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EDUCATION
-RESPONSE
AND IM
PACT
CHAPTER - VI
INVESTOR EDUCATION - RESPONSE AND IMPACT
The focus of this chapter would be to first group the investors on the basis of investor
responsibility levels. It would then examine the response of the investors to the investor
education programs. Finally the impact of investor education programs on investor
responsibility levels, on the use of unbiased information sources for making 'an investment
decision and future intensions to invest in mutual funds are examined. 6.1
Grouping
426
70.3 159
26.2 2'
3.5
321
53
161
26.5 124
20.5
321
53
262
43.2 23
3.8
363
59.9 193
31.8 50
8.3
281
46.4 282
46.6 43
7.1
395
65.2 197
32.4 14
2.3
196
32.3 344
56.8 66
10.9
351
57.9 221
36.5 34
5.6
the performance of a scheme/fund prior to their investment in that scheme/fund but do not
update themselves with the same after their investment in it.
To take this part of the study a step further K-means Clustering method was used,
where the 606 investors were classified into different segments based on their pre-investment
and post-investment behaviour. On the basis of cluster analysis two segments of investors
were formed for each of the classification (pre-investment behaviour and post-investment
behaviour). Each group had clear and differentiated behavioural strengths and weakness. The
TABLE-6.2
PRE INVESTMENT BEHAVIOUR FINAL CLUSTER CENTERS
results of the cluster analysis by clustering variables are presented in Tables 6.2 and 6.3.
Cluster 1: Moderate intensity pre investment responsible behaviour. The
total number of investors in this cluster is 215 (35.5%). An analysis of their response to the
various statements reveals that they exhibit relatively weaker responsible behaviour.
Cluster-2: High intensity pre investment responsible behaviour. A majority of investors,
391 in number (64.5%) fall in this cluster. These investors exhibit markedly different
behaviour from the first cluster. They are strong on most of the statements and hence the
name.
TABLE-6.3
POST INVESTMENT BEHAVIOUR FINAL CLUSTER CENTER
Statements
Cluster
1
I keep track of the NAVs of schemes I have invested
2.62
in on a regular basis.
I ensure that I receive an account statement for the
2.86
money that I invested
update myself on the performance of the scheme
2.43
(e.g.Return, expense, change in fund managers etc)
on a regular basis
I will not hesitate to approach the investment
2.60
relation officer of the concerned fund and then the
appropriate authorities when I face a problem
Number of investors in each cluster
Number of investors
430
Percentage of the total
71
Intensity of responsible behaviour
Moderate
Source: Primary Data
2
1.84
2.09
1.68
2.33
176
29
High
Like with the pre investment behaviour, it is observed that investors show clear and
differentiated behavioural strengths and weakness in their post investment behaviour also.
Again we have 2 segments of investors.
Cluster 1: High intensity post investment responsible behaviour (71 %)
These investors show a clear and differentiated behaviour from the investors in the second
cluster. They are very strong on most statements. Hence they can be classified as investors
who exhibit highly responsible post-investment behaviour. Cluster2: Low intensity post
investment responsible behaviour (29%) Relative to the cluster1 this group exhibits weaker
post investment behaviour on most aspects. Hence they have been categorized as investors
exhibiting low intensity post-investment responsible behaviour.
Cluster analysis reveals that 64.5 percent and 71 percent of the respondent mutual
fund investors exhibit high pre investment and post investment responsible
behaviour respectively. It can be concluded that a good majority of the respondents
act in a responsible manner.
TABLE-6.4
AWARENESS AND RESPONSE TO INVESTOR EDUCATION PROGRAMS
information
sources
requiring
independent
analysis,
has
contributed
towards
investors'
choice
of
unbiased
0.65289
0.03273
0.57789
0.05868 4.504
0.000*
education program
Did
not
attend 509 3.4267 0.64704 0.02868
investor
education
program
Source: Primary Data *Denotes significance at 5 %level
The results indicate that there is a positive relation between reading investor
education material and the importance attached to unbiased information source
requiring independent analysis (t:=6.645, p=O.OOO). More over the mean values of
those investors who have read the investor education material and who give
importance to unbiased information source is higher (3.7010) than those who have
not read the investor education material (3.3608).
Similarly there is a positive relationship between attending investor education programs and
use of unbiased information sources (t=4.504, p=O.OOO). Again the mean values of
those investors who have read the investor education material and who give
importance to unbiased information source is higher (3.7443) than those who have not
read the investor education material (3.4267).
Over all it can be concluded that investor education programs have a positive impact
on the importance attached to unbiased information sources requiring an independent analysis.
FIGURE - 6.1
IMPACT OF INVESTOR EDUCATION ON USE OF
Read investor
education
Attended
Did not attend
Total
72
(74.2)
299
(58.7)
371
(100)
72 (74.8)
97 (100)
8.228
0.004*
606
Low investor awareness and response to investor education poses the biggest
challenge for channelizing household savings into mutual funds. Lifting investor awareness
will provide a boost to the direct distribution channels, fuelling further growth of the industry.
Educating the investors will make the investor capable of making informed investment
decisions, have a positive investment attitude towards mutual funds and make him a more
'responsible mutual fund investor. Investor awareness has to spread its wings across the length
and breadth of the country to spearhead the growth of the mutual fund industry in the right
direction.