RISK-RETRUN PERCEPTIONS OF RETAIL EQUITY INVESTORS IN

INDIA: A CRITICAL ANLYSIS

Article submitted by

*Dr.ABDUL MAJEEB PASHA SHAIK

Professor, Nimra College of Business Management
Andhra Pradesh, India
E-Mail: majeeb_37@yhoo.com
Mobile:+91 9949343596

**Dr. T.N.Murty
Director, Nimra College of Business Management
Andhra Pradesh, India
E-Mail: thamminaina@yahoo.com
Mobile:+919949070607

***V.HEMANTHA GOPI KIRAN

M.B.A Student, Nimra College of Business Management
Andhra Pradesh, India
E-Mail: hemanthagopikiranv@yahoo.co.in
Mobile: +91 9989479739

Corresponding Author Name: Dr.ABDUL MAJEEB PASHA SHAIK

Corresponding Author E-mail: majeeb_37@yhoo.com

Electronic copy available at: http://ssrn.com/abstract=2032635

RISK-RETRUN PERCEPTIONS OF RETAIL EQUITY INVESTORS IN
INDIA: A CRITICAL ANLYSIS

*Dr. ABDUL MAJEEB PASHA SHAIK

**Dr. T.N.Murty
***V.HEMANTHA GOPI KIRAN
ABSTRACT

Return is the yield plus capital appreciation and risk is the variability of returns or loss,
which is inherent in any investment both are going hand in hand. The higher the risk, the
higher is the return. However, the risk-return perceptions of investors on various investments
may differ one to one. In the study investors were asked to rate the various investments by
risk and return on a 4-point scale used by the researchers for data analysis. The Test for
Paired Differences disproves the theory and concludes that investors assign different risk and
return ratings for each type of investment and the rating vary with the socio- economic and
investment profile of the investors. Mean Differences reveal that Shares, Real Estate,
Gold/Silver etc., are perceived to generate greater relative return than relative risk by all
classes of investors as a whole. Out of the above Real Estate is perceived as the best
investment followed by Gold / Silver and insurance policies as a whole. Moreover, in India
percentage of participation and investing in equities is too low comparatively other
investment avenues. Hence better to bring the government and others lot of awareness,
encourage retail investors invest in equity stocks.

KEY WORDS: risk return perceptions, retail investors, shares, real estate, gold/silver.

Electronic copy available at: http://ssrn.com/abstract=2032635

INTRODUCTION

‘Investment’ refers to the employment of funds to assets with the aim of achieving
additional income or growth in value over a given period of time. Today investors have
various attractive avenues of investment with different features matching their needs. But
generally the art of investment is to see that the return is maximized with minimum risk
which is inherent in all investments. The funds allocated by the investors to various
investment avenues depend on the risk-return perceptions perceived by them. Risk is
present in every decision, whether it is corporate decision or even personal decision. All
the decisions at personal finance involve risk and return. ‘Risk’ is a chance of financial
loss arising between expected and actual result. ‘Return’ is the cash inflow expected or
received in the form of interest/dividend capital gain or loss. Investors not only see risk-
return perception, sometimes they differ in their pattern of investment, preferences and
objectives for investment also.

In the present scenario, coming to the dynamic Indian capital market, approximately
turnover in Indian stock market is not less than Rs.1,00,000 crores per day (both cash and
F&O). So many investors (institutional and retail) are investing lot of money in short term
and long term point time horizon. Psychological studies have demonstrated that the pain of
losing money from investments is nearly three times greater than the joy of earning. Small
corrections in the capital market have often disintegrated into full-scale crashes fueled by
panicked investors, who made hasty decisions to avoid losing money in short term, rather
than focusing on an investment’s long-term potential objective. In recent times the Indian
Capital Market is in transition. There has been a revolutionary change over a period of
time. In fact, on almost all the operational and systematic risk management
parameters, settlement system, disclosures, accounting standards, the Indian Capital
Market is at par with the global standards. In this connection, there is growing literature
that suggests an individual’s (investors’) investment decisions, which are associated with
their risk-return feelings. This literature review can be useful to understand the financial
behavioural psychology of the retail equity investors in India.

