A STUDY ON RISK DISPOSITION OF THE INVESOR

WITH SPECIAL REFRENCE TO

NIRMAL BANG SECURITIES PVT.LTD

PROJECT REPORT

Submitted to the

UNIVERSITY OF MADRAS

In partial fulfillment for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted by

K.SRIKRISH

Register No: MB 13050

Under the Guidance of

Ms.V.Uma Maheshwari

Assistant Professor

GURU NANAK COLLEGE, VELACHERY

CHENNAI 600042

APRIL 2015
 DECLARATION

I, K.Sri Krish , Reg No : MB13050 , final year MBA Student of Guru Nanak
College, has done a project report for a period of Three months from December
2014 to March 2015. The project title is “A STUDY ON RISK DISPOSITION
OF INVESTOR’’ with special reference to NIRMAL BANG PVT LTD. I
declare that this is my original work and has not been submitted to any other
University or institute for award of any other Diploma or Degree.

Place: CHENNAI K.SRIKRISH

Date: Reg no: MB13050

 BONAFIDE CERIFICATE

This is to certify that project report entitled “A STUDY ON RISK

DISPOSITION OF INVESTORS” is a bonafide record of work carried out by
K.SRIKRISH (Reg No : MB13050)Under my guidance and supervision, in
partial fulfillment of the requirements for the award of the degree of MASTER OF
BUSINESS ADMINISTRATION, of the UNIVERSITY OF MADRAS.

Place: Chennai Project Guide

Date: Ms. V. Uma Maheswari

 GURU NANAK COLLEGE

DEPARTMENT OF MASTER OF BUSINESS ADMINISTRATION

This is to certify that the project entitled

“A STUDY ON “RISK DISPOSITION OF THE INVESTOR”

Is a bonafide record of work done by

K.SRIKRISH

(Register No: MB 13050)

Of MBA during the year 2014-2015

DR.M.K.SHAKILA

Director -MBA
 ACKNOWLEDGMENT

I take this opportunity to thank our principal DR. M. SELVARAJ. M.Sc, Ph.D.,
who encouraged me throughout to do this project.

I extend my hearty thanks to DR. GUNITA ARUN CHANDHOK, M.Com,

B.Ed, M.Phil, M.B.A, Ph.D .for her continuous motivation.

I sincerely thank the Director, DR M.K. SHAKILA, M.B.A., M.Phil., Ph.D, who
encouraged me to precede a head with the work and offered many invaluable
suggestions for the betterment of this project and there by acting as a constant
source of encouragement.

I would also like to thank my guide Mr.P.S.Sridharan/Ms.V.Umamaheshwari/ Ms.Chitra

Kesavan/ Ms.T.Lakshmi Pradha

who motivated and guided me for the successful completion of the project work
.Words are not enough to thank her for sacrificing her precious time in helping me.

Finally, I thank all my family members and friends who stood by me throughout
my course.

K.SRIKRISH
 CONTENTS

Chapter No Title Page No

I INTRODUCTION

1.1 Introduction of the study 1

1.2 Need for the study 3

1.3 Scope of the study 4

1.4 Objective of the study 5

1.5 Limitations of the study 6

II BACK GROUND OF THE STUDY

2.1 Industry profile 7

2.2 Company profile 13

2.3 Operational Definition 16

2.4 Review of literature 23

III RESEARCH METHODOLOGY 33

IV DATA ANALYSIS AND INTERPRETATION 37

V FINDINGS,SUGGESTIONS
ANDCONCLUSION

5.1 Findings 98

5.2 Suggestions 101

 5.3 Conclusion 102

Bibliography 103

Annexure 105

LIST OF TABLES AND CHARTS

Page
no
Table Title
no:

