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Influence of Demographic and Psychological on Investment decision

Chapter 1: Introduction

M S RAMAIAH INSTITUTE OF MANAGEMENT, BANGALORE

Influence of Demographic and Psychological on Investment decision

WORKING TITLE Influence of Demographic and Psychological factors on Investment decision

BACKGROUND OF THE STUDY


Beginning in the early 1970`s, the Efficient Market Hypothesis (EMH henceforth) became dominant in academic circles trying to understand the rules of return in the equity market. After a long period of successes, faith in this hypothesis was gradually eroded by the discovery of several anomalies. The last decades showed immense research efforts to find new models accurately predicting market behavior. These efforts build the foundation for what is called Behavioral Finance. Behavioral finance began as an attempt to understand why financial markets react inefficiently to public information. One stream of behavioral finance examines how psychological forces induce traders and managers to make suboptimal decisions, and how these decisions affect market behavior. Another stream examines how economic forces might keep rational traders from exploiting apparent opportunities for profit. Behavioral finance remains controversial, but will become more widely accepted if it can predict deviations from traditional financial models without relying on too many ad hoc assumptions. Different investors behave differently in different market situation before investing like return, flexibility and etc, but the markets will face a question mark in knowing the pulse of an investor. So a study must be made on the demographics and psychographics of the investor such that the market can know the pulse of an investor and can act upon it. Investor behavior analysis deals with analyzing the behavior of an investor based on his demographic and psychographic factors like age, gender and income groups. This states what would be a preferred portfolio of an investor at a particular age. This will be helpful to the stock brokers and portfolio managers so that they can offer better portfolios to their investors. This needs better insight, and understanding of human nature in the existing global perspective, plus development of fine skills and ability to get best out of investments. In addition, investors have to develop positive vision, foresight, perseverance and drive. Every investor differ from others in all aspects due to various demographic factors like socio-economic background, educational attainment level, age, race and sex. The most crucial challenge faced by the investors is in the area of investment decisions. An optimum investment decision plays an active role and is a significant consideration. This analysis will show the mentality of an investor and his preferences clearly and concisely. In order to study a review of literature was conducted to develop the concept and idea behind the study.

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Influence of Demographic and Psychological on Investment decision

Chapter 2: Research design

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Influence of Demographic and Psychological on Investment decision

AIM
To study the influence of Demographic and Psychological factor on Investment decision in Bangalore.

STATEMENT OF THE PROBLEM


During all this time researchers have identified two major reasons why the EMH fails to deliver correct results in so many cases. While the first is called Limits to arbitrage and it shows why even well informed, completely rational investors can be limited in their ability to use market options; the second relates to an application of behavioral psychology on individual investors, cataloguing the kinds of deviations from full rationality in investment decisions.

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.

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Influence of Demographic and Psychological on Investment decision

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.

I Stage- Literature Research


In order to study the behavior a review of literature was done to develop the concept and understand what had been done earlier. Stock markets performance is not simply the result of intelligible characteristics but also due to the emotions that are still baffling to the analysts. Despite loads of information bombarding from all directions, it is not the cold calculations of financial wizards, or companys performance or widely accepted criterion of stock performance but the investors irrational emotions like overconfidence, fear, risk aversion, etc., seem to decisively drive and dictate the fortunes of the market. Rajarajan (2000) in his study revealed that there was an association between the lifestyle clusters and investment related characteristics. K.Santi Swarup (2003) studied on the decisions taken by the investors while investing in the primary markets. In her study she indicated that investors give importance to their own analysis as compared to their brokers advice. Louhichi Wael (2004) examined the market behavior around the times of annual earnings announcements made in the Paris Bourse to study both the informational role of accounting numbers and the intraday speed of adjustment of stock prices to new information. Yash Pal Davar and Suveera, Gill (2007) in their paper on investment decision making revealed that the class of investors (undoubtedly) with growing age develop maturity and experience for making decisions about the usage of their surplus and available funds in the light of overall economic needs of family. Szyszka Adam (2008) in his study on efficient market hypothesis to behavioral finance analyzed how investors psychology changes the vision of financial markets. He found that investors are not always able to correctly value the utility of decision alternatives, cannot update and estimate probability and events and do not diversify properly. Dr. Vanita Tripathi (2008) examines the perceptions, preferences and various investment strategies in Indian stock market. Study reveals that investors use both fundamental as well as technical analysis while investing in Indian stock market. Most of the respondents strongly agree that various company fundamentals (such as size, book to market equity, price earnings ratio, leverage etc.) significantly influence stock prices and hence addition of these factors in asset pricing model can better explain cross sectional variations in equity returns in India.
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Influence of Demographic and Psychological on Investment decision

