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“AN EMPIRICAL STUDY ON THE INFLUENCE OF SOCIO-DEMOGRAPHIC CHARACTERISTICS ON BEHAVIOURAL ASPECTS OF RETAIL INVESTORS IN COIMBATORE”

ABSTRACT

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This study analyzes the impact of socio demographic variables on the behavioural of investors towards investments. To achieve this, 405 respondents of Coimbatore city, having different
socio Economic profiles were surveyed. Seven
behavioural factors of investment were identified such as Cognitive Factor, Attitude
Factor, Herding Factor, Emotional Factor, Risk Factor, Economic Factor and Market
Factor and included for the study. The results
highlight that age of investors has significant association with Herding
factor and Risk factor, while gender of investors has significant association
with Attitude and Economic factor. It is evident from the study that annual
individual income of the investors does not have significant association with
all the seven behavioural factors and also found that association between life
cycle stage of investors and Risk factor of retail investors.

Key words:
Behavioural factors, Socio-Demographic Characteristics, Retail Investors,
Investment

1. INTRODUCTION

Investment Behaviour is a study of investor’s psychological
traits on their investment decisions. Behaviour may be a reflection of an
interaction of Cognitive and Emotional factors and can be captured more
effectively using an approach that focuses on the interplay of different
decision-making systems. It
is vital to study the effect of socio-demographic factors on the behavioural
factors in order to understand and explain the investors’ decisions. In other
words, understanding the normal behaviour is important for investment decision
making. This study aims to determine the influence of the socio-demographic
factors on the behavioural aspects of Investment decisions of retail investors.

2.
REVIEW OF LITERATURE

In the opinion of Iqbal Mahmood, Habib Ahmad & Mansoor
Anjum1 (2011)
recognized an important area in the study of recent finance literature.
Its implicit objective is to discover and remedy the deviations from the
rational decision making in the investment process. They examined the role of
various socioeconomic, demographic and attitudinal factors affecting the
investment decision of investors in the market.

Shanmugsundaram.V and
Balakrishnan.V2
(2011) found that Investor decisions are influenced by psychological factors
and behavioural dimensions. Menu Verma3
(2008) stated that investment choice depends on and is affected by the
demographic variables as well as by the personality types. Manish Mittal and
Vyas4
(2008) has classified the Indian investors into different personality
types and explored the association between various demographic factors and the
investment personality exhibited by the investors.

Meenakshi Chaturvedi and Shruti Khare5 (2012)
studied on saving pattern and investment preferences of individual household in
India that revealed the impact of age, education, occupation and income level
of the individual on investment. Sohani Islam6 (2012)
had found that psychological factor is the most dominating influence upon
investor’s decision making process and micro economic factor also have
influence on selecting investment securities. Lingesiya
Kengatharan7
(2014) found out that there are four behavioural factors affecting the
investment decisions of individual investors which are herding, heuristics,
prospect and market. Godbole, & Arekar,8
(2014) concluded that there are six important factors which affects the
investment buying behaviour i.e. motives, risk & returns, opinions, market
information, benefits and security.

3 RESEARCH METHODOLOGY

This research has adopted
descriptive research design using interview method. This study is descriptive
in nature because this study describes the characteristics of a particular
individual or a group and attempts to capture the characteristics of Investors,
opinion, behaviour, Risk taking attitude, their awareness of Investment
opportunities and their Investment pattern of retail Investors. The research was conducted in Coimbatore,
which is a city in India. The data collection process took place during
the period December 2012 to May 2013.

The Data collection was done mainly through primary sources and also
secondary sources. The primary data was collected through questionnaire method.
The sampling techniques used for
the study is Non-Probabilistic Convenience sampling method. Since the exact
population of salaried class Investors is not known exactly, the selection is
left to the researcher who is to select the sample. A sample size of 405
Investors was personally interviewed and data was collected for this
statistical study.

4 OBJECTIVES OF THE STUDY

 

Following objective is framed for the study with
regard to the above mentioned research questions:

To study the impact of socio-demographic characteristics over the behavioural
factors of retail investors.

 

5 RESEARCH HYPOTHESES

 

Following hypotheses are developed after
reviewing the extant literature on socio-demographic profile and behavioural
factors of retail investors

 

Ha0:
There is no significant association between the age group and the behavioural factors of retail investors.

Hb0:
There is no significant association between the gender and the behavioural factors of retail investors.

Hc0:
There is no significant association between the individual annual income and the behavioural factors of retail
investors.