4.1 Age wise classification of the respondents 37

4.2 Educational qualification of the respondents 39

4.3 Occupation of the respondents 40

4.4 Investment preference of the respondents 42

4.5 Share preference of the respondents 44

4.6 Risk preference in securities 46

4.7 Share trading experience 48

4.8 Basis of investment of respondents 50

4.9 Level of satisfaction of respondents 52

4.10 Protection by SEBI 54

4.11 Source of investment 56

4.12 Most beneficial investment 58

4.2.1 Significant association between education and most beneficial investment 60

4.2.2 Significant association between the education and share preference 63

4.2.3 Significant association between the education and source of investment 66

4.2.4 Significant association between education and basis of investment 69

4.2.5 Significant association between education and risk preference of securities 72

4.2.6 Significant association between occupation and basis of investment 75

4.2.7 Significant association between occupation and risk preference of 78

securities

4.3.1 Significant difference between return expectation and basis of investment 81

4.3.2 Significant difference between the risk disposition and risk preference in 84
securities

4.3.3 Significant difference between return expectation and risk preference in 86

securities

4.3.4 Significant difference between the return expectations and share trading 88
experience

4.3.5 Significant difference between risk disposition and share trading 90

experience

4.3.6 Significant difference between risk disposition and the share preference of 92
investor

4.3.7 Significant difference between basis of decision and the share preference 94
of the investor

4.3.8 Significant difference between investment preference and the basis of 96

decision of the investor.
 INTRODUCTION

The extent to which an investor is willing to take risk is termed as risk disposition. The needs,
beliefs, perceptions and their attitude generally vary for various types investors. While some
don’t even hesitate to pledge their personal belongings like gold, land etc to invest some
investors are very cautious when it comes to their investment. Those types of investors only
invest from their savings or their monthly income. They also go one step further by having a
suitable backup when their investment decision goes south. Mostly these investors invest using
their monthly earnings. However the quantum of investment for both the investment vary
drastically. While the first category of investors invest a large sum of money, the second
category however invest very small amount of money. While the first category of investors can
be grouped under speculators, the second category are regular investors. The first category of
investors aim for short term return while the second category investors aim for long term returns.
The ideal instrument for the speculators would be derivatives while for the second category of
the investors debt or equity of the Nifty Fifty companies. In general the investors make their
decision as per the market sentiments. In fact they move along with the flow of the market, only
the risk taking aspect varies for various individuals. In general the forces that act as drive for an
investor to make huge investment in turn makes him a gambler

1. Gamble: “To play at any game of chance for stakes. To stake or risk money, or anything
of value, on the outcome of something involving chance.”
2. Invest: “To put money to use, by purchase or expenditure, in something offering
profitable returns.”

Over many centuries the primary objective of any investor in whatever be his investments was
to maximize his returns. Returns are of two types one is the return that an investor gets in the
form of interest and the next is the return of the principal amount itself. Investments likewise are
of various types, they include investments in Land, fixed deposit, real estate, share market, gold
bullion, jewellery etc. However in the modern times the only source of investment that has
caught everybody’s attention is the investment in the share market. In share market the concept is
very rudimentary Higher the risk Higher the return and vice versa.
 Most investors make their decision on the basis of market, fundamental & technical analysis,
market news, broker’s advice or even their gut sense. This study aims at finding the risk
disposition of the investors
 NEED FOR THE STUDY

Increasing number of people are relying on stock market since they have made very huge
investment. As a matter of fact investment in the share market has become one of the most
preferred sources of investment. While people with huge risk appetite tend to invest in a risky
security to reap more return, there are also people who invest in standard earners like debt
instrument to earn a stable return

This study aims at studying the risk disposition of the investor with special reference to nirmal
bang securities pvt.ltd to find the overall risk appetite of the investors. This segment of the
investors might as well give the overall picture of the market.
 SCOPE OF THE STUDY

With the wide clientele base Nirmal Bang has emerged as one of the leading stock broking firm
in India. This study aims in studying the risk disposition or the risk appetite of the equity
investors. Various investors take various level of risk. This study’s sole purpose is to study the
risk appetite so the findings may be used by share traders and future researchers alike for
assessing the risk appetite of the investors. By knowing the risk appetite of the investors the
brokers can offer their services according to the preferences of the investors.
 OBJECTIVES OF THE STUDY

Primary Objective:

1. To find the risk disposition of the equity investor with special reference to Nirmal
Bang securities Pvt.Ltd.

Secondary Objective

1. To find the relationship between the investors risk appetite and their expected return
equity investment.
2. To find the investor’s basis of decision.
3. To find whether an investor relies more on fundamental analysis or technical analysis.
4. To deduce the risk-return relationship.
 LIMITATIONS OF THE STUDY

1. The respondents may not have expressed their true intentions which may lead to some
discrepancies in future analysis.
2. The study was made only with a limited number of samples.
3. The study was made only for a limited period of time, so very detailed analysis was not
possible.
4. Stock market is a very volatile phenomenon, an investor who is willing to take high risk
might eventually windup being a risk averse person and vice versa. So this study may not
be conclusive perennially.
 INDUSTRY PROFILE

Major Indices in India

These are few popular indices in India.
• BSE Sensex
• BSE Midcap
• BSE-100
• BSE-200
• BSE-500
• S&P CNX Nifty
• CNX Nifty Junior
• S&P CNX Defty
• CNX Midcap
• S&P CNX 500