REVIEW OF LITERATURE

The National Council of Applied Economic Research (NCAER)1 Survey of households,

(1964), entitled “Attitudes Towards and Motivations for Saving”, provides one of
the earliest attempts on the study of savings of households. The survey covered a
sample of 4650 households spread over India. It provides an insight into the attitude
towards and motivations for savings of individuals. One of the key findings was that
the investment in securities was preferred only by the high-income households.

Zvi Bodie and Dwight Crane2, (1997), in their article entitled, “Personal Investing:
Advice, Theory and Evidence”, made an attempt to know whether the advice
available to individuals from newspapers, magazines and other providers of financial
products were in agreement with economic theory and to examine the actual behaviour
of a group of survey respondents to see whether they behaved in accordance with the
advice risk return point of.

Baker, et.al.,3 (1977), in their study entitled, “An Empirical Analysis of the Risk
Return Preferences of Individual Investors”, studied the ex ante risk-return
preferences of individual common stock investors. Investors exhibited a strong
association between expected annual rates of return and acceptable risk levels on
common stocks. According to the study, there appeared to be differences among the
nature and shape of the relationship as evidenced by statistical tests.

Bhagawati Prasad, Subhas M.S4, (1991), in their study entitled, “Problems Faced by
the Investors”, have examined the problems faced by the investors by surveying 200
small investors belonging to Hubly and Dharwar districts in India. The study reveals
that majority of the investors were very active belonging to the middle income group
without bothering risk return pointwise.

Radha V5, (1995), in her study entitled, “A Study on Investment Behaviour of

Investors in Corporate Securities”, examined the investment plan of corporate
security investors in Tamilnadu. The analysis revealed that the largest segment of
sample was constituted by young generation model investors based on risk and
return perception levels.

Selvam M, et.al.,6(2008), in their study entitled, “Equity Culture in Indian Capital

Market’, examined the need for promoting equity culture, which deserves special
attention for the development of economic growth. The study discussed in detail the
current trend of equity culture, its implications and its revival and remedial measures.
 Shobana V.K. and Jayalakshmi J7, (2009), in their study entitled, “Investor Awareness
and Preferences”, studied the investors’ preferences, the level of investor awareness
and the factors influencing investor awareness of 100 respondents in Salem District.
The study reveals that real estate, bank deposits and jewellery were the preferred
investments. Investors above 50 years of age, post graduates and professionals had high
level of awareness. Age and education do not have any significant influence over
investor awareness but occupational status leads to difference in the awareness level of
people.

SCOPE OF THE STUDY:

The present study titled “RISK-RETRUN PERCEPTIONS OF RETAIL EQUITY

INVESTORS ’ IN INDIA: A CRITICAL ANLYSIS” aims to probe into the investors risk-
return perceptions and the problems associated with equity investments of retail equity
investors in with reference to Krishna District, Andhra Pradesh, India.

OBJECTIVES OF THE STUDY:

To be precise, the study has undertaken with the following objectives:

a) To examine the risk-return perceptions of retail equity investors on various investment

avenues in India;

b) To identify the problems associated with retail equity investment and to offer
constructive suggestions to overcome such problems for enhancing retail investor
participation and confidence in Indian equity markets.

LIMITATIONS OF THE STUDY

The major limitations of the study are:-

• The study is confined to Krishna District alone. Hence the findings may not be
generalized for the other parts of the country.
• The study is confined to the retail equity investors alone. Institutional
investors remain uncovered.
 METHODOLOGY

The study is empirical in nature based on survey method. The whole data required for the
study were collected in three stages. The primary data relating to the retail equity
investors were collected by interviewing the equity investors (respondents are 500) with
the help of the interview schedule. The secondary data relating to the study like the
capital market developments and the trends in retail investor participation in India were
obtained from various published and unpublished records, annual reports, manuals,
bulletins, booklets, journals, magazines, etc., lastly, the researcher held discussions with
the officials of SEBI, Regional Stock Exchanges, Stock Broking Houses (Trading
Members), Depository Participants etc. These discussions were helpful to the researcher
in identifying the problems for the study. The study is individual, investor oriented and
the factors selected are personal in character.