Hd0:
There is no significant association between the marital status and the behavioural factors of retail
investors.

He0:
There is no significant association between the Life cycle stage and the behavioural factors of retail
investors.

Hf0:
There is no significant association between the family type and the behavioural factors of retail investors.

 

6.
DATA ANALYSIS AND INTERPRETATION

The instrument
used for this purpose is structured questionnaire. The reliability of this
questionnaire was tested by calculating the Cronbach alpha which is an
established method to work out the internal consistency. Cronbach’s alpha is
found to be 0.892 for the internal scales questions. The measures included in
the study are above 0.60 which demonstrates good reliability. Therefore the
results of reliability analysis confirmed that consistency is at an acceptable
level for each factor. These indexes show that items included in the factors: Cognitive,
Attitude, Herding, Emotional, Risk, Economic, and Market are reliable enough
for further use. Cronbach’s alpha for each factor is given below.

 

 

Table No. 6.0:
Results of Cronbach’s Alpha test

Factors Identified

No. of Items

Cronbach’s alpha

Cognitive

7

0.757

Attitude

12

0.814

Herding

8

0.747

Emotional

7

0.694

Risk

8

0.782

Economic

8

0.730

Market

6

0.660

  Source: Computed from
Primary data

Table
6.1 Behavioural factors and socio-demographic profile of retail investors

Socio-Demographic
Profile

Behavioural
Factors

Attitude

Cognitive

Herding

Risk

Economic

Emotional

Market

Age group

Chi-Square

4.533

1.100

8.154

15.842

0.864

5.038

3.211

Sig. Value

0.209

0.777

0.043*

0.001*

0.834

0.169

0.360

Gender

Chi-Square

7.040

3.225

1.084

0.530

5.506

0.124

1.771

Sig. Value

0.008*

0.073

0.298

0.467

0.019*

0.725

0.183

Individual Annual Income

Chi-Square

2.709

6.159

11.917

9.515

4.447

5.402

6.584

Sig. Value

0.844

0.406

0.064

0.147

0.616

0.493

0.361

Marital Status

Chi-Square

0.318

0.063

2.292

4.454

0.709

2.416

0.003

Sig. Value

0.573

0.802

0.130

0.035*

0.400

0.120

0.958

Life cycle

Chi-Square

3.110

3.789

7.964

14.573

3.538

8.726

5.741

Sig. Value

0.540

0.435

0.093

0.006*

0.472

0.068

0.219

Family Type

Chi-Square

4.109

1.123

7.045

2.916

1.449

1.753

4.134

Sig. Value

0.128

0.570

0.030*

0.233

0.484

0.416

0.127

*   Significant association between the
variables     Source: Computed from
Primary data

Table 6.2: The mean rank scores of Behavioural
factors and Socio-demographic variables 

Socio-Demographic
Factors

Behavioural
Factors (Mean Rank)

Attitude

Cognitive

Herding

Risk

Economic

Emotional

Market

Age
Group   
(in years)

20 to 25

235.12

190.85

152.79

184.33

191.68

152.14

182.97

26 – 30

195.76

195.12

189.27

155.05

214.43

217.48

187.30

31 – 35

138.99

206.87

222.00

209.88

181.78

198.70

213.04

> 35

211.07

217.70

236.66

254.76

205.62

217.16

226.76

Gender

Male

185.51

191.60

211.68

199.13

187.70

206.77

194.90

Female

249.85

235.08

186.44

216.76

244.54

198.27

227.05

Individual
Annual Income
(Amount in
Rs)