Trading System
Futures and options are standardized contracts and like shares, they are traded on exchanges.
Markets around the world can be classified into two main types based on the methods of booking
a trade namely an “open outcry” market and the “electronic” market. Open outcry is the way of
communication between professionals on an exchange, which involves shouting, or using hand
signals to transfer information about buy and sell orders. In an open outcry markets, usually the
trading takes place in a large hall known as “pit” where members are present and contracts are
traded through continuous bids and offers. Thus, such a market brings together the buyers and
sellers (through their brokers) on a platform for trading. In case of electronic trading, there are
screen based broker dealing terminals, instead of the trading pit. Futures and options trading in
India is electronic in nature, with the bids and offers, and the acceptance being displayed on the
terminal continuously. The Trading system of BSE is called Derivatives Trading & Settlement
System (DTSS) and that of NSE is called NEAT-F&O trading system. Both these trading
systems provide a fully automated screen-based trading for index futures, index options, stock
futures and stock options. These trading systems support an order driven market and
simultaneously provide complete transparency of trading operations. Derivative trading is similar
to that of trading of equities in the cash market segment. Both the exchanges have developed
software for the F&O market to facilitate efficient and transparent trading in futures and options
instruments.

Entities in the trading system

Broadly there are four entities in the trading system

• Trading Members
• Trading cum Clearing Members
• Professional Clearing Members and
• Participants

Trading Members
They are members of Stock Exchanges. They can trade either on behalf of their clients or on
their own account. The exchange assigns a trading member ID to each of its trading member. A
trading member can have more than one user. The number of users allowed for each trading
member is decided by the exchange from time to time. A user must be registered with the
exchange where he is assigned a unique user ID.
The unique trading member ID is common for all the users of a particular trading member.
Therefore, it functions as a reference for all user of a particular tradingmember. Trading member
is responsible to maintain adequate control over persons having access to the firm’s User IDs.

Trading cum Clearing Members

They are member of Stock exchanges. They can trade and clear their own trades as well as clear
the trades of their associate trading members.
Professional Clearing Member
Professional clearing member clears the trades of his associate Trading Member and institutional
clients. He need not be a member of an exchange. He is a member of Clearing Houses/Clearing
Corporations who facilitate settlement of trades done on stock exchanges. They could be a
broker or custodian registered with SEBI. They carry out risk management activities and
confirmation/inquiry of trades through the trading system.

Participants
Participant is a client of trading members like financial institutions. They may trade through
various trading member but settle through a single clearing member.

Market Timing of Equity and Derivative segment

Trading of the equity and derivatives segment takes place on all working days of the week
between 9:15 am and 3:30 pm. The derivatives contracts expire on the last Thursday of each
contract maturity month.

Corporate Hierarchy

In the Futures and options trading software, trading member will have a provision of defining the
hierarchy amongst users of the system. This hierarchy comprises:
• Corporate Manager
• Branch Manager and
• Dealer

Corporate Manager
As a user, it is the highest level in a trading firm. Corporate Manager can perform all the
functions such as order and trade related activities, receiving reports for all branches of the
trading member firm and also all dealers of the firm. Along with this he can also define exposure
limits for the branches of the firm. This facility is available only to the corporate manager.
Branch Manager
As a user, it is placed under the corporate manager. Branch Manager can perform and view
order and trade related activities for all dealers under that branch.

Dealer
Dealer is at the lowest level of the user hierarchy. He can only view his own orders and trades
and does not have access to information on other dealers under either the same branch or in other
branches.

Client Broker Relationship

A trading member would be responsible for various compliance related activities including
Know Your Client (KYC) form, execution of Client Broker agreement, timely execution of
orders given by clients, collection of adequate margins, maintain separate client bank account for
segregation of client money, ensure timely pay-in and pay-out of funds, timely issue of contract
notes, resolve clients’ complaints, sending periodical statement of accounts, maintain unique
clientcode,etc..

Clearing Members
Broadly speaking there are three types of clearing members

1. Self clearing member: They clear and settle trades executed by them only, either
on their own account or on account of their clients.
2. Trading member–cum–clearing member: They clear and settle their own trades
as well as trades of other trading members.
3. Professional clearing member: They clear and settle trades executed by trading
members.
 4. Both trading-cum-clearing member and professional clearing member are
required to bring in additional security deposits in respect of every trading
member whose trades they undertake to clear and settle.