HYPOTHESIS:

In tune with the above objectives, hypothesis have been formulated that the various
independent variables such as, Age, Gender, Type of Investors, Category of Investors,
Type of market operated, Experience in the market, influence the dependent variables
namely Shares, Debentures / Bonds. Stock Futures and Options. Mutual Funds.
NSC/PPF/PF. Fixed Deposits. .Insurance Policies. Real Estate. Gold / Silver and others
are having close association to know the risk and return perception of the retail equity
investors while making investment.

DATA ANALYSIS ON ‘RISK –RETURN PERCEPTIONS’

Return is the yield plus capital appreciation and risk is the variability of returns or loss, which
is inherent in any investment. Theoretically, risk and return go hand in hand. The higher the risk, the
higher is the return. However, the risk-return perceptions of the investors on various investments
may differ from one another. These perceptions have important implications throughout the
financial markets and have a significant impact on the asset allocation decisions of the investors.

The study examines that risk-return perceptions of retail equity investors on various
investment avenues viz.,
 1. Shares

2. Debentures / Bonds

3. Stock Futures and Options

4. Mutual Funds

5. NSC/PPF/PF

6. Fixed Deposits

7. Insurance Polices

8. Real Estate

9. Gold / Silver and

10. Others

The Investors were asked to rate the various investments by risk and return on a 4-
point scale. Theoretically, the investors are expected to assign similar risk-return ratings for
each type of investment. In order to examine the validity of this hypothesis, a Test for Paired
Differences has been employed and the results are tested at 5% level of significance.

Mean difference tests are conducted on the return ratings minus the risk rating. A
mean difference greater than zero (i.e.) (MD>0) indicates that investors view the investment
asset as having greater relative return than relative risk. Contrary to this a mean difference
less than zero (i.e.) (MD<0) indicates that investors believe the relative risk to be greater than
the presumed return level.

The study analyses the results of the survey as a whole and based on selected socio-
economic and investments profile factors such as investors’ Age, Gender, Family income,
Type of investor, Category of investor and Market experience of the investor to determine
whether there are differences in their risk-return ratings. The results are presented in the form
of tables and relevant interpretations.

1. RISK – RETURN PERCEPTIONS AS A WHOLE:

The entire set of data has been considered to determine that risk–return perceptions of
the retail equity investors as a whole and the results are presented in Table No.1. It reveals
that all the investments other than stock futures and other investments show a positive
significant mean difference, which implies that these investments generate greater return than
relative risk. Stock futures and others show negative mean differences which implies that
these investments are more risky than their relative return. The results of 9 out of 10 asset
classes are significant at 5% level.

Real Estate, Gold/Silver and Insurance Policies have high positive significant mean
differences as compared to other investments.

It can be concluded that Shares, Debentures/Bonds, Mutual Funds, NSC/PPF/PF,

Fixed Deposits, Insurance Policies, Real Estate, Gold/Silver generate greater relative return
than relative risk. Out of the above, Real Estate is perceived as the best asset followed by
Gold /Silver and Insurance Policies by all the investors as a whole.

TABLE :1 PAIRED DIFFERENCE BETWEEN RETURN AND RISK AS A WHOLE

As a whole (500)
Investments
Mean difference t values P-values
Shares 0.13 3.3 .00*
Debentures / Bonds
0.22 6.3 .00*

Stock futures -0.054 -1.3 0.19

Mutual funds 0.47 11 .00*
NSC/PPF/PF 0.56 14 .00*
Fixed deposits 0.55 15 .00*
Insurance polices 0.74 17 .00*
Real estate 0.96 16 .00*
Gold /silver 0.78 13 .00*
Others -0.056 -1.45 .00*
* Significant at 5% level

2. AGE AND RISK – RETURN PERCEPTIONS :

The Age wise risk return perceptions of the equity investors in terms of mean
differences are presented below to ascertain if age might make a significant difference in risk-
return ratings.
 Table 2 reveals that all the investments other than Stock Futures and other
investments show a positive mean difference in all age groups, which implies that these
investments generate greater return than relative risk. Stock Futures and others show a
negative insignificant mean difference in all age groups, which implies that these investments
are more risky than their relative return. The results of 8,7,9 and 4 investments are significant
at 5% level in case of young, middle aged and old investors respectively.

