THE IMPACT OF BEHAVIOURAL DIMENSIONS OF INVESTORS IN EQUITY

DERIVATIVE MARKET – WITH REFERENCE TO INVESTORS IN COIMBATORE

DISTRICT, TAMILNADU.

Abstract :

Behavioural finance is a part of finance that seeks to understand and explain the
systematic Derivatives market implications of psychological decision processes. Behavioural
finance is the study of the influence of the psychological factors on Derivatives markets
evolution. Derivatives investors are people with a very varied number of deviations from rational
behaviour, which is the reason why there is a variety of effects, which explain market anomalies.
Human beings are rational agents who attempt to maximize wealth while minimizing risk. These
agents carefully assess the risk and return of all possible investment options to arrive at an
investment portfolio that suits their level of risk aversion. Classical finance assumes that
investors are rational and they are focused to select an efficient portfolio, which means including
a combination of asset classes chosen in such a manner as to achieve the greatest possible returns
over the long term, under the terms of a tolerable level of risk. Behavioural finance paradigm
suggests that investment decision is influenced in a large proportion by psychological and
emotional factors. This study aims to measure the behavioural dimensions of investors towards
Indian derivatives market with reference to investors in Coimbatore district. The investors who
access the derivative market in Coimbatore district is consider as respondents for this survey.
Descriptive research design is used in the study. The primary data is collected by using well –
structured questionnaire. The convenient sampling techniques are used to select the respondents.
The data were collected from the retail Derivatives investors from the six taluk head quarters of
Coimbatore district. Cronbach’s alpha is used to find out the reliability of the questionnaire. The
results of Cronbach’s Alpha Coefficient for five Scale Items are from ‘good’ to ‘excellent’. The
data were analyzed by using various statistical tools. Confirmatory Factor Analysis and
Structural Equation Modeling (SEM) are used in this study. The researcher found that the various
methods of investment in equity derivative market, majority of the equity derivative investors
prefer trading only when there is a good price in the market.