LITERATURE REVIEW:

Studying the nature of relationship between Locus of control and financial self-efficacy
across age groups, genders, income groups and education levels can help us understand if
they have any significant bearing on the risk-taking attitude of individuals when it comes to
investments in financial markets. As their risk attitudes influence the decision-making
process, any systemic shifts in their ability to accept risk will be likely to have wide-ranging
effects on economic and socio-political outcomes[ CITATION Ank12 \l 1033 ]. There is also clear
evidence that cognitive functioning is related to people's risk perceptions, and people with
stronger cognitive abilities are more likely to invest in stocks or choose alternative
investments[ CITATION Jam10 \l 1033 ].

Other important factors that play an important role in decision making for investors are their
demographics, personality traits and psychological biases. For instance, developing countries
are still trying to establish a relationship between heuristic and stock buying decision since
their economies are different from those of developed countries in terms of education, income
level, political stability, technological development etc. [ CITATION Ali162 \l 1033 ]. This also
affects the risk tolerance of individuals. A rapidly growing literature in behavioural finance
has further identified optimism and overconfidence as drivers of investment behaviour
[ CITATION Deb15 \l 16393 ] [ CITATION Man07 \l 16393 ][ CITATION Aut98 \l 16393 ] . Howard
Tokunaga examined whether theory and research in consumer behaviour can discriminate
between consumers who make a judicious and effective use of consumer credit and the ones
who do not. His study was aimed at modelling an integrative profile of individuals with credit
troubles, while focusing on the additional predictive ability of psychological variables. In his
study, he found that people who had not been successful at using credit effectively had lower
levels of self-efficacy and higher anxiety regarding their finances when compared with
successful credit users.[ CITATION How93 \l 16393 ].

Moreover, [ CITATION Pin18 \l 16393 ] conducted a study on internal locus of control affecting
their decisions in financial markets. In the study subjects (72 for main treatment, 76 for
human treatment, and 32 for info treatment) have been exposed to sequences of random
outcomes. Under moderate conditions, it is better to avoid responding to effects and to
consider the same chance every time. Subjects with a high locus of control, on the other hand,
appear to make inconsistent risk decisions.
Adding to that research a study conducted by [ CITATION Ras17 \l 16393 ] , was done to analyse
the effect of locus of control, financial knowledge and the income on investment decision.
The study employs both descriptive and explanatory analysis methods to explain the causal
association between variables. The sample size of the study includes all the permanent
employees of PERTAMINA (Persero) of Padang branch, which amounted to 68 people, with
a total sample of 43 people. The locus of control has a major impact on investment decisions,
according to hypothesis testing. This demonstrates that the participants believe that the events
that occurred were triggered by forces outside their influence and apart from what occurred.
The test findings for the impact of financial knowledge on investment judgment show that
financial knowledge has a high importance and affects workers when making investment
decisions. The paper concludes that all the three variable affects 57.5% of employee’s
investment decisions and the remaining 42.5% is affected by other factors. Out of which
financial knowledge is the most dominant variable in making investment decisions.
On the same lines another study was conducted by [ CITATION Lat20 \l 16393 ] to verify the
relation between locus of control and emotional biases in the decision-making process of
investor. The research includes three stages. In the first stage they conducted a thorough
analysis of the current literature in order to recognize 20 frequently occurring prejudices in
investor decision making. In the second stage, they analysed each bias separately in order to
define and build tools for testing these biases in decision making process. Next the data
gathered, along with Levenson's locus of control, was distributed to a group of investors from
around the country, and 618 responses were collected. The results of the study found out
some patterns with locus of control, emotional biases and investment decisions Furthermore,
investors with a high internal locus of control displayed low cognitive dissonance bias, while
investors with a low internal locus of control displayed high cognitive dissonance bias.
As a result, an investor's internal locus of control and chance control have shown a higher
degree of behavioural biases. The study seeks to assist clients, financial managers, and
policymakers in identifying certain variations depending on the locus of control in order to
remedy them and protect investors from mistakes in decision making of various investments
and comparing the effect of locus of control considering different generations in making
investment decisions the study conducted `by [ CITATION Put20 \l 16393 ] is relevant, which
aims to compare and analyse the locus of control, financial literacy, and investment choices
made by families of the Baby Boomer generation, gen X, and gen Y. The direct interview
technique was used in this analysis, and a questionnaire was used to gather data. (30
housewives were interviewed, 30 from each group). The findings revealed a substantial gap
in financial education among the three generations. According to the findings, all variables
had a major impact on investment decisions. For generations X and Y, investing is seen as a
viable option that can benefit the family economy. In contrast to the Baby Boomer
generation, investment is insufficient to support the economy.
In the locus of control variable, the majority of participants of every generation concluded
that working hard determines future life and is inseparable from outside forces such as chance
and destiny. Internal locus of control is a source of motivation for respondents to make
investment choices, as shown by the high average value. The locus of control test findings
indicate that it has a profound impact on each generation's investment decisions. Based on
this research respondents agree that investing is one of the safest ways to monitor their
financial fate in the future.
A study conducted by [ CITATION Hec06 \l 1033 ] expressed that a person inherits the traits of
locus of control from his or her family, surrounding, past experiences and culture. A person
who belongs to a family where people are less focused towards education and
responsibilities, tend to possess high internal factors whereas a person has high external
factors when the family belongs from a weak financial background coupled with a low
socioeconomic status. Hence, locus of control is a measure of non-cognitive skills that is well
established in the psychological literature and has frequently been used in previous
economic studies on the role of non-cognitive skills for labor market outcomes.
The research done by [ CITATION DrR101 \l 1033 ] shows Indian investors have a common
belief that the success they achieve in the field of financial investment majorly depends on
their skill of decision making. There is a significant level of variance amongst them with
respect to their external locus of control and, a different frame of mind while investing in a
particular avenue. The external locus of control also determines the money saving behavior
of investors. The level of external locus of control plays a major role on information source
while making decisions and choices before choosing an investment avenue. The investment
behavior consists of why people invest, from where and how they get information, what are
the factors they use while evaluation, who influences them on choice of investment and
how they act post investing.
[ CITATION Syl10 \l 1033 ] Conducted a study to investigate the perception of married earning
women about the role of locus of control in their financial risk-taking behavior, in the state
of Karnataka. In order to do so, the authors reviewed relevant literature, developed a
questionnaire consisting of several items representing role of locus of control in the financial
risk-taking behavior, administered the same among the married earning women in the state
of Karnataka, developed a factor structure of the financial risk-taking behavior, and tested
whether the respondents differed in their perception or not.
In the study conducted by [ CITATION Rat16 \l 1033 ] some of the factors that influenced the
financial attitudes of Indian women were identified and then classified based on these
attitudes. The properties of these clusters were then studied by analyzing them. An analysis
of the literature revealed nine factors that affected women's financial attitudes: fear,
intuitive choices, precautionary saving, interest in financial issues, free spending, tendency
to prepare for long and short-term financial goals, and materialistic and fatalistic attitudes.
After that, confirmatory factor analysis was performed on these variables. These variables
were then used as the foundation for ease sampling cluster analysis. The survey was
conducted using a self-reported questionnaire. According to the findings, only one-third of
the respondents did not purchase any financial products, and fixed deposits and insurance
plans were the most common financial products among Indian women.