AEIJST - January 2017 - Vol 5 - Issue 01 ISSN - 2348 - 6732

A Study on Investors Behaviour towards Investment

*Dr.K.P.Rajalakshmi

*Asst Prof, MBA DEPT, MNM Jain Engg College

The financial system in India is undergoing a rapid phenomenal change, mainly after
the improvement in the economic sector. An efficient, competitive and expanded financial
system is vital to increase the rate of capital structure, increase the return on investments and
to promote growth of the economy. There is also a phenomenal change in the money market
and the foreign exchange market, securitys market, capital market, debt market and the
foreign exchange market. The emergence of various financial institutions and regulatory
bodies has transformed the financial services sector from being a traditional industry to a
dynamic one. The advance has linked financial companies and the investors in the global
financial market in choosing investments by offering many options. With a growing awareness
among the investors, there has been a distinct shift from investing the savings in physical
assets like gold, silver and land to financial assets like shares, debentures and Mutual funds.
Many factors influence the investors behaviour towards long- term investment they are
personal demographic factors such as information source factors, Locus of control factors,
social factors, behavioural, economic, psychological, lifestyle and risk factors are studied with
investors behaviour towards long- term investment. Various researchers have considerably
investigated the impact of these factors on investors behaviour towards long term investment
Noel Capon (1994). Brinson et al. (1991), Santi Swarup (2003), Hilgert et al. (2003), Saraoglu
and Detzler (2002), Leininger and Kalil (2008).
Review of Literature
Nofsinger (2008) explained that traditional finance theory assumed that investors make
rational choices when deciding on different investment avenues. They tend to look for
characters like maximising their wealth in the face of risk and uncertainty while making
decisions. The investors overcome the emotion and psychological biases since wealth, and
return on investment are considered to be the primary factors while deciding on investment
decisions.
Hirschey and Nofsinger (2008) related psychology with investors behaviour, the decision
making of investors is based on mixture of a pyramid of assets. Each stage in the pyramid
satisfies a definite objective of the investor. Once an objective is satisfied, the investor moves
on to the next stage of the pyramid .The stages from the bottom to the top include wealth
preserving stage like (low-risk investment, Mutual funds, and insurance products). They
proceed further to wealth-building investment stage to earn high returns and acts as a risk-
seeker which includes (Treasury bonds, investment grade corporate bonds, bond-market
index funds, high-yield common stocks) the next stage is aggressive wealth- building stage
which explains whether the investor is positive to accept a greater amount of risk to gain
higher level of wealth creation (individual common stocks, small-capital index funds, managed
Mutual funds).The investor is financially and emotionally ready to move on to the next stage of
speculative investment products, consisting of IPOs (Indian Public Offerings) and day trading.
It has been found that the major investment strategies adopted are speculations and wealth-
building investment.
DaSilva and Giannikos (2004) confirmed investors behaviour in view of information,
depends on socio-economic and psychological characteristics. Investors behaviour varies
according to age, occupation and the environment they live. Their study proves that richer
investors give importance to financial information and the poor investors do trading even with
very precise information they gather.
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 AEIJST - January 2017 - Vol 5 - Issue 01 ISSN - 2348 - 6732

Graham et al. (2005) analysed whether sophisticated investors who are experienced in
the investment field, trade often. The study provides evidence that active rebalancing of funds
is more apparent for sophisticated investors. The sophisticated investors give importance in
acquiring more financial information and their irrational behaviour reduces significantly as
soon as investors wealth and sophistication increases.
Croson and Gneezy (2009) examined how strongly social preferences is evident in men
and women investors. A sequence of identical trading decisions is naturally found between
both investors because they are well informed about the investment products by the social
influencer. Both the men and the women investors do not fully depend on the justification of
the social network but they carefully evaluate and then take rational decisions to invest in
long-term investments.
Glaser and Weber (2007) stated that overconfident investor do high trading when they
possess the investment skill and the past performance of trading. Moreover, overconfidence
may also affect the impact of financial information on individuals trading behaviour.
Overconfident investors are likely to create fundamental mistakes when evaluating the worth
of a certain stock as it would not result in higher returns and lower risks as expected by the
investors.
Aim of the Study
The aim of the study is to know the behaviour of investors, to understand the factors
influencing their preferences with respect to long- term investments. The study reveals the
influence of different factors that guides them for better investment decision. It also tries to
examine the behaviour of the investor towards risk, depending on the type of investment and
its returns.
Need For the Study
Every investor differs from the other while selecting investment avenues due to the
influence of factors like, information source, social factors, behavioural factors, economic
factors and psychological factors. The most advantageous investment decision plays an active
role among investors. The investors should consider their financial goals, risk tolerance level
and to predict the future return on investment while designing the investment portfolio. It
becomes important to determine how the investors think about the financial products and
services, the influence of different factors and the investors attitude towards risk that drive
them to select their preferred portfolio and to get best out of the investment.
Objectives of the Study
1. To study the profile of the investors towards long- term investment.
2. To study the relationship between investors behaviour and the amount of risk considered
while investing in different investment avenues.
3. To compare the investors behaviour with the variables influencing the investment decision.
Research Methodology
Descriptive research design was followed, with the aim of finding out relationship among the
factors. Under Non-probability sampling technique and quota sampling method was used to
select the respondents from the population. On the different age group, respondent were
selected conveniently.

