xie (2009), Bolton, Bitner & Mende
(2013), Saeidi, Sofian & Saeidi (2015).

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In the aforementioned studies, the theories of behavioral have suggested the
author to identify and analyze the key factors that capture the behavioral intentions
of investors in Vietnam's derivatives markets. This study of behavioral intention is
conducted by using different approaches. The theory of planned behavior (TPB) has
been proven relatively effective predicting various human behaviors (Sheppard,
Hartwick et al., 1988). Furthermore, the TPB theory has shown to be one of the
strongest theories with multiple implications and it was mentioned in many studies
related to behavioral intention. Therefore, the identification of individual investor
behavior can be examined by the adoption of a behavioral approach to the study of
the financial derivatives market and the level of investor perception of different
derivatives markets.
Derivatives are used by large corporations and companies to manage
exchange rate risk, loans or financial expenses. Based on mentioned studies,
derivatives are very useful in risk management. Through the option call and put
option, market risks are prevented using forward and future contracts. Derivatives
are indispensable products in the deep, broad and diversified development of
financial markets. To date, derivatives have developed rapidly, are strong on a
global scale and play an increasingly important role in the financial and monetary
system. These tools show prominent features in risk prevention, meeting the needs
and interests of many market participants. However, it also shows the complexity
and if not good management can cause economic instability.
In Vietnam, derivative products originating from currencies and commodities

influenced by a number of psychological factors. Although individual investors
have gradually become more professional in investment, some empirical studies of
market performance show evidence that the VN-Index is not random. One of the
reasons is the existence of psychological factors affecting the behavioral intentions
of individual investors in the stock market (Phan & Chu, 2014). In accordance, the
decision of investors although based on reasonable analysis, is influenced by
psychological factors (Murgea, 2008, Sehgal & Singh, 2012).
Hence, this study is necessary to conduct in the current context of Vietnam to
understand the level of investors toward derivative financial instruments when the
derivative financial market is put into operation. The study also is expected to
identify factors that affect intention of investors in the use of derivative financial
instruments in Vietnam.
The purpose of this study is to explore the factors that influence the decision
to participate in the financial derivative market of the investor in Vietnam. On
August 10, 1977, the Derivative Market was officially opened. The Vietnamese
State Securities Commission has issued certificates of eligibility for trading of
derivative securities to five securities companies including Saigon Securities Inc.
(SSI), Vietnam Prosperity Securities Company (VPBS), Vietnam Securities
Corporation Vietnam Investment and Development (BSC), MB Securities (MBS)
and VNDIRECT Securities (VND). Hence, this study focuses on investors who are
dealing in these five securities companies.
The results of this study will help to learn about the behavior of investors in
the derivative securities market in Vietnam. Determining the level of impact of
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factors on the behavior of individual investors in the derivatives market is
important. It will help to capture the behavior of investors in the new derivative
market as in Vietnam today. This result is very important for both brokers as well as
the State Security Commission of Vietnam. Knowing the behavior of investors can

According to the theory of planned behavior (TPB), behavioral control can
affect behaviors in two ways: PBC may affect intentions of behavior and PBC can
directly influence behavior. Both of these controlling effects may be related to the
course of action of investors. In addition, other factors that affect investors' actions
are internal factors and external factors. Internal factors include feelings, personal
knowledge, experiences and skills. External factors include financial resources, time
or partner (Ajzen, 2005). In TPB theory, the three main factors are behavioral
attitudes, subjective norms, and perceived behavioral control. These factors have
been proven and confirmed in numerous researches.
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Behavioral intentions have been predicted by attitudes, subjective norms,
perceived behavioral control in the past. The theory of plan has been tested for
many years and has been shown to be reliable, effective through numerous
empirical studies. TPB has been widely used in the prediction of human behavior in
business (Krueger & Carsrud, 1993), the study of bad habits (Chang, 1998) or
tobacco control behaviors for adults (Hu & Lanese, 1998). In addition to predicting
and controlling personal behavior, TPB is also used to predict behavior that benefits
the community. For example, research on resource sharing in the organization
(Bolloju, 2005) or decision making in human resource management (Carpenter &
Reimers, 2005). TPB is also analyzing the intention to use a variety of new forms,
such as the use of internet in shopping (Hsieh & Rai, 2008), the intention to use
technology devices in households (Pavlou & Fygenson, 2006), or intention to use
credit cards (Rutherford & DeVaney, 2009).
TPB is widely used in the financial and securities markets (Gopi &
Ramayah, 2007). Gopi and Ramayah (2007) use TPB to study the intent of online
home-based business, or use internet banking for securities trading (Serkan, 2004).
All of the above may indicate that TPB is a good model for predicting behavior. In a
famous study by East (1993), he used TPB to accurately predict the behavior of

