Antecedents of Regret Aversion Bias of Investors in the Stock Market of Pakistan (PSX) along with the Scale Development on Regret Aversion Bias

Abstract

The aim of this study is to explore the causes behind the regret-averse bias of investors in the stock market of Pakistan (PSX) and to develop scale on it to operationalize this study in the future. The regret-averse bias is a state in which people fear that their decisions will turn out to be wrong in the future. The opening section of study consists of semi-structured interviews taken from the professionals of stock market and put on NVivo on their crisp results to get a word-cloud, and check the context and content validity of the customary measure by approving the measure successively the authorization of 5 language and 5 market experts. The second section consists of the floatation of self-developed scale and to: apply Kaiser-Meyer-Olkin (KMO) test to commend the sample-size; apply Bartlett’s test of sphericity to check the exactness of the items; check the univariate outliers and apply Exploratory Factor Analysis (EFA) on the results for the drop of over-loading items. The third section consists of the floatation of refined scale with lesser sample size as liken to prior floatation of scale to check the inter-item correlation amongst items so that get more refined scale. The fourth section consists of the floatation of refined scale with lesser sample size as liken to prior floatation of scale to check the reliability (if-item deleted) of factors, association among factors, and cause and effect relationship amongst factors. The last section consists of the floatation of more refined scale with lesser sample size as liken to prior floatation of scale to confirm the factors for scale through Principal Component Analysis (PCA). By exploring and approving the reasons of regret-averse bias of investors in the PSX, the supervisory body of stock market (Security and Exchange Commission of Pakistan - SECP) may control the regret-averse bias of individuals by providing workshops on it, which may lead to proficient stock market and economy as well.