Clearing Banks

Funds settlement takes place through clearing banks. For the purpose of settlement all clearing
members are required to open a separate bank account with Clearing Corporation
designatedclearing bank for F&O segment.

Clearing Member Eligibility Norms

Networth of at least Rs.300 lakhs. The networth requirement for a Clearing Member who clears
and settles only deals executed by him is Rs. 100 lakhs. Deposit of Rs. 50 lakhs to clearing
corporation which forms part of the security deposit of the Clearing Member. Additional
incremental deposits of Rs.10 lakhs to clearing corporation for each additional TM, in case the
Clearing Member undertakes to clear and settle deals for other TMs.

Clearing Mechanism

The first step in clearing process is calculating open positions and obligations of clearing
members. The open positions of a CM is arrived at by aggregating the open positions of all the
trading members (TMs) and all custodial participants (CPs) clearing though him, in the contracts
which they have traded. The open position of a TM is arrived at by adding up his proprietary
open position and clients’ open positions, in the contracts which they have traded. While entering
orders on the trading system, TMs identify
orders as either proprietary (Pro) or client (Cli). Proprietary positions are calculated on net basis
(buy-sell) for each contract and that of clients are arrived at by summing together net positions of
each individual client. A TM’s open position is the sum of proprietary open position, client open
long position and client open short position.
Settlement Mechanism

In India, SEBI has given the stock exchanges the flexibility to offer:

a) Cash settlement (settlement by payment of differences) for both stock options and stock
futures; or
b) Physical settlement (settlement by delivery of underlying stock) for both stock options
and stock futures; or
c) Cash settlement for stock options and physical settlement for stock futures; or
d) Physical settlement for stock options and cash settlement for stock futures.
 COMPANY PROFILE

INTRODUCTION

Nirmal Bang Securities Pvt Ltd (Nirmal Bang) is amongst the top full-servicebroking firm
established in the year 1989. It started as a small localised player and ultimately transformed into
a diverse group in a span of 20 years. The company offers comprehensive range of products and
services to meet the financial needs of it’s investors. It is solidly capitalized to meet the demands
of retail clients and sufficiently caring to ensure that service is not compromised.

History

The Nirmal Bang group of companies were founded by NirmalBang,Dilip Bang and Kishore
Bang. The group always believed in developing retail client network and had wide network of
clients all over India. It started up the DP services and also added broking into commodities and
insurance advisory services to diversify into allied activities. Thus Nirmal Bang became a
corporate member of BSE with three membership rights. The company, besides broking isa
depository participant with NSDL and CDSL. Bang Equity Broking Private Limited was formed
in the year 1997. This company also became the corporate member of the BSE with three
membership rights in the year 1999. The Group was thus the first in the history of the Bombay
Stock Exchange to acquire six membership rights ofthe Exchange.

Major Strengths

1. Professionally driven
Nirmal Bang is a professionally driven organization having people with diverseprofessional
backgrounds. The blend of experience, skill and dedication is sharedwith all clients. The group
has more than 300 well-experienced and efficient staffto cater to the large clientele base.
2. Approach
The company focuses on adequate and thorough research on local and world-widedevelopments,
balancing these with the astute discovery of intrinsic values,synergies and growth.

3. Aim
It aims at maximizing returns of its investors depending upon the investmentmotive.

4. Commitment
The Company is committed in providing service at par excellence.

Major Offerings
Nirmal Bang currently offers the full stock brokerage services in line with the overall strategy of
the group. Some of the major offerings include the following:

1. Trading in Equities & Derivatives

Equity trading is offered to retail clients through multiple channels including online rating in the
BSE and the NSE, for cash & derivatives segments. Live quotes, market commentary and major
news are also offered through its website. This segment contributes a major portion of its
revenue.

2. Trading in Commodities
The group company is a member of India’s premier commodity exchanges, namely the Multi
Commodity Exchange of India Ltd (MCX), the National Commodity & Derivatives Exchange
Ltd (NCDEX).

3. Online Trading
The company offers an online trading portal which is developed and maintained by Financial
Technologies (India) Ltd.
4. Depository
Nirmal Bang is a depository participant of NSDL and CDS(I)L. It offers depository services
through an online platform provided by Apex Softcell.

5. IPO
Nirmal Bang is also involved in the marketing of IPO’s. It even offersinformation about
forthcoming IPO’s, open issues, new listing etc.

Reach & Access

Nirmal Bang has pan India presence with offices and branches spreadacross all major cities and
states. Its wide spread network is further supported by franchisees and more than 200 sub
brokers. As on Oct 2007, the company had 180 offices, 242 sub brokers and more than 300
employees.