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.

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Influence of Demographic and Psychological on Investment decision

II Stage- Sample Design

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

4. Data Analysis Tabulation CHI-SQUARE test Analysis

IV Stage- Scope of the study The scope of the study is limited to Bangalore area only.

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Influence of Demographic and Psychological on Investment decision

Chapter 3: Profile of the industry

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Influence of Demographic and Psychological on Investment decision

Investment Industry in India


The investment industry in India has been riding high since the last few years. India's equity market has doubled since March 2009, with ADRs like Dr. Reddy's Laboratories and Tata Motors only getting doubled and tripled. So, do we say that the Indian investment industry is overheated at the moment or may we infer that the stocks are fairly valued? Warren Buffett has always mentioned that investment in India should always be a long-term story - as the industry has been growing from an emerging market to a developed one. The next 10 years in India will surely give good returns. India's GDP growth was around 7 percent in 2010. The sustainable growth rate of India would however hover around 7%. Before becoming a mature economy, India has another 20 to 40 years to spare. The overall contribution made by the financial services sector in India in the year 2009 was 15 per cent towards the GDP of the country.

Types of Investment in India


The investment industry is huge; therefore the types of investments are also varied. Different types of investments are: Cash investments: Cash investments are generally risky and offer a low rate of interest. Some of the important types of Cash investments are; certificates of deposit (CDs) and treasury bills and savings bank accounts. Debt securities: This type of investment gives returns in the form of fixed periodic payments and the fixed capital appreciates at maturity. This is safe bait for the investors in the investment industry and has always proved to be the risk free investment tool. Though, it is generally low in risks, the returns are also lower than the other peer securities. Stocks: Investors can also buy stocks (equities) from the secondary markets and be a part of any business corporates that are listed in the stock exchanges. By this way, one can become a part of the profits that the company generates. But one thing that should be kept in mind is that stocks are generally more volatile and carries more risk than bonds. Mutual funds: They are usually a collection of stocks and bonds that a fund manager selects for an investor such that the returns are maximum. The investor does not have to track the investment, be it a bond, stock- or index-based mutual funds.

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Influence of Demographic and Psychological on Investment decision

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.

Comparison of investment options in India


Top Investment Area Gold Bank Deposit Investment Restrictions No limit --Return on Investment Offers high returns as gold prices are on a rise Offers upto 8.5 percent annual return depending on the bank and period Risk of Loss Low Low Equity Based: High No risk

Mutual Funds

No limit

Equity Based: High

National Saving Certificate (NSC)

No limit

Offers upto 8 interest calculated biannually

Real Estate

No limit

Capital gains guaranteed for specified avenues also tax exemption are available on long term Low investments

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Advantages of Investing in India


According to The World Fact Book, India is among the world's youngest nations with a median age of 25 years as compared to 43 in Japan and 36 in USA. Of the BRICBrazil, Russia, India and China countries, India is projected to stay the youngest with its working-age population estimated to rise to 70% of the total demographic by 2030 - the largest in the world. India will see 70 mn new entrants to its workforce over the next 5 years. India has the second largest area of arable land in the world, making it one of the world's largest food producers - over 200 mn tones of food grains are produced annually. India is the world's largest producer of milk (100 mn tones p.a), sugarcane (315 mn tones p.a) and tea (930 mn kg p.a) and the second largest producer of rice, fruit and vegetables. With the largest number of listed companies - 10,000 across 23 stock exchanges, India has the third largest investor base in the world. According to a study by the McKinsey Global Institute (MGI), India's consumer market will be the world's fifth largest (from twelfth) in the world by 2025 and India's middle class will swell by over ten times from its current size of 50 million to 583 million people by 2025.