(Gibler & Nelson, 1998). Therefore, attitude is one of the determinants of personal
behavior.
For the attitude towards behavior, Ajzen and Fishbein (1980) believe that the
attitude toward any concepts is one of the feelings about one's favourableness and
unfavourableness. Thus, attitude towards behavior is only the end result while there
are small factors that affect attitude towards behavior. Phan and Zhou (2004) have
identified four factors that directly affect attitude towards behavior, including
overconfidence, excessive optimism, herd behavior, and risk aversion. Thus,
attitude towards behavior is considered as a dependent variable influenced by four
psychological factors as follows:
Overconfidence is the expression of self-confidence behavior of some
knowledge or decision. Overconfidence has been studied extensively in the stock
market (Barberis & Thaler, 2003). In trading, many investors are confident about
their knowledge, their ability in reality is not so. Transaction results are far from
their confidence. However, they do not see this problem. Mostly, investors are
overconfident believe that they choose the best stock and the best time to sell the
stock for the highest profit.
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Excessive confidence influences their decision. Excessive confidence also
causes them to ignore other useful data in the investment decision that leads to their
erroneous investment decision (Odean, 1998; Wang, 2000; Gervais & Heaton,
2002; Grinblatt & Keloharju, 2009; Montier, 2009). Overconfidence also greatly
influences the use of derivative in securities transactions.
Most investors are overconfident about their ability, so they will not use risk
control measures in their trades, particularly derivative. An over-confident investor
performs high-frequency transactions and thus increases the volume and volatility
of the market while their expected returns decrease (Gervais, Heaton and 2002).
Therefore, the confidence of a person's ability to directly influence the investment

risk (Barber & Odean, 2009).
Herd behavior can greatly affect the behavior of investors. Investors who
have high herd behavior may not use derivative to manage risk. For investors with
low herd behavior, they will use derivative as a tool to control risk from their
behavior.
Risk in the financial sector is the uncertainty of an unexpected decision or
incident. Tversky and Kahneman (1974) propose prospect theory and reveal that
forecasting and forecasting under uncertainty do not usually follow probability
rules. Risk averse is a factor in prospect theory that determines that people tend to
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risk averse in the "profitable zone" and risk seeking in the "losing zone" (Tversky &
Kahneman 1992).
Thus, for risk aversion investors, they prefer to look for risk, so they will be
more interested in the market fluctuations and high risk. Conversely, for investors
with low risk aversion, they only trade when they feel safe and secure (Olsen, 2007,
2008). The use of derivative in securities trading is also affected. Risk aversion does
not like derivative because they think that dealing with derivative is too safe and
profit will be low. Conversely, for the volatile market, derivative as a useful tool for
investors with low aversion risk.
H1: Attitude towards behavior positively affects the behavioral intention of
investors in using financial derivative instruments.
H1a: Overconfidence is negatively affects the attitude among individual
investors.
H1b: Excessive optimism is negatively affects the attitude among individual
investors.
H1c: Herd behavior is positively affects the attitude among individual
investors.
H1d: Risk aversion is positively affects the attitude among individual

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studies (Lewis et al., 2003). Moreover, recent studies have also shown that
subjectivity is a different predictor of subjective norms for investors' intentions in
different regions (Wu et al., 2011).
However, despite different conclusions about the role of subjective norms
with behavioral intention, it may be possible to show a significant association
between subjective norms and behavioral intention. It can be predicted that if an
individual investor is affected by subjective norms, they may intend to use more of
those who do not suffer the same pressure.
H2: Subject norm positively affects the behavioral intention of investors in
using financial derivative instruments.
H3: Subject norm positively affects the attitude among individual investors.
2.2.3 Perceived behavioral control (PBC)
Perceived behavioral control is a complementary factor to overcome the
constraint on the TPB model, which is applicable in the case of individuals affected
by external factors (SN). Thus, individuals will feel more active in their decision by
reducing the pressure from SN (Ajzen, 2002). PBC is defined as perceived by
individuals as easy or difficult to carry out specific behaviors (Ajzen, 2005). In
other words, if the investor's PBC are stronger, they will be motivated more to
perform this behavior (Ajzen, 2005). In addition, perceived behavioral control is
defined as the degree to which he or she has control of internal and external factors
that facilitate or limit behavioral activity.
In addition, Ajzen (1991) built the PBC based on research and synthesis of
various historical data. Specifically, information is collected through personal
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