Real Estate, Gold/Silver and Insurance Policies have high significant mean
differences in all age groups, which implies that these assets generate very high returns
compared to others.

It can be concluded that Shares, Debentures/Bonds, Mutual Funds, NSC/PPF/PF,

Fixed Deposits, Insurance Policies, Real Estate, Gold/Silver generate greater relative return
than relative risk in all category of investors irrespective of their age. Out of the above, young
and middle aged investors perceive investment in Real Estate as the best, followed by
Gold/Silver and Insurance Polices whereas old investors perceive investment in Gold / Silver
as the best, followed by Real Estate and Insurance Policies.

TABLE: 2 AGE WISE PAIRED DIFFERENCE BETWEEN RETURN AND RISK

Young (341) Middle Aged (139) Old (20)

difference

difference

difference

Investments
P-values

P-values

P-values
t values

t values

t values
Mean

Mean

Mean

Shares .15 3.205 .001* .079 1.000 .319 2.5 .960 .349
Debentures / .23 5.239 .000* .20 3.280 .001* 2.0 1.165 .258
Bonds
Stock Futures -.079 -1.689 .092 -.043 -.489 .626 -.30 -1.30 .209
Mutual Funds .47 8.973 .000* .40 4.316 .000* 1.05 5.294 .000*
NSC/PPF/PF .56 12.080 .000* .55 7.632 .000* .50 2.364 .029
Fixed Deposits .58 13.371 .000* .50 6.783 .000* .45 2.438 .025
Insurance .75 14.119 .000* .72 8.737 .000* .80 3.760 .001*
Polices
Real Estate .99 13.670 .000* .83 7.220 .000* 1.45 4.477 .000*
Gold /Silver .74 10.185 .000* .79 6.516 .000* 1.45 4.313 .000*
 Others -.076 -1.683 .093 -.014 -0.18 .855 0.00 0.00 1.00
* Significant at 5% level

3. GENDER AND RISK – RETURN PERCEPTIONS:

The Gender wise, risk – return perceptions of the equity investors are presented below
to ascertain if gender might make a significant difference in risk and return ratings.

Table No.3 reveals that all the investments other than Stock Futures and Other
investments show a positive mean difference in all age groups which implies that these
investments generate greater return than relative risk. Stock Futures and others show a
negative insignificant mean difference in all age groups, which implies that these investments
are more risky than their relative return. The results of 7 asset classes other than Shares,
Stock Futures and Other investments are significant at 5% level across all classes of
investors.

Real Estate, Gold/Silver and Insurance Policies have high significant mean difference
in case of both male and female investors, which implies that these assets generate very high
returns compared to others.

It can be concluded that Shares, Debentures/Bonds, Mutual Funds, NSC/PPF/PF,

Fixed Deposits, Insurance Policies, Real Estate, Gold/Silver generate greater relative return
than relative risk in all categories of investors irrespective of their gender. Out of the above,
Real Estate is perceived as the best asset followed by Gold/Silver and Insurance Policies by
all the investors as a whole.

TABLE: 3 GENDER WISE PAIRED DIFFERENCE BETWEEN RETURN AND

RISK
Male (401) Female (99)
Investments
difference

difference
P-values

P-values
t values

t values
Mean

Mean

Shares .0798 1.905 .057 .0791 1.000 .319

Debentures / Bonds .20 5.273 .000* .20 3.280 .001*
Stock Futures -.059 -1.266 .206 -.0432 -.489 .626
Mutual Funds .45 8.861 .000* .40 4.316 .000*
 NSC/PPF/PF .54 12.692 .000* .55 7.632 .000*
Fixed Deposits .51 12.658 .000* .50 6.783 .000*
Insurance Polices .69 13.922 .000* .72 8.737 .000*
Real Estate .96 14.317 .000* .83 7.220 .000*
Gold /Silver .79 11.211 .000* .79 6.516 .000*
Others -.0574 -1.331 .093 -.0144 -.183 .855
* Significant at 5% level

4. MONTHLY FAMILY INCOME AND RISK - RETURN PERCEPTIONS:

The Monthly family income wise risk-return perceptions of the equity investors are
presented in Table.4 to ascertain if family income might make a significant difference in risk
and return ratings.