The company has tie ups with some of the leading IT solution providersfor constant support and
development of its technology set up. It has about50 VSATs that enhance connectivity across
several branches and terminals. Some of its technology partners include Financial Technologies,
Apex Softcell and Reliable Software.

Performance
During the first 10 months of CY07, Nirmal Bang reported growth across allits major businesses
namely; equity and derivative reporting a growth of 200%and 75% and commodity reported a
growth of 50% respectively. Number of terminals went upto 800 in 2007. Similarly number of
offices and sub-brokersalso underwent a substantial rise.The company added 15,000 domestic
customer accounts in 2007 ascompared to 3,000 in the previous year. The E-broking business
also showed100% growth and it added about 300 e-broking accounts.

Future Plans
Nirmal Bang plans to enhance its FII and institutional client base. Thecompany is further
planning to enhance its existing service portfolio byintroducing investor advisory, portfolio
management services and merchantbanking services in the near future.
OPERATIONAL DEFINITIONS

PROSPECT THEORY

Prospect theory was propounden by Khaneman and Tversky which states that investors
become risk averse after winning and risk hungry after losing. This is an corollary to the
Disposition Effect which states that investors tend to sell the winning stocks too soon to realize
gains and hold on to the losing stocks for too long to mitigate losses.

STOCK MARKET

A stock market or equity market is the aggregation of buyers and sellers (a loose network
of economic transactions, not a physical facility or discrete entity) of stocks(also called shares);
these may include securities listed on a stock exchange as well as those only traded privately.

A stock exchange is a place to trade stocks. Companies may want to get their stock listed
on a stock exchange. Other stocks may be traded "over the counter", that is, through a dealer. A
large company will usually have its stock listed on many exchanges across the world. Exchanges
may also cover other types of security such as fixed interest securities or indeed derivatives. In
INDIA the two major stock exchanges are Bombay Stock Exchange(One of the oldest stock
exchange in India whose Index is SENSEX consisting of thirty companies) and another stock
Exchange is National Stock Exchange( One of the recent developments established in the year
1992 whose index is NIFTY consisting of fifty companies). It is only through these two stock
exchange the investment in share market takes place.

The various types of financial instrument in the stock market are Equity, debt ,mutual
funds, derivatives(subdivided into options and futures).
1. Equity: Investment in equity symbolise the investment in the equity shares and the preference
shares of the company. They are the owners of the company.

2. Debt:Debt includes investment in the debentures of the company.

3. Mutual Funds: This is a professionally owned investment which pools money from various
investors to purchase securities.

4. Derivative: This is a relatively new investment which derives it’s value from it’s underlying
securities. Underlying security may be in the form of commodity,equity,index like BSE and
NSE. This is also a very risky investment. Further derivative is subdivided into Futures
andOptions. Futures are the Exchange traded forward contract. Forward contract is a tailor made
contract between two parties where both party agree to buy a specific quantity at a specific price
in a specified future date.

Option contract gives the right but not the obligation to buy or sell a security at a specified future
date. The holder of the right has to pay the premium to other party Writer or seller.There are two
types of option call option and put option.

Types of Investors

The following classes of investors are not mutually exclusive:

Retail investor

1. Individuals gambling in games of chance.

2. Individual investors (including trusts on behalf of individuals, and umbrella companies

formed by two or more to pool investment funds)

3. Angel Investor (Individuals and group).

4. Sweat Equity Investor.

Institutional investor

1. Venture capital funds, which serve as investment collectives on behalf of individuals,

companies, pension plans, insurance reserves, or other funds.

2. Businesses that make investments, either directly or via a captive fund

3. Investment trusts, including real estate investment trusts

4. Mutual funds, hedge funds, and other funds, ownership of which may or may not be publicly
traded (these funds typically pool money raised from their owner-subscribers to invest in
securities)

5. Sovereign wealth funds

6. Investors might also be classified according to their styles. In this respect, an important
distinctive investor psychology trait is risk attitude.

Types of Risk

Interest Rate Risk

Interest rate risk is the possibility that a fixed-rate debt instrument will decline in value as a
result of a rise in interest rates. Whenever investors buy securities that offer a fixed rate of return,
they are exposing themselves to interest rate risk. This is true for bonds and also for preferred
stocks.

