Understanding Investment – the Effects of Language
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Date
2016-05
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Publisher
The Ohio State University
Abstract
Investment, as a major part of business activities, has always been a popular topic of business research. Economic and financial scientists have identified a lot of financial factors that have been publicly recognized as investment influencers. However, there are relatively few researchers trying to identify behavioral factors that have an impact on investment. Having a business and psychology background, I am interested in exploring people’s investment behaviors from a behavioral-finance standpoint. Previous research has shown that languages differ in whether they require speakers to mark future events using grammatical markers, and this difference actually affects people’s saving behaviors. Considered the fact that savings and investment are highly correlated with each other, the purpose of my research is to see whether there is a similar relationship between languages and investment behaviors. I gather information of 23 languages representing 37 countries as well as the domestic stock market participation rates and foreign equity holding rates of these countries. These two types of rates serve as my indicators of people’s investment behaviors. The main method used in my study is regression analysis. Current progress shows that although other major investment influencers have been controlled in the regression, languages do not seem to have a statistically significant impact on investment. This result is not consistent with the finding of the previous research that languages affect savings. Therefore, besides helping people know more about the underlying mechanism of their investment behaviors, my study provides evidence to question the methods and the finding of the previous research.
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Keywords
Language, Investment, International Comparison, Connections with the previous research of savings