TABLE 4. MONTHLY FAMILY INCOME WISE PAIRED DIFFERENCE

BETWEEN RETURN AND RISK
Low (195) Medium (199) High (106)
Investments
difference

difference

difference
P-values

P-values

P-values
t values

t values

t values
Mean

Mean

Mean

Shares .18 2.518 .013* .18 3.176 .002* .0472 .638 .525
Debentures /
.17 2.974 .003* .23 4.226 .000* .30 3.910 .000*
Bonds
Stock Futures -.0974 -1.371 .172 -.040 -.652 .515 .00 .000 1.000
Mutual Funds .49 5.976 .000* .45 6.559 .000* .49 6.445 .000*
NSC/PPF/PF .69 10.867 .000* .35 5.752 .000* .69 10.01 .000*
Fixed
.64 10.719 .000* .43 7.280 .000* .63 8.562 .000*
Deposits
Insurance
.79 10.797 .000* .63 9.690 .000* .87 9.150 .000*
Polices
Real Estate 1.17 11.706 .000* .79 8.850 .000* .89 6.741 .000*
Gold /Silver .88 8.067 .000* .59 7.538 .000* .78 6.411 .000*
Others -.0154 -.261 .395 -.065 -1.84 .067 -.066 -.842 .402
* Significant at 5% level
 Table 4. reveals that all the investments other than Stock futures and Other
investments show a positive mean difference in all age groups which implies that these
investments generate greater return than relative risk. Stock Futures and Others show a
negative insignificant mean difference in all age groups, which implies that these investments
are more risky than their relative return. The results of 8 asset classes other than Stock
Futures and Others are significant at 5% level in case of low and medium income investors.
The results of 7 assets classes are significant at 5% level in case of high-income investors.
The mean difference of investment in shares, stock futures and others stand insignificant.

Real Estate, Gold / Silver and Insurance Polices have high significant mean
differences across various income groups, which implies that these assets generate very high
returns compared to others.

It can be concluded that Shares, Debentures/Bonds, Mutual Funds, NSC/PPF/PF,

Fixed Deposits, Insurance Policies, Real estate, Gold/Silver generate greater relative return
than relative risk in all categories of investors irrespective of their monthly family income.
Out of the above, the investors of low income group perceive investment in Real Estate as the
best followed by Gold/Silver and Insurance Policies. Investors of medium and high income
group perceive investment in Real Estate as the best followed by Insurance Policies and Gold
/ Silver.

5. TYPE OF INVESTOR AND RISK–RETURN PERCEPTIONS :

The Type of investor wise risk–return perceptions of the equity investors are
presented in Table 5. to ascertain if the type of investor might make a significant difference
in risk and return ratings.

TABLE 5. TYPE OF INVESTOR WISE PAIRED DIFFERENCE BETWEEN

RETURN AND RISK

Hereditary Investor (97) New Generation Investor (403)

