Deciphering the Psychological and Economic Forces Shaping Pakistani Stock Exchange Behaviour

Abstract

In the bustling world of the Pakistan Stock Exchange (PSX), individual investors make decisions that drive the market's pulse. But what compels them to buy, sell, or hold onto shares? This curious riddle is the main objective of researchers to crack. This study embarked on a mission to understand the invisible forces guiding these investors' choices. They cast their net, not across financial charts or economic reports, but into the depths of human minds. Not complex algorithms, but simple questionnaires. With these, they tapped into the thoughts and feelings of 390 individual investors, delving into their hopes, fears, and biases. The analysis, like a skilled detective sifting through clues, revealed a fascinating truth: both "the mind" and "the market" played a critical role in steering investment decisions. The whispers of confidence and anxiety, the lure of quick gains and the dread of losses, all swayed the investors' hands as they manoeuvred their stocks. But here's the twist: the mind, not the market, held the upper hand. Psychological factors, like overconfidence or the fear of missing out, turned out to be more influential than cold, hard economic data. It was like emotions were the puppet masters, pulling the strings of logic and reason. This discovery paints a vibrant picture of the investors within the PSX – not just as rational number-crunchers, but as human beings driven by a complex mix of hopes and fears. Their decisions, shaped by both the whispers of the mind and the roars of the market, create a fascinating dance that defines the very rhythm of the PSX. This research, then, becomes a window into this dance, allowing us to see the invisible forces at play. It's a story not just about stocks and numbers, but about the human drama that unfolds within the financial arena. By understanding the minds of these investors, we gain a deeper appreciation for the intricate tapestry woven within the walls of the PSX.

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