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 AEIJST - January 2017 - Vol 5 - Issue 01 ISSN - 2348 - 6732

Analysis and Interpretation:

Table-1 Factors Influencing Investment Decision among Personal Demographic
Character
Influencing factor for Sum of
df Mean Square F Sig
investment decision making Squares
Between Groups 480.577 1 480.577
Social Within Groups 11670.173 513 22.749 21.125 .000
Total 12150.750 514
Between Groups 197.562 1 197.562
Behavioural Within Groups 8904.011 513 17.357 11.382 .001
Total 9101.573 514
Between Groups 304.783 1 304.783
Economic Within Groups 9448.809 513 18.419 16.547 .000
Total 9753.592 514
Between Groups 56.324 1 56.324
psychological Within Groups 10789.831 513 21.033 2.678 .102
Total 10846.155 514
Between Groups 294.776 1 294.776
lifestyle Within Groups 9620.944 513 18.754 15.718 .000
Total 9915.720 514
Between Groups 99.160 1 99.160
Risk Within Groups 10757.081 513 20.969 4.729 .030
Total 10856.241 514

It could be seen from the table that, social, economic, lifestyle, risk and behavioural
factors show significant difference with the gender. The F value for social (21.125), economic
(16.547) and lifestyle (15.718) factors are highly significant; the F value for behavioural factors
is 11.382 and risk factors is 4.729 Clark and Strauss (2008). The psychological factor does not
show any significant difference. Hence the hypothesis states that there would exist significant
difference among the gender between factors influencing investment decisions is partially
accepted.

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 AEIJST - January 2017 - Vol 5 - Issue 01 ISSN - 2348 - 6732

Table-2 Step-Wise Multiple Regression Analysis On Risk And Investors

Investment in Equity Shares
Details regarding
R R 2 Ad. R 2 SE F Sig
contributed variable
Behavioural .595 .354 .352 3.501 171.010 .000
Lifestyle .673 .453 .449 3.228 128.708 .000
Locus Of Control .690 .476 .471 3.164 93.853 .000
Social .696 .485 .478 3.142 72.699 .000

Table- 2 (a)

Details regarding
B SE Beta T Sig
contributed variable

(constant) 14.212 1.779 7.989 .000

.595
Behavioural .619 .047 13.077 .000

Behavioural .401 .052 .385 7.634 .000

Lifestyle .384 .051 .378 7.495 .000

Behavioural .311 .057 .299 5.478 .000

Lifestyle .363 .051 .358 7.188 .000
Locus of control .182 .049 .181 3.696 .000
social .097 .042 .107 2.306 .000

The obtained Adjusted R2 value is found to be 0.352, which means that the model explains
35.2% of variance is influenced by behavioural factors. In addition, Beta value informs how
much each of the criterion variables included in the model contributed to the explanation of
the dependent variable.
The specified regression equation takes the following form:
S = + 1 (BH) + 2 (LS) + 3 (LOC) + 4 (S) Therefore, equation comes as,
Investors Behaviour = 14.212 + 0.595 (BH) + 0.378 (LS) +0.181(LOC) +0.107(S)
Beta value of most contributed variable Behaviour is 0.563. The obtained t value
13.007 is significant. Hence, there would exist significant relationship between investors
behaviour and the amount of risk considered while investing in Equity Shares is accepted.
From the table it could be noted that the lifestyle, Locus of control and social factors also
contribute to the investors in deciding to invest in Equity shares. Finke and Huston (2003).