difference

difference
P-values

P-values
t values

t values
Mean

Mean

Investments

Shares .0722 .943 .348 .15 .3.223 .001*

 Debentures/
.13 1.709 .091 .24 6.164 .000*
Bonds

Stock Futures .11 .976 .332 -.0943 -2.197 .029

Mutual Funds .45 4.291 .000* .48 9.631 .000*

NSC/PPF/PF .60 6.247 .000* .55 13.087 .000*

Fixed Deposits .58 5.136 .000* .55 14.888 .000*

Insurance Policies .86 7.667 .000* .72 15.260 .000*

Real Estate .80 5.964 .000* 1.00 14.864 .000*

Gold / Silver .69 5.659 .000* .81 11.399 .000*

Others -.0515 -.561 .576 -.0571 -1.345 .179

* Significant at 5% level

Table 5 indicates that the mean differences are positive for all investments except
other investments in the case of hereditary investors. New generation investors fall in line
with hereditary investors with a difference that Stock Futures and other investments indicate
a negative mean difference. A positive mean difference implies greater return than relative
risk and a negative mean difference implies greater risk than relative return. The results of 6
asset classes except investment in Shares, Debentures/ Bonds, Stock Futures and Other
investments are significant at 5% level in the case of hereditary investor and the results of 8
asset classes except Stock Futures and Other investments stand significant at 5% level in the
case of new generation investors.

Real Estate, Gold/Silver and Insurance Policies have high significant mean difference
across various type of investors, which implies that these assets generate very high returns
compared to others.

It can be concluded that hereditary investors perceive all the investments except Other
investments to generate higher return than their relative risk. New generation investors
perceive all the investments except Stock Futures and Other investments to generate higher
return than their relative risk. Hereditary investors rank Insurance Policies as the best
investment followed by Real Estate and Gold/Silver. New generation investors perceive
investment in Real Estate as the best followed by Gold/Silver and Insurance Polices.
6. CATEGORY OF INVESTOR AND RISK – RETURN PERCEPTIONS:

The Category of investor wise risk-return perceptions of the equity investors are
presented in Table 6. to ascertain if the category of investor might make a significant
difference in risk and return ratings.

TABLE 6. CATEGORY OF INVESTOR WISE PAIRED DIFFERENCE BETWEEN

RETURN AND RISK

Long Term Investor Day Trader Both

(204) (47) (249)
difference

difference

difference
Investments
P-values

P-values

P-values
t values

t values

t values
Mean

Mean

Mean
Shares .0245 .439 .661 .19 1.592 .118 .21 3.459 .001*

Debentures/Bonds .26 4.418 .000* .45 3.301 .002* .15 3.323 .001*

Stock Futures -.034 -.544 .587 .0426 .340 .736 -.088 -1.454 .147

Mutual Funds .42 6.435 .000* .51 4.508 .000* .51 7.339 .000*

NSC/PPF/PF .56 9.338 .000* .53 3.925 .000* .56 10.357 .000*

Fixed Deposits .48 8.458 .000* .62 5.144 .000* .61 11.443 .000*

Insurance Polices .72 10.810 .000* .79 5.290 .000* .76 12.037 .000*

Real Estate .89 9.844 .000* .94 5.173 .000* 1.02 11.464 .000*

Gold/Silver .84 9.081 .000* .66 3.417 .001* .76 8.340 .000*

Others -.15 -2.539 .012 .0213 .198 .844 .0803 .143 .886
* Significant at 5% level

Table 6. reveals that all the investments except Stock Futures and Other investments
show a positive mean difference in case of long-term investors. The results are significant in
8 out of 10 asset classes except investment in Shares and Stock Futures. All the 10
investments show a positive mean difference in the case of day traders. The results are
significant in 7 out of 10 asset classes except investment in Shares and Stock Futures.
Investors who are both long-term investors and day traders indicate positive mean difference
for all the investments except Stock Futures. The results are significant in 8 out of 10 asset
classes except Stock Futures and Other investments.

Real Estate, Gold/Silver and Insurance Policies have high significant mean
differences across various category of investors which implies that these assets generate very
high returns compared to others.

It can be concluded that according to the long-term investors and investors who are
both long-term investors and day traders, all the investments except Stock Futures generate
higher return than their relative risk. In the case of day traders, all the investments are high
return generators than their relative risk. Out of the above long-term investors and investors
who are both long-term investors and day traders perceive investment in Real Estate as the
best followed by Gold/Silver and Insurance Policies. Day traders perceive investment in Real
Estate as the best followed by Insurance Polices and Gold/Silver.

7. MARKET EXPERIENCE AND RISK – RETURN PERCEPTIONS :

The Market experience wise risk-return perceptions of the equity investors are
presented in Table 7. to ascertain if the investors’ market experience might make a significant
difference in risk and return ratings.

