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Chapter 1: Introduction
AIM
To study the influence of Demographic and Psychological factor on Investment decision in Bangalore.
RESEARCH OBJECTIVE
On the basis of the above study we framed the main objectives of our study which are as under: 1. 2. 3. 4. To study the influence of age on the investment pattern. To study the impact of income level on investment decisions. To study the impact of announcement of annual result on investment pattern. To study the impact of declaration of dividend & bonus announcements on investment pattern.
HYPOTHESIS
H0: There is no association between the age of the investors and their investment behavior. H1: There is a association between the age of the investors and their investment behavior.
H0: There is no association between the age of the investors and their behavior when dividends and bonus of listed companies are announced. H2: There is a association between the age of the investors and their behavior when dividends and bonus of listed companies are announced.
RESEARCH METHODOLOGY
The questionnaire was divided into three parts: In the first part, the demographic factors of the investors were recorded primarily for their classification. The second part of the questionnaire was related to the investment details of the investor. The various avenues the investor had invested in and details regarding investment in capital market viz. primary, secondary or both were recorded. The final part of the questionnaire was related to the behavioral details, which recorded the investors reaction to the various capital market information. ANOVA test has been used to test the relationship between age and decision making process and between average income and investment portfolio. CHI SQUARE test was also used for testing the relationship between age and behavior of investors to the various information announcements.
Gaurav Kabra, Prashant Kumar, Mishra, Manoj Kumar Dash (2010) from the study concluded that modern investor is a mature and adequately groomed person. In spite of phenomenal growth in the security market and quality Initial Public Offerings (IPOs) in the market, the individual investors prefer investments according to their risk preference. A majority of investors are found to be using some source and reference groups for taking decisions. Though they are in the trap of some kind of cognitive illusions such as overconfidence and narrow farming, they consider multiple factors and seek diversified information before executing some kind of investment transaction. Syed Tabassum Sultana (2010) concludes that the individual investor still prefers to invest in financial products which give risk free returns. This confirms that Indian investors even if they are of high income, well educated, salaried, independent are conservative investors prefer to play safe. The investment product designers can design products which can cater to the investors who are low risk tolerant and use TV as a marketing media as they seem to spend long time watching TVs. E. Bennet, Dr. M. Selvam, Eva Ebenezer, V. Karpagam, S. Vanitha (2011) concluded that the average value of the five factors, namely, Return on Equity, Quality of Management, Return on Investment, Price to EarningsRatio and various ratios of the company influenced the decision makers. Further, other five factors, namely, recommendation by analysts, Broker and Research Reports, Recommended by Friend, Family and Peer,Geographical Location of the Company and Social Responsibility were given the lowest priority or which had low influence on the stock selection decision by the retail investors. Azwadi Ali (2011) in his study showed interest in examining the relationships between individual investors perceived financial performance of companies and their trading intentions, and the mediating effect of companies images on the relationships. Giridhari Mohanta & Dr. Sathya Swaroop Debasish (2011) studied that investors invest in different investment avenues for fulfilling financial, social and psychological need. While selecting any financial avenue they also expect other type of benefits like, safety and security, getting periodic return or dividends, high capital gain, secured future, liquidity, easy purchase, tax benefit, meeting future contingency etc.
SOURCES OF DATA: The research design for the study is descriptive in nature. The researchers depended heavily on primary data. The required data were collected from the retail investors living in Bangalore through a Structured Questionnaire. SAMPLING SIZE AND PROCEDURE: The questionnaire approach was used for the collection of data. In this study, the primary data was collected from 100 investors in Bangalore city. Questionnaire was distributed through online platform through social networking websites and offline platform through individual brokers. Questionnaires were hand delivered to many investors while personal interviews have also been taken to ensure a degree of objectivity in the survey data, selected investors were personally interviewed to verify the accuracy of the self-reported data.
III Stage- Approaches to Research Design 1. Research Design Descriptive Research 2. Data Collection-Primary data. This data is collected from Questionnaire. 3. Statistical tools CHI-SQUARE test
IV Stage- Scope of the study The scope of the study is limited to Bangalore area only.
Derivatives: Derivatives are financial contracts, whose value is derived from the value of the underlying assets like equities, commodities and bonds. They can take the form of futures, options and swaps. Investors choose derivatives as they are used to minimize the risk of loss that result from variations in the underlying asset values. Commodities: The items that are traded on the commodities market are agricultural and industrial commodities and they need to be standardized. Commodities trading have always been giving high returns and thus they are the riskiest of all investment options. One, who trades in commodities, requires specialized knowledge and analytical capabilities. Real estate: Investing in real estate has to be a long term affair. Funds get hooked into the real estate sector for a considerable time period.