Business Risk

Business risk is the measure of risk associated with a particular security. It is also known as
Unsystematic Risk and refers to the risk associated with a specific issuer of a security. Generally
speaking, all businesses in the same industry have similar types of business risk. But used more
specifically, business risk refers to the possibility that the issuer of a stock or a bond may go
bankrupt or be unable to pay the interest or principal in the case of bonds. A common way to
avoid unsystematic risk is to diversify - that is, to buy mutual funds, which hold the securities of
many different companies.
CreditRisk

This refers to the possibility that a particular bond issuer will not be able to make expected
interest rate payments and/or principal repayment. Typically, the higher the credit risk, the higher
the interest rate on the bond.

Taxability Risk

This applies to municipal bond offerings, and refers to the risk that a security that was issued
with tax-exempt status could potentially lose that status prior to maturity. Since municipal bonds
carry a lower interest rate than fully taxable bonds, the bond holders would end up with a lower
after-tax yield than originally planned.

Call Risk

Call risk is specific to bond issues and refers to the possibility that a debt security will be called
prior to maturity. Call risk usually goes hand in hand with reinvestment risk, discussed below,
because the bondholder must find an investment that provides the same level of income for equal
risk. Call risk is most prevalent when interest rates are falling, as companies trying to save
money will usually redeem bond issues with higher coupons and replace them on the bond
market with issues with lower interest rates. In a declining interest rate environment, the investor
is usually forced to take on more risk in order to replace the same income stream.

Inflationary Risk

Also known as purchasing power risk, Inflationary risk is the chance that the value of an asset or
income will be eroded as inflation shrinks the value of a country's currency. Put another way, it
is the risk that future inflation will cause the purchasing power of cash flow from an investment
to decline. The best way to fight this type of risk is through appreciable investments, such as
stocks or convertible bonds, which have a growth component that stays ahead of inflation over
the long term.
Liquidity Risk

Liquidity risk refers to the possibility that an investor may not be able to buy or sell an
investment as and when desired or in sufficient quantities because opportunities are limited. A
good example of liquidity risk is selling real estate. In most cases, it will be difficult to sell a
property at any given moment should the need arise, unlike government securities or bluechip
stocks.

Market Risk

Market risk, also called systematic risk, is a risk that will affect all securities in the same manner.
In other words, it is caused by some factor that cannot be controlled by diversification. This is an
important point to consider when you are recommending mutual funds, which are appealing to
investors in large part because they are a quick way to diversify. You must always ask yourself
what kind of diversification your client needs.

Reinvestment Risk

In a declining interest rate environment, bondholders who have bonds coming due or being
called face the difficult task of investing the proceeds in bond issues with equal or greater
interest rates than the redeemed bonds. As a result, they are often forced to purchase securities
that do not provide the same level of income, unless they take on more credit or market risk and
buy bonds with lower credit ratings. This situation is known as reinvestment risk: it is the risk
that falling interest rates will lead to a decline in cash flow from an investment when its principal
and interest payments are reinvested at lower rates.

Social/Political / legislative Risk

Risk associated with the possibility of nationalization, unfavorable government action or social
changes resulting in a loss of value is called social or political risk . Because the U.S. Congress
has the power to change laws affecting securities, any ruling that results in adverse consequences
is also known as legislative risk.
Currency/Exchange Rate Risk

Currency or exchange rate risk is a form of risk that arises from the change in price of one
currency against another. The constant fluctuations in the foreign currency in which an
investment is denominated vis-à-vis one's home currency may add risk to the value of a security.

American investors will need to convert any profits from foreign assets into U.S. dollars. If the
dollar is strong, the value of a foreign stock or bond purchased on a foreign exchange will
decline. This risk is particularly augmented if the currency of one particular country drops
significantly and all of one's investments are in that country's foreign assets. If the dollar is weak,
however, the value of the American investor's foreign assets will rise.

Understandably, currency risk is greater for shorter term investments, which do not have time to
level off like longer term foreign investments.

Market Participants

There are broadly three types of participants in the derivatives market - hedgers, traders (also
called speculators) and arbitrageurs. An individual may play different roles in different market
circumstances.

Hedgers
They face risk associated with the prices of underlying assets and use derivatives to reduce their
risk. Corporations, investing institutions and banks all use derivative products to hedge or reduce
their exposures to market variables such as interest rates, share values, bond prices, currency
exchange rates and commodity prices.

