emperical study on investment analysis

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Influence of Demographic and Psychological on Investment decision

M S RAMAIAH INSTITUTE OF MANAGEMENT, BANGALORE 1

Chapter 1: I ntroduction


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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 financialmarkets 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 analysisdeals 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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Chapter 2: Research design


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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 itshows 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. To study the influence of age on the investment pattern.2. To study the impact of income level on investment decisions.3. To study the impact of announcement of annual result on investment pattern.4. 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 dividendsand bonus of listed companies are announced.


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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 hadinvested 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, whichrecorded 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- L iterature Research

In order to study the behavior a review of literature was done to develop the concept andunderstand 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 theprimary 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 accountingnumbers 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 andexperience 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 investmentstrategies 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 influencestock 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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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 themarket, 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 narrowfarming, they consider multiple factors and seek diversified information before executing somekind 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 theyare 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 decisionmakers. 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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I I 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 onlineplatform 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 personallyinterviewed to verify the accuracy of the self-reported data.

I I I Stage- Approaches to Research Design

1. Research DesignDescriptive Research

2. Data Collection-Primary data.

This data is collected from Questionnaire.

3. Statistical tools-

CHI-SQUARE test4. Data Analysis-

Tabulation CHI-SQUARE test Analysis

I V Stage- Scope of the study

The scope of the study is limited to Bangalore area only.


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Chapter 3: Prof il e of the industry


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I nvestment I ndustry in I ndia

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 gettingdoubled 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 centtowards the GDP of the country.

Types of I nvestment i n I ndia

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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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 I ndia

Top Investment

Area

Investment

RestrictionsReturn on Investment Risk of Loss

Gold No limit Offers high returns as gold prices are on a rise Low

Bank Deposit ---Offers upto 8.5 percent annual return depending

on the bank and periodLow

Mutual Funds No limit Equity Based: High

Equity

Based:

High

National Saving

Certificate (NSC)No limit Offers upto 8 interest calculated biannually No risk

Real Estate No limit

Capital gains guaranteed for specified avenues also

tax exemption are available on long term

investments

Low


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Advantages of I nvesting in I ndia

According to The World Fact Book, India is among the world's youngest nationswith 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 populationestimated 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 theworld'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 thethird 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 byover ten times from its current size of 50 million to 583 million people by 2025.


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Chapter 4: Analysis & in terpretation


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AGE DISTRIBUTION OF THE RESPONDENTS:

From the questionnaire it was observed that maximum number of respondents fall in between 25-

35 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 NO. OF RESPONDENTS % NO. OF RESPONDENTS

BELOW 25 12 12

25-35 48 48

35-45 24 24

45-55 9 9

ABOVE 55 7 7

TOTAL 100 100

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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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 NO. OF RESPONDENTS % NO. OF RESPONDENTS

BELOW 1,50,000 24 24

150000-300000 16 16

300000-450000 29 29

450000-600000 14 14

ABOVE 600000 16 16

TOTAL 100 100

CHART 3: SHOWING THE INCOME DISTRIBUTION OF THE RESPONDENTS


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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 thatbecause 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 NO. OF RESPONDENTS % NO. OF RESPONDENTS

SERVICES 32 32

BUSINESS 32 32

STUDENTS 12 12

PROFESSIONALS 24 24

OTHERS 0 0

TOTAL 100 100

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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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 NO. OF RESPONDENTS % NO. OF RESPONDENTS

HIGH 13 13

MEDIUM 68 68

LOW 19 19

TOTAL 100 100

CHART 5: SHOWING THE RISK APPETITE OF THE RESPONDENTS


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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 about10-20% of their income annually.