TABLE 7. MARKET EXPERIENCE WISE PAIRED DIFFERENCE BETWEEN

RETURN AND RISK

Low (117) Moderate (213) High (170)

difference

difference

difference

Investments
P-values

P-values

P-values
t values

t values

t values
Mean

Mean

Mean

Shares .10 1.179 .241 .21 3.300 .001* .0588 .962 .337
Debentures/ .30 3.584 .000* .23 4.405 .000* .15 2.795 .006*
Bonds
Stock -.094 -1.19 .234 -.032 -.561 .575 -.052 -.654 .514
Futures
Mutual .50 5.380 .000* .55 7.892 .000* .36 4.778 .000*
Funds
NSC/PPF .50 6.289 .000* .54 9.256 .000* .62 9.248 .000*
/PF
Fixed .57 7.523 .000* .57 10.210 .000* .52 8.131 .000*
Deposits
Insurance .70 7.986 .000* .74 10.390 .000* .78 11.091 .000*
Polices
Real Estate .87 6.770 .000* .92 9.942 .000* 1.06 10.737 .000*
Gold / Silver .61 4.472 .000* .82 9.316 .000* .86 7.842 .000*
Others -.076 -.853 .395 -.014 .258 .797 -.094 -1.430 .155
* Significant at 5% level

Table 7. reveals that all the investments other than Stock Futures and Other
investments show a positive mean difference irrespective of the investors’ market experience
which implies that these Investments generate greater return than relative risk. Stock Futures
and Other investments show a negative insignificant mean difference in all cases. The mean
difference of investment in Shares is insignificant in low as well as high experienced
investors. Real Estate, Gold/Silver and Insurance Polices have high significant mean
difference in all categories of investors, which implies that these assets generate very high
returns compared to others.

It can be concluded that Shares, Debentures/ Bonds, Mutual Funds, NSC/PPF/PF,

Fixed Deposits, Insurance Policies, Real Estate, and Gold/Silver generate greater relative
return than relative risk in all categories of investors irrespective of their market experience.
Investors with low market experience perceive investment in Real Estate as the best followed
by Insurance Policies and Gold/silver. Investors with moderate and high market experience
perceive investment in Real Estate as the best followed by Gold /Silver and Insurance
Policies.

Finally, the theory that the investors are expected to assign similar risk and return
ratings for each type of investment is disproved and it can be concluded that investors assign
different risk and return ratings for each type of investment and the ratings vary with age,
gender, family income, type of investor, category of investor and market experience of the
investor.
FINDINGS AND CONCLUSION:

The theory that the investors are expected to assign similar risk – return ratings for
each type of investment has been tested using Test for Paired Differences and the Mean
Differences has been used to identify the risk – return perceptions of the retail equity
investors. Mean Differences reveal that Shares, Debentures/Bonds, Mutual Funds,
NSC/PPF/PF, Fixed Deposits, Insurance Policies, Real Estate, Gold/Silver are perceived to
generate greater relative return than relative risk by all classes of investors as a whole. Out of
the above Real Estate is perceived as the best investment followed by Gold / Silver and
Insurance Policies as a whole. These ratings vary among the different classes of investors
based on their socio – economic and investment profile. The Test for Paired Differences
disproves the theory and concludes that investors assign different risk and return ratings for
each type of investment and the rating vary with the socio- economic and investment profile
of the investors. Mean Differences reveal that Shares, Debentures/Bonds, Mutual Funds,
NSC/PPF/PF, Fixed Deposits, Insurance Policies, Real Estate, Gold/Silver are perceived to
generate greater relative return than relative risk by all classes of investors as a whole. Out of
the above Real Estate is perceived as the best investment followed by Gold / Silver and
Insurance Policies as a whole especially by young and middle aged investors. Moreover, in
India percentage of participation and investing in equities is too low comparatively other
investment avenues. Hence better to bring the government or regulatory bodies like SEBI lot
of awareness and encourage in retail investors in equities to become greater part of
development of economic system for making investment on long term basis.
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