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Influence of Demographic and Psychological on Investment decision

Chapter 4: Analysis & interpretation

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Influence of Demographic and Psychological on Investment decision

AGE DISTRIBUTION OF THE RESPONDENTS:


From the questionnaire it was observed that maximum number of respondents fall in between 2535 years category. The next highest number of respondents falls in the 35-45 years category. Thus around 72% (72) of the respondents are between 25-45 years of age and are relatively working group. TABLE 1: SHOWING THE AGE DISTRIBUTION OF THE RESPONDENTS
AGE GROUP BELOW 25 25-35 35-45 45-55 ABOVE 55 TOTAL NO. OF RESPONDENTS 12 48 24 9 7 100 % NO. OF RESPONDENTS 12 48 24 9 7 100

CHART 1: SHOWING THE AGE DISTRIBUTION OF THE RESPONDENTS

NO. OF RESPONDENTS
BELOW 25 25-35 35-45 45-55 ABOVE 55 TOTAL

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Influence of Demographic and Psychological on Investment decision

SEX DISTRIBUTION OF THE RESPONDENTS:


From the questionnaire it was observed that maximum number of respondents was in male category about 70%. TABLE 2: SHOWING THE SEX DISTRIBUTION OF THE RESPONDENTS

SEX

NO. OF RESPONDENTS

% NO. OF RESPONDENTS

MALE

70

70

FEMALE

30

30

TOTAL

100

100

CHART 2: SHOWING THE SEX DISTRIBUTION OF THE RESPONDENTS

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INCOME DISTRIBUTION OF THE RESPONDENTS:


Most of the investors fall under the income level below Rs 3,00,000 - 4,50,000. From this we can say that this is probably because most of the investors i.e. around 72% (72) of the respondents fell under the age group of between 25-45 years. TABLE 3: SHOWING THE INCOME DISTRIBUTION OF THE RESPONDENTS

INCOME LEVELS BELOW 1,50,000 150000-300000 300000-450000 450000-600000 ABOVE 600000 TOTAL

NO. OF RESPONDENTS 24 16 29 14 16 100

% NO. OF RESPONDENTS 24 16 29 14 16 100

CHART 3: SHOWING THE INCOME DISTRIBUTION OF THE RESPONDENTS

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Influence of Demographic and Psychological on Investment decision

OCCUPATION DISTRIBUTION OF RESPONDENTS:


From the questionnaire it was disclosed that most of respondents are of service and business class. Thus around 32% (32) of Respondents are of service and business class who falls between the age group of between 25-45 years with income 3,00,000 - 4,50,000. (So, we can say that because of then fixed income source they could take high risk and could invest in a number of Investment avenues). Next to service is Professional class that is 24% (24) which shows because of uneven income. They will be less aggressive in investing in different investment avenues. TABLE 4: SHOWING THE OCCUPATION DISTRIBUTION OF THE RESPONDENTS
OCCUPATION SERVICES BUSINESS STUDENTS PROFESSIONALS OTHERS TOTAL NO. OF RESPONDENTS 32 32 12 24 0 100 % NO. OF RESPONDENTS 32 32 12 24 0 100

CHART 4: SHOWING THE OCCUPATION DISTRIBUTION OF THE RESPONDENTS

NO. OF RESPONDENTS
BELOW 25 25-35 35-45 45-55 ABOVE 55 TOTAL

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Influence of Demographic and Psychological on Investment decision

RISK APPETITE OF THE RESPONDENTS:


From the questionnaire it was observed that maximum number of respondents was medium risk takers about 68%. TABLE 5: SHOWING THE RISK APPETITE OF THE RESPONDENTS
RISK APPETITE HIGH MEDIUM LOW TOTAL NO. OF RESPONDENTS 13 68 19 100 % NO. OF RESPONDENTS 13 68 19 100