Speculators
They try to predict the future movements in prices of underlying assets and based on the view,
take positions in derivative contracts. Derivatives are preferred over underlying asset for
speculation purpose, as they offer leverage, are less expensive (cost of transaction is generally
lower than that of the underlying) and are faster to execute in size (high volumes market).
Arbitrageurs
Arbitrage is a deal that produces profit by exploiting a price difference in a product in two
different markets. Arbitrage originates when a trader purchases an asset cheaply in one location
and simultaneously arranges to sell it at a higher price in another location. Such opportunities are
unlikely to persist for very long, since arbitrageurs would rush in to these transactions, thus
closing the price gap at different locations.
 REVIEW OF LITERATURE

In the article published by Mohan.S.Kumar and AvinashPersaud in 2001 (Pure contagion

and investors shifting risk appetite) (IMF Working paper) (WP/01/134)

Both the researchers make use of the research article published by Kindelberger in 1978 to
describe the process of contagion that determine the risk appetite of a particular individual ”
Insiders and outsiders determine the overall risk appetite of a particular economy. The insiders
are the persons who are very well aware of the situation prevailing in the company or even the
economy. They sell out their holdings before a crisis. So at this point the outsiders who are
unaware of the happenings in the economy or the company buy the scrips from the insider at the
highest possible price. At this point the overall risk appetite increases”

In the article published by Brenda Gonzalez-Hermosillo in 2008(Investors risk appetite and

global financial market conditions) (IMF Working Paper)(WP/08/85)

“When the investors appetite for the risk increases they generally buy more risky assets thereby
increasing the value of such securities. On the contrary when their risk appetite decreases they
reduce their investments in risky assets thereby reducing the overall value of risky securities. In
this case they either sell their securities that are risky from their portfolio or avoid buying various
types of risky securities. This type of contagion is called PURE CONTAGION. These events
determine the overall risk appetite for the investors in a particular economy. They make their
investment choices by looking at a similar economy. If that economy performs well they invest
in the similar economy or else they don’t make the investment. Crisis in one country may make
their investors to reduce the risk appetite in another country with similar political,economic
structure

In the article published by Brenda Gonzalez-Hermosillo in 2008(Investors risk appetite and

global financial market conditions) (IMF Working Paper) (WP/08/85)
The author makes use of the research article published by Giorgio and Valdes ( Risk, Liquidity
and Economic outlook. Business Economics January 2000, pp 20-24) “Generally a string of
positive returns will make the investors to increase their risk appetite. However a string of
negative returns will make the investors to reduce their risk appetite. This is a phase of
experimental learning by the investors wherein they learn from their past mistake and decide
their risk disposition according to that. In short in a risk averse environment, it may that the short
term traders respond to the deteriorating environment by exiting the riskier environment by
widening the bid offer spreads. This could in turn state the Heuristic behavior of the investors
with respect to risk disposition.

FenghuaWen, Zhifang He, Xu Gong, and Aiming Liu,(Investors’ Risk Preference

Characteristics Based on Different Reference Point) Discrete Dynamics in Nature and
Society, vol. 2014, pp. 1–9, 2014.

Many studies suggest that investors risk preference or the risk aversion changes over time.
Investors generally make their decisions in a uncertain environment, in that case the prior
outcome in all strata influence the risk disposition of the investors. The past gains or losses
influence the risk disposition of the investors. Early studies mainly focused on disposition effect
which reflects the tendency to sell assets that have gained value and keep assets that have lost
value. In general investors loathe losses and they are willing to greater risk to avoid further
losses. Using a set of transaction records from Taiwan Futures Exchange, Huang and Chan
examined risk taking behavior subject to prior outcomes and showed that the degree of morning
gains/losses nonlinearly influences afternoon risk taking for all trader types.

In the article published N.Barberis and W.Xiong 2012 (Realization Ulility) ( Journal
OfFinanacial Economics 104 (2012) 251-271)

Given a choice between a sure gain and a bet offering either a larger gain or a smaller one,
people prefer the sure gain. If a person is holding a stock that has gone up in value since
purchase. He or She could sell it (that would give you a sure gain); or He or She could hold on to
it (which will lead to either a larger gain or a smaller one). Since Prospect Theory says you will
prefer the sure gain, it seems that it predicts that He or She will want to sell a stock that has risen
in value since purchase – just as people do in reality. Given a choice between a certain loss and a
bet offering either a larger loss or a smaller one, people prefer the bet. If a person is holding a
stock that has gone down in value since purchase. He or She could sell it (that would give you a
certain loss); or He or She could hold on to it (which will lead to either an even larger loss, or a
smaller one). This is what the prospect theory states and the investors risk disposition varies
according to this.