TABLE 6: SHOWING THE PERCENTAGE OF INCOME INVESTED BY

RESPONDENTS USUALLY

PERCENTAGE OF INCOME INVESTED NO. OF RESPONDENTS % NO. OF RESPONDENTS

LESS THAN 10 30 30

10-20% 30 30

20-30% 28 28

30-40% 10 10

40 AND ABOVE 1 1

TOTAL 100 100

CHART 6: SHOWING THE PERCENTAGE OF INCOME INVESTED BY

RESPONDENTS USUALLY


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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 ofbetween 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 becauseof attraction towards less risky and assure returns & because high fluctuation behavior in theequity. 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 officeSaving 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 NO. OF RESPONDENTS % NO. OF RESPONDENTS

FIXED DEPOSIT 54 28

POST OFFICE SAVINGS 16 8

MUTUAL FUNDS 30 16

EQUITY 44 23

REAL ESTATE 10 5

GOLD 28 15

OTHERS 11 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 NO. OF RESPONDENTS % NO. OF RESPONDENTS

RETURNS 68 33

SAVINGS 59 29

TAX BENEFITS 34 17

SECURITY 16 8

WEALTH CREATION 28 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? NO. OF RESPONDENTS % NO. OF RESPONDENTS

ONCE IN A YEAR 33 35

1-3 TIMES A YEAR 18 19

4-7 TIMES A YEAR 14 15

>7 TIMES A YEAR 29 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 % NO. OF RESPONDENTS

NEVER 5 5

SOMETIMES 27 28

I RESERVE MY REPLY 8 8

I ANALYZE ONLY MICRO FACTORS 11 11I ANALYZE BOTH MICRO AND MACRO 46 47

CHART 10: SHOWING RESPONDENTS ANALYSIS BEFORE STOCK MARKET

TRADING INVESTMENTS


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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 ofcompany 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 % NO. OF RESPONDENTS

BUY THE STOCK 40 56

HOLD 18 25

SELL 13 18

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

ANNUAL RESULTS

RESPONSE IF RESULTS ARE ABOVE EXPECTATION


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If the company performance was as per expectation 21% (16) investors want to buy the stock and57% (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 % NO. OF RESPONDENTS

BUY THE STOCK 16 21

HOLD 43 57

SELL 17 22

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


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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


BELOW EXPECTATION NO. OF RESPONDENTS % NO. OF RESPONDENTS

BUY THE STOCK 12 17

HOLD 30 43

SELL 28 40

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 stockafter 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


ABOVE EXPECTATION NO. OF RESPONDENTS % NO. OF RESPONDENTS

BUY THE STOCK 45 63

HOLD 11 15

SELL 15 21

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 % NO. OF RESPONDENTS

BUY THE STOCK 10 13

HOLD 59 78

SELL 7 9

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 % NO. OF RESPONDENTS

BUY THE STOCK 9 13

HOLD 31 43

SELL 32 44

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 = 57.7Degree 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


H1:There is an association between the age of the investors and their behavior when dividends


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 dividendsand bonus of listed companies are announced.


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CONCLUSION

The research brings out certain characteristics of investors living in Bangalore. The ability tounderstand 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 influencedby 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.

LI M I TATIONS 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 ofauthentication 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 thecountry.


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ANNEXURE

Influence of demographic & psychological factors on investment

decision

Questionnaire

1. Agea.


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7. Investment avenuesa. Fixed depositb. Post office savingsc. Mutual fundsd. Equitye. Real estatef. Goldg. Others

8. Reason for investing in financial instrumentsa. Returnb. Savingc. Tax benefitd. Securitye. Wealth creation

9. How often do you trade with stocka. Once in a yearb. 1-3 times in a yearc. 4-7 times in a yeard. >7 times in year

10. I analyze stock market before trading investmentsa. Neverb. Sometimesc. I reserve my replyd. I analyze only micro factorse. I analyze both micro and macro factors

11.Preferred mode of stock tradinga. Online tradingb. Offline trading


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12.Response to announcement of annual result1. Above expectation

a. Buy the stockb.

Hold

c. Sell2. As per expectation

a. Buy the stockb. Holdc. Sell

3. Below the expectationa. Buy the stockb. Holdc. Sell

13.Response to bonus and dividend1. Above expectation

d. Buy the stocke. Holdf. Sell

2. As per expectationd. Buy the stocke. Holdf. Sell

3. Below the expectationd. Buy the stocke. Holdf. Sell

emperical study on investment analysis

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