CHART 5: SHOWING THE RISK APPETITE OF THE RESPONDENTS

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Influence of Demographic and Psychological on Investment decision

PERCENTAGE OF INCOME INVESTED BY INVESTORS:


As the higher number of investors falls in the age group of between 25-45 years with income level 3,00,000 - 4,50,000 taking calculative risk maximum number of respondents invest about 10-20% of their income annually. TABLE 6: SHOWING THE PERCENTAGE OF INCOME INVESTED BY RESPONDENTS USUALLY
PERCENTAGE OF INCOME INVESTED LESS THAN 10 10-20% 20-30% 30-40% 40 AND ABOVE TOTAL NO. OF RESPONDENTS 30 30 28 10 1 100 % NO. OF RESPONDENTS 30 30 28 10 1 100

CHART 6: SHOWING THE PERCENTAGE OF INCOME INVESTED BY RESPONDENTS USUALLY

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Influence of Demographic and Psychological on Investment decision

INVESTMENT BASIS OF INVESTORS:


When it is about investment in primary or secondary instrument almost 44 of respondents invest in equity market. Thus we can say that as the 72% of respondents fall under the age group of between 25-45 years they have risk taking ability with average income levels to earn more. Next to equity is fixed deposit which is preferred by almost 54 of respondents it may be quite because of attraction towards less risky and assure returns & because high fluctuation behavior in the equity. Next to fixed deposit is investment in real estate and gold/commodities that is 38 because of very low risk profile and having long term use. Only 30 investors were interested in investing in mutual funds because of the lack of awareness towards this instrument and 16 in Post office Saving Scheme because of availability of more instruments and last only 10 in others Investment Avenue which includes investment in currency, derivatives, commodities etc. because of very high risk profile. TABLE 7: SHOWING THE INVESTMENT AVENUES OF THE RESPONDENTS
INVESTMENT AVENUES FIXED DEPOSIT POST OFFICE SAVINGS MUTUAL FUNDS EQUITY REAL ESTATE GOLD OTHERS NO. OF RESPONDENTS 54 16 30 44 10 28 11 % NO. OF RESPONDENTS 28 8 16 23 5 15 6

CHART 7: SHOWING THE INVESTMENT AVENUES OF THE RESPONDENTS

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REASON FOR INVESTING IN FINANCIAL INSTRUMENTS:


From the questionnaire it was observed that maximum number of respondents invest in financial markets for returns and savings around 62%. TABLE 8: SHOWING THE REASON FOR INVESTING IN FINANCIAL INSTRUMENTS OF THE RESPONDENTS USUALLY

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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HOW OFTEN DO RESPONDENTS TRADE WITH STOCK?


From the questionnaire it was observed that maximum number of respondents trade once in a year about 35%. TABLE 9: SHOWING HOW OFTEN DO RESPONDENTS TRADE WITH STOCK
HOW OFTEN DO YOU TRADE WITH STOCK? ONCE IN A YEAR 1-3 TIMES A YEAR 4-7 TIMES A YEAR >7 TIMES A YEAR NO. OF RESPONDENTS 33 18 14 29 % NO. OF RESPONDENTS 35 19 15 31

CHART 9: SHOWING HOW OFTEN DO RESPONDENTS TRADE WITH STOCK

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I ANALYZE STOCK MARKET BEFORE TRADING INVESTMENTS:


From the questionnaire it was observed that maximum number of respondents analyze both micro and macro factors around 47%. TABLE 10: SHOWING RESPONDENTS ANALYSIS BEFORE STOCK MARKET TRADING INVESTMENTS
I ANALYZE STOCK MARKET BEFORE TRADING INVESTMENTS

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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PREFERRED MODE OF STOCK TRADING:


From the questionnaire it was observed that maximum number of respondents prefer online trading against offline mode of trading around 74%. TABLE 11: SHOWING THE PREFERRED MODE OF STOCK TRADING OF RESPONDENTS:
PREFERRED MODE OF STOCK TRADING