Mutual Funds
No limit
No limit
Real Estate
No limit
Capital gains guaranteed for specified avenues also tax exemption are available on long term Low investments
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NO. OF RESPONDENTS
BELOW 25 25-35 35-45 45-55 ABOVE 55 TOTAL
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SEX
NO. OF RESPONDENTS
% NO. OF RESPONDENTS
MALE
70
70
FEMALE
30
30
TOTAL
100
100
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INCOME LEVELS BELOW 1,50,000 150000-300000 300000-450000 450000-600000 ABOVE 600000 TOTAL
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NO. OF RESPONDENTS
BELOW 25 25-35 35-45 45-55 ABOVE 55 TOTAL
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REASONS FOR INVESTING RETURNS SAVINGS TAX BENEFITS SECURITY WEALTH CREATION
NO. OF RESPONDENTS 68 59 34 16 28
% NO. OF RESPONDENTS 33 29 17 8 14
CHART 8: SHOWING THE REASON FOR INVESTING IN FINANCIAL INSTRUMENTS OF THE RESPONDENTS USUALLY
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NO. OF RESPONDENTS 5 27 8 11 46
% NO. OF RESPONDENTS 5 28 8 11 47
NEVER SOMETIMES I RESERVE MY REPLY I ANALYZE ONLY MICRO FACTORS I ANALYZE BOTH MICRO AND MACRO
CHART 10: SHOWING RESPONDENTS ANALYSIS BEFORE STOCK MARKET TRADING INVESTMENTS
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NO. OF RESPONDENTS 75 27
% NO. OF RESPONDENTS 74 26
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NO. OF RESPONDENTS 40 18 13
% NO. OF RESPONDENTS 56 25 18
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If the company performance was as per expectation 21% (16) investors want to buy the stock and 57% (43) want to hold the stock with a view to get long term return and 22% (17) of investors preferred to sell the stock. TABLE 12(B): RESPONSE IF RESULTS ARE AS PER EXPECTATION
RESPONSE IF RESULTS AS PER EXPECTATION
NO. OF RESPONDENTS 16 43 17
% NO. OF RESPONDENTS 21 57 22
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If the company performance was below expectation than almost 43% (30) of investors preferred to hold the stock, they could be waiting for the right price to exit, While 40% (28) of investors sell the stock by booking their losses and to start with new so that their losses could be averaged & only 17% (12) investors preferred to buy the stock with a view that because of poor performance the stock would be available at a discount which could be an opportunity to encash. TABLE 12(C): SHOWING RESPONSE IF RESULTS ARE BELOW EXPECTATION
RESPONSE IF RESULTS ARE BELOW EXPECTATION
NO. OF RESPONDENTS 12 30 28
% NO. OF RESPONDENTS 17 43 40
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NO. OF RESPONDENTS 45 11 15
% NO. OF RESPONDENTS 63 15 21
CHART 13(A): SHOWING INVESTORS REACTION TO THE DECLARATION OF DIVIDEND AND BONUS IF RESULTS ARE ABOVE EXPECTATION
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TABLE 13(B): SHOWING INVESTORS REACTION TO THE DECLARATION OF DIVIDEND AND BONUS IF RESULTS ARE AS PER EXPECTATION
NO. OF RESPONDENTS 10 59 7
% NO. OF RESPONDENTS 13 78 9
CHART 13(B): SHOWING INVESTORS REACTION TO THE DECLARATION OF DIVIDEND AND BONUS IF RESULTS ARE AS PER EXPECTATION
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TABLE 13(C): SHOWING INVESTORS REACTION TO THE DECLARATION OF DIVIDEND AND BONUS IF RESULTS ARE BELOW EXPECTATION
RESPONSE IF RESULTS ARE AS PER EXPECTATION
NO. OF RESPONDENTS 9 31 32
% NO. OF RESPONDENTS 13 43 44
CHART 13(C): SHOWING INVESTORS REACTION TO THE DECLARATION OF DIVIDEND AND BONUS IF RESULTS ARE BELOW EXPECTATION
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CHI-SQUARE TEST
HYPOTHESIS H0: There is no association between the age of the investors and their investment behavior. H1: There is an association between the age of the investors and their investment behavior.
X2 = 57.7 Degree of Freedom = 4, = 0.05, Critical Value = 9.49 X2> CV Hence Null hypothesis (H0) is Rejected. H1: There is an association between the age of the investors and their investment behavior.
H0: There is no association between the age of the investors and their behavior when dividends and bonus of listed companies are announced. H1: There is an association between the age of the investors and their behavior when dividends and bonus of listed companies are announced.
X2 =0.86 Degree of Freedom = 14, = 0.05, Critical Value = 23.69 X2 < CV Hence Null hypothesis (H0) is Accepted. H0: There is no association between the age of the investors and their behavior when dividends and bonus of listed companies are announced.
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CONCLUSION
The research brings out certain characteristics of investors living in Bangalore. The ability to understand the judgment criteria like rationality and irrationality in investment pattern and behavior which enables the investor to be cautious as its consequences affect the lifestyle, asset value and relationship with others. The present study has shown that investors prefer investing in both primary and secondary market instruments. Most of the decision are rational and influenced by the various information available in market. It was also found that investors prefer the wait and watch policy for taking their decision, and are very cautious and their decisions are influenced by various psychological factors and behavioral dimensions.
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ANNEXURE
7. Investment avenues a. Fixed deposit b. Post office savings c. Mutual funds d. Equity e. Real estate f. Gold g. Others
8. Reason for investing in financial instruments a. Return b. Saving c. Tax benefit d. Security e. Wealth creation
9. How often do you trade with stock a. Once in a year b. 1-3 times in a year c. 4-7 times in a year d. >7 times in year
10. I analyze stock market before trading investments a. Never b. Sometimes c. I reserve my reply d. I analyze only micro factors e. I analyze both micro and macro factors
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12. Response to announcement of annual result 1. Above expectation a. Buy the stock b. Hold c. Sell 2. As per expectation a. Buy the stock b. Hold c. Sell 3. Below the expectation a. Buy the stock b. Hold c. Sell
13. Response to bonus and dividend 1. Above expectation d. Buy the stock e. Hold f. Sell 2. As per expectation d. Buy the stock e. Hold f. Sell 3. Below the expectation d. Buy the stock e. Hold f. Sell
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