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 AEIJST - January 2017 - Vol 5 - Issue 01 ISSN - 2348 - 6732

Table-3 Step-Wise Multiple Regression Analysis On Risk And Investors

Investment In Mutual Funds

Details
regarding
R R 2 Ad. R 2 SE F Sig
contributed
variable

Lifestyle .701 491 .488 3.227 198.569 .000

Behavioural .743 .551 .547 3.036 126.034 .000

Economic .752 .566 .560 2.994 88.713 .000

TABLE- 3 (a)

Details regarding
contributed B SE Beta T Sig
variable

(constant) 9.536 2.000 4.769 .000

Lifestyle .739 .052 .701 14.091 .000

Lifestyle .509 .066 .483 7.734 .000

Behaviour .346 .066 .329 5.266 .000

Lifestyle .462 .067 .438 6.844 .000

Behaviour .266 .072 .253 3.722 .000

Economic .167 .064 .164 2.620 .009

From table 3 the obtained Adjusted R2 value is found to be 0.488, which means that the model
explains 48% of variance is influenced by lifestyle factors. In addition, Beta value informs how
much each of the criterion variables included in the model contributed to the explanation of
the dependent variable.
The specified regression equation takes the following form:
S = + 1 (LS) + 2 (BH) + 3 (ECO) Therefore, equation comes as,
Investors Behaviour = 9.536 + 0.701 (LS) + 0.329 (BH) +0.164(ECO)
Beta value of most contributed variable Life style is 0.701. The obtained T value
14.091 is significant. Hence, the hypothesis stated that there would exist significant

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 AEIJST - January 2017 - Vol 5 - Issue 01 ISSN - 2348 - 6732

relationship between investors behaviour and the amount of risk considered while investing in
Mutual funds is accepted.
Correspondence Analysis Between Investors Age Group And Their Willingness To Accept
Risk In Investment
The table shows the relationship between the different age group of the investors and
their willingness to take risk is analysed through the correspondence analysis. Chi- Square
value is 392.770 is found to be highly significant, which states that there exist significant
association between the investors age group and their willingness to accept risk in
investment is accepted.
Demographic factors Chi Square Sig
Age 25.679 .001
**Significant at 0.01 level, * Significant at 0.05 level, NS- not significant

From the chart it is observed that the respondents in the age group of 60 years fall under the
low- risk category. Respondents who are in the age group between 31-40 years are moderate
risk takers and respondents in the age group between 21-30 41-50 and 51-60 years are high-
risk takers while making investment decisions. The people in the age group between 21-30
years, 41-50 years and 51-60 years are high- risk takers.
Findings
The investment decision of the investors varies with gender, the social, behavioural,
economical, the willingness to take risks and the lifestyle are major contributing factors for an
investor in deciding investment irrespective of the gender.
All the factors such as information source, Locus of control, social, behavioural,
economical, and risk factors and the lifestyle of the investor contributes significantly in
influencing investment decision in the age group between (21-30/31-40/41-50/51-60>60)
years. The investors age group is not influenced by the psychological factor.
Considering upon equity shares, the behavioural factors influence more on risk when
investors take the decisions in investing in long-term equity shares. The social, Locus of
control and lifestyle factors influences the investors to invest in equity shares. Barnewall
(1987).

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 AEIJST - January 2017 - Vol 5 - Issue 01 ISSN - 2348 - 6732

As far as Mutual funds are concerned, the lifestyle factors influence more on risk when
investors take decisions in investing in long-term Mutual funds. It is also found that the
behavioural and economic factors also influence the investors to invest in Mutual funds.
The investors who are above the age group of 60 years are low risk takers. Investors in the
age group between 21and 30 years and between 41and 60 years are high- risk takers as
young investors tend to buy assets with price appreciation potential. Since they have many
years for the asset to appreciate, the investors generally select the riskiest investments.
Considering investors in the age group between 41 and 60 years, as their account balance
increases, they slightly select riskier investment. Investors in the age group between 31and 40
years are moderate risk takers.
Implications

Based on the research findings, it indicates that economic condition and frame of references
influence investors decision-making behaviour. While selecting any financial avenue they also
expect benefits like, safety and security, getting periodic return or dividends, high capital gain,
secured future, liquidity, easy purchase, tax benefit, meeting future contingency and so on.
The first aspect that needs to be developed is a well-organized delivery system by
understanding the investors financial expectations out of investment. It is found that
investors with various asset levels do show a significantly different preference to market
selection. It could be suggested that investors prefer to make investment among the
companies with high credibility, larger in size, high cash/stock dividends and high stock price
or high risk with high return and simple and clear procedure. So the customers could be
informed about the various choices of investments their facts, data, knowledge and to provide
detail benefits of various investment avenues such that it becomes easy for the investors to
select the investment which satisfies his/her financial needs.
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