0
– 100000

200.28

143.36

77.52

146.05

193.11

209.67

173.83

100001 – 200000

197.23

207.23

191.96

217.52

219.20

168.34

190.74

200001 – 300000

221.89

230.38

216.48

201.28

188.06

213.29

205.87

300001 – 400000

178.77

204.97

205.76

171.93

228.95

218.95

260.06

400001 – 500000

200.28

185.94

194.58

226.55

156.37

239.38

192.36

500001 – 600000

154.72

91.39

127.23

65.70

209.06

188.77

108.13

> 600000

230.63

184.76

287.98

259.49

229.92

232.79

211.10

Marital
Status

Single

211.53

207.52

184.87

177.23

215.08

184.40

204.97

Married

198.95

201.93

218.63

224.29

196.34

218.99

203.79

Divorcee

190.17

179.42

131.64

165.98

120.82

192.86

158.60

Widow

150.26

126.28

189.78

165.98

115.36

156.20

115.78

Life cycle

Single with financial burdens

212.25

209.20

182.32

170.85

214.76

181.10

204.36

Young couple without children

187.98

153.15

145.98

150.53

192.89

179.20

128.52

Young family with childcare/ mortgage cost

173.47

206.30

229.31

215.69

168.52

260.49

211.25

Mature family with peak earnings

231.78

239.31

237.27

275.36

216.73

185.05

226.51

Preparing for retirement

215.04

189.38

237.55

252.89

226.26

218.41

224.47

Family Type

Nuclear

229.77

216.66

233.54

224.47

218.13

220.92

228.20

Joint

184.01

197.02

174.80

192.11

191.00

191.35

189.88

Source: Computed
from Primary data

Ha0:
There is no significant association between the age group and the behavioural factors of retail investors.

From the Table No.
6.1, it is inferred that among the seven behavioural factors, the p value of Herding
factor is 0.043 and p value of Risk factor is 0.001, both the values are lesser
than 0.05 (5 percent level of significance), therefore the null hypothesis is
rejected. Hence it is concluded that among the seven behavioural factors, there
is significant association between Herding factor and Risk factor on age of
retail investors.  It is inferred from
the Table No. 6.2, the investors of age group greater than 35 years are highly
influenced by Herding factor (Mean Score: 236.66) and Risk factor (Mean Score:
254.76) associated to the investment.

Hb0: There is no significant
association between the gender and the
behavioural factors of retail investors.

From the Table No.
6.1, it is inferred that among the seven behavioural factors, the p value of Attitude
factor is 0.008 and Economic factor is 0.019, both the values are lesser than
0.05 (5 percent level of significance), therefore the null hypothesis is
rejected. Hence it is concluded that among the seven behavioural factors, there
is significant association between Attitude factor and Economic factor on
gender of retail investors. It is inferred from the Table No. 6.2, the female
investors are highly influenced by their Attitude factor (Mean Score: 249.85)
and their Economic factor (Mean Score: 244.54) associated to the investment.

Hc0: There is no
significant association between the
individual annual income and the behavioural factors of retail
investors.

From the Table No.
6.1, it is inferred that among the seven behavioural factors, the p value of Attitude
factor is 0.844, Cognitive factor is 0.406, Herding factor is 0.064, Risk
factor is 0.147, Economic factor is 0.616, Emotional factor is 0.493 and Market
factor is 0.361. It is inferred that all the p values of behavioural factors
are greater than 0.05 (5 percent level of significance), hence the null
hypothesis is accepted. It is concluded that all the seven behavioural factors
do not have significant association with their annual individual income of
retail investors.

Hd0: There is no significant
association between the marital status
and the behavioural factors of retail investors.

From the Table No.
6.1, it is inferred that among the seven behavioural factors, the p value of Risk
factor is 0.035 is lesser than 0.05 (5 percent level of significance),
therefore the null hypothesis is rejected. Hence it is concluded that among the
seven behavioural factors, there is significant association between Risk factor
and marital status of retail investors. It is inferred from the Table No. 6.2,
the married investors are highly influenced by their Risk factor (Mean Score:
224.29) associated to the investment.

He0: There is no significant
association between the Life cycle
stage and the behavioural factors of retail investors.

From the Table No.
6.1, it is inferred that among the seven behavioural factors, the p value of Risk
factor is 0.006 is lesser than 0.05 (5 percent level of significance),
therefore the null hypothesis is rejected. Hence it is concluded that among the
seven behavioural factors, there is significant association between Risk factor
and Life cycle stage of retail investors. It is inferred from the Table No. 6.2,
the investors who are in mature family with peak earnings are highly influenced
by their Risk factor (Mean Score: 275.36) associated to the investment.

Hf0: There is no
significant association between the
family type and the behavioural factors of retail investors.

From the Table No.
6.1, it is inferred that among the seven behavioural factors, the p value of Herding
factor is 0.030 is lesser than 0.05 (5 percent level of significance),
therefore the null hypothesis is rejected. Hence it is concluded that among the
seven behavioural factors, there is significant association between Herding
factor and family type of retail investors. It is inferred from the Table No. 6.2,
the investors who are in nuclear family type are highly influenced by their Herding
factor (Mean Score: 233.54) associated to the investment.

