Investor Response to Online Stock Trading: A Study Using Q Methodology

Abstract

After the introduction of online trading, some investors adopted it while others stuck to their full-service brokers. This research employed Q methodology to identify different groups and why they responded differently to the same innovation of online trading. The respondents were 26 adults — 24 investors and 2 non-investors — who sorted a 40-statement Q sample. Analysis revealed 4 groups — 3 factors, or types, with 1 factor being bipolar. Factor 1, long-term investors, sought expert advice because they did not feel confident in their own judgment and research skills, but would like to be involved in online trading in the future. Factor 2 wanted to invest online for empowerment and fun. Factor 3, a bipolar factor, had a group that distrusted full- service brokers and wanted to save transaction costs through online trading, while capturing gains from daily price fluctuations. Another group under Factor 3 was composed of staunch supporters of full-service brokers. These 4 groups seemed to fit into the stages of the innovation-adoption process that diffusion theorists have propounded. Empowerment and fun were important elements attracting investors to online trading along with price and trust. Privacy, anonymity, and protection of investor assets were not important. Gender and the frequency of stock trading seemed to be type determiners, but age, occupation, time of initial stock purchase, or size of portfolio did not.