NO. OF RESPONDENTS 75 27

% NO. OF RESPONDENTS 74 26

ONLINE TRADING OFFLINE TRADING

CHART 11: SHOWING THE PREFERRED MODE OF STOCK TRADING OF RESPONDENTS:

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INVESTORS REACTION TO THE ANNOUNCEMENT OF ANNUAL RESULTS:


When the results announced by the company are better than the expectation, 56% (40) of investors wanted to buy more shares, which shows that for investors if the performance of company is good the company carries future growth potential which translates into good returns on stock. 25% (18) of investors preferred to hold the stock with a view that good performance was already discounted by the market and there is little scope of future appreciation & 18% (13) of investors preferred to sell the stock with a view to encash the good result. TABLE 12: SHOWING INVESTORS REACTION TO THE ANNOUNCEMENT OF ANNUAL RESULTS TABLE 12(A): SHOWING RESPONSE IF RESULTS ARE ABOVE EXPECTATION
RESPONSE IF RESULTS ARE ABOVE EXPECTATION

NO. OF RESPONDENTS 40 18 13

% NO. OF RESPONDENTS 56 25 18

BUY THE STOCK HOLD SELL

CHART 12(A): SHOWING INVESTORS REACTION TO THE ANNOUNCEMENT OF ANNUAL RESULTS


RESPONSE IF RESULTS ARE ABOVE EXPECTATION

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Influence of Demographic and Psychological on Investment decision

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

BUY THE STOCK HOLD SELL

CHART 12(B): SHOWING RESPONSE IF RESULTS ARE AS PER EXPECTATION

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Influence of Demographic and Psychological on Investment decision

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

BUY THE STOCK HOLD SELL

CHART 12(B): SHOWING RESPONSE IF RESULTS ARE BELOW EXPECTATION

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INVESTORS REACTION TO THE DECLARATION OF DIVIDEND AND BONUS:


It was found that 45% (49) of investors preferred to hold the stock after declaration of dividend and bonus because of long term gain which was expected by the investor as a result of good performance of company, while 40% (44) investors preferred to buy the stock which shows good performance of company attracts the investment and only 15% (17) of investors sell the stock after the dividend declaration with a view to book profits and liquidate their holdings. TABLE 13(A): SHOWING INVESTORS REACTION TO THE DECLARATION OF DIVIDEND AND BONUS IF RESULTS ARE ABOVE EXPECTATION
RESPONSE IF RESULTS ARE ABOVE EXPECTATION

NO. OF RESPONDENTS 45 11 15

% NO. OF RESPONDENTS 63 15 21

BUY THE STOCK HOLD SELL

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

RESPONSE IF RESULTS ARE AS PER EXPECTATION

NO. OF RESPONDENTS 10 59 7

% NO. OF RESPONDENTS 13 78 9

BUY THE STOCK HOLD SELL

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

BUY THE STOCK HOLD SELL

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.

E = row total * column total / Grand total

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.

LIMITATIONS OF THE STUDY:


The present research paper was aimed to achieve the defined objectives in full earnest and accuracy, although there were certain limitations: The data has been taken from the primary sources, so the findings are true to the extent of authentication of the data. The study was conducted targeting the investors in Bangalore city only. The primary data has been collected through a structured questionnaire to a sample of 100 investors in Bangalore city, which may not reflect the opinion of the entire population of the country.

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ANNEXURE

Influence of demographic & psychological factors on investment decision


Questionnaire
1. Age a. <25 b. 25-35 c. 35-45 d. 45-55 e. 55 and above 2. Sex a. Male b. Female 3. Income level per annum a. <150000 b. 150000-400000 c. 400000-600000 d. 600000 and above 4. Occupation a. Services b. Business c. Students d. Professionals e. Others 5. Risk appetite a. High b. Medium c. Low 6. Percentage of income invested a. < 10 b. 10-20 c. 20-30 d. 30-40 e. 40 and above M S RAMAIAH INSTITUTE OF MANAGEMENT, BANGALORE 32

Influence of Demographic and Psychological on Investment decision

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

11. Preferred mode of stock trading a. Online trading b. Offline trading

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Influence of Demographic and Psychological on Investment decision

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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