 

 

 

7.
FINDINGS OF THE STUDY

Among
the seven behavioural factors, there is significant association between Herding
factor, Risk factor on age of retail investors. It is inferred that
investors of age group greater than 35 years are highly influenced by Herding
and Risk factor associated to the investment.
There
is significant association between Attitude factors, Economic factor on
gender of retail investors. It is inferred that female investors are
highly influenced by their Attitude and their Economic factor associated
to the investment.

All
the seven behavioural factors do not have significant association with
their annual individual income of retail investors. There is significant
association between Risk factor and marital status of retail investors. It
is inferred that married investors are highly influenced by their Risk
factor associated to the investment.
There
is significant association between Risk factor and Life cycle stage of
retail investors. The investors who are in mature family with peak
earnings are highly influenced by the Risk factor associated to the
investment. There is significant association between Herding factor and
family type of retail investors. It is inferred that investors who live in
nuclear family type are highly influenced by their Herding factor
associated to the investment.

 

8.
CONCLUSION OF THE STUDY

It is evident
from the study that socio-demographic profile such as age, gender, martial
status, life cycle stage and family type of investors has association with
their behavioural aspects of investment. It is essential to note that annual
income of retail income do not have association with heir behavioural aspects
of investment. Age of retail investors is influenced by Herding and Risk factor
associated to the investment. Gender of investors is influenced by their Attitude
and their Economic factor associated to the investment. Life cycle of investors
has influence on their investment related Risk factor. There is association
between family type of retail investors and Herding factor.

9.
REFERENCES

Chandra,
A., & Kumar, R. (2012). “Factors Influencing Indian Individual
Investor Behaviour: Survey Evidence.” Decision, 39(3), 141-167.

Islam,
S. (2012). Behavioral Finance of an Inefficient Market. Global Journal
of Management and Business Research, 12(14).

Kengatharan,
L., & Kengatharan, N. (2014). The Influence of Behavioral Factors in Making
Investment Decisions and Performance: Study on Investors of Colombo Stock Exchange,
Sri Lanka. Asian Journal of Finance & Accounting, 6(1), 1-23

Khan,
M. H. (2014). An Empirical Investigation on Behavioral Determinants of
Perceived Investment Performance; Evidence from Karachi Stock Exchange Research
Journal of Finance and Accounting, 5(21), 129-137.

Lin, H. W. (2011).
Elucidating rational investment decisions and behavioral biases: Evidence from
the Taiwanese stock Market. African Journal of Business Management, 5(5),
1630-1641.

Mittal, M., & Vyas,
R. K. (2008). Personality type and investment Choice: An empirical study. The
ICFAI University Journal of Behavioral Finance, 5(3), 7-22.

Parsaeemehr, M.,
Rezeai, F., & Sedera, D. (2013). Personality Type of Investors and
Perception of Financial Information to Make Decisions. Asian Economic and
Financial Review, 3(3), 283-293

Sultana, S. T. (2010).
An empirical study of Indian individual investors’ behavior. Global
journal of finance and management, 2(1), 19-33.

 

1       Mahmood,
I., Ahmad, H., Khan, A. Z., & Anjum, M. (2011). Behavioral implications of
investors for investments in the stock market. European journal of social
science, 20(2), 240-247.


     Shanmugasundaram, V., &
Balakrishnan, V. (2011). Investment decisions-Influence of behavioural factors.
Indian Journal of Finance, 5(9), 25-34.

3       Verma,
M. (2008). Wealth management and behavioral finance: The effect of demographics
and personality on investment choice among Indian investors. The Icfai
University Journal of Behavioral Finance, 5(4), 31-57.

4       Mittal,
M., & Vyas, R. K. (2008). Personality type and investment Choice: An
empirical study. The ICFAI University Journal of Behavioral Finance, 5(3),
7-22.

5       Chaturvedi,
M., & Khare, S. (2012). Study of saving pattern and investment preferences
of individual household in India. International Journal of Research in
Commerce and Management, 3(5), 115-120

6       Islam, S. (2012). Behavioral Finance of
an Inefficient Market. Global Journal of Management and Business
Research, 12(14).

7       Kengatharan, L., & Kengatharan, N. (2014). The
Influence of Behavioral Factors in Making Investment Decisions and Performance:
Study on Investors of Colombo Stock Exchange, Sri Lanka. Asian Journal of Finance & Accounting, 6(1), 1-23

8       Godbole, S. S., & Arekar, K. A.
(2014).A study of factors influencing gold investment decisions of retail
customers in India. The International Journal of Applied Business and
Economic Research, 12(4) 981-995. 

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