In the article published by Kahneman and Tversky 1979(Prospect Theory) ( Institute of

empirical research in economics university of Zurich) (Working Paper Series ISSN 1424-
0459)
Behavioral scientists made a research on the investors risk appetite and their findings were stated
herein “Investors evaluate the outcomes relative to a reference point which incase of stock
investment happens to be the price at which the stocks have been bought. The reference point
divides the outcomes into two regions; Losses occur if the final return is less than the reference
point and gains occur if the final outcome is more than the reference point. Decision Makers
investors frame their choices with respect to potential gains and losses. Secondly they behave as
if evaluating the decision consequences on an S shaped value function, which is concave for
gains and convex for losses. This reflects risk aversion fo r gain region and risk seeking for the
loss region”

KPMG understanding articulating defines risk appetite as

The amount of risk, on a broad level, an organisation is willing to take on in pursuit of value. Or,
in other words, the total impact of risk an organization is prepared to accept in the pursuit of its
strategic objectives.

In a research article published by JuusoLehto 2010 (Risk tolerance and myopic behavior
with special reference to finnish investors) (Master Thesis) (Helsinki School Of Economics)

The researcher makes use of another research article published by S.Benartzi and R.Thaler
1995 (Myopic Loss Aversion and the Equity Premium Puzzle. The Quarterly Journal of
Economics 110, 1, 73-92).Based on both his and their research article he find’s that “Myopic loss
aversion is the combination of the investors high sensitivity of the losses and their tendency to
evaluate their investments frequently. They both tested the myopic loss aversion of the investors
and made some interesting findings. Individuals who evaluated their investments less often were
willing to take more risks than investors who evaluated their investments frequent. Their
decisions vary considerably on how the investments opportunities are described to them and how
frequently they receive their feedback on investment. For instance if the investors original
investment horizon was five years and if they verify the foothold of their investment after one
year then the horizon automatically vary. That is they will hold the investments if the scrip has
rose considerably and sell if it has reduced considerably.”

In a research article published by JuusoLehto in 2010 (Risk tolerance and myopic behavior
with special reference to finnish investors) (Master Thesis) (Helsinki School Of Economics)

The researcher makes use of another research article published byZ.Bodie , A.Kane and
A.Marcus 2003 Life Cycle Investing In Theory And Practice. Financial Analysts Journal
59,1,24-29) .Based on both his and their research article he find’s that “The risk disposition of
the investors are based on a concept called as Regret avoidance, Which states that investors
invest in the stock of blue chip companies than the stock of a new company. If the stock of the
blue chip company has gone down they could blame it on the bad luck. However if they made a
investment in a new company and it’s stocks have gone down then they automatically blame it
on the bad decision. This in turn gives regret to the investors. This concept of regret avoidance
also determines the risk appetite of the investors.”

In a article published by Matt King ( Chief Investment Ofiicer And Managing Director)
2012(Why momentum exists; A perspective investors behavior) (Published In Bell
InvestmentAdvisors : A Momentum For Life 36(6) : 643-60)

The investors tendency to take risk primarily depends on three effect. They are the disposition
effect, Herding Effect, House money effect. The first effect states that investors tend to sell the
winning stock to realize the gain immediately thereby the risk that they are willing to take on a
winning stock is very less. On the other hand incase of losing stocks the investors tend to hold it
for a longer period of time. They have no intention of selling the stocks anytime soon. Thereby
the risks that the investors are willing to take on a losing stocks is considerably high. Herding
effect is rather a simple concept which states that the investors rely on the other investors for
their investment decision. In the 90’s the tech industries were performing very well. So many
investors bought the stocks of the tech industries. Consequently the tech industries collapsed and
the investors once again began investing on bonds and other instruments. When the investors are
playing with the house money they tend to be more aggressive when their recent investment
outcome was very positive. The author makes use of some research article which includes
Solomon Asch, 1956, (Studies of Independence and Conformity: A Minority of Oneagainst
a Unanimous Majority) Psychological Monographs 70: 1-70 and HershShefrin andMeir
Statman, 1985, (The Disposition to Sell Winners Too Earlyand Ride Losers Too
Long:Theory and Evidence) Journal of Finance 40 (3): 777-790.

In a research article published by Thomas Armin and David and Uwe in 2006(
Intergeneration transmission of risk and trust attitude) (Discussion Paper Series IZA DP
No.2380)
Parents who are willing to take more risks and trust others more have children who have the
same risk hungry attitude. Parental investment is a significant predictor of a child investment
decision. If the parents have more risk appetite the child will similarly have the same risk
appetite. They found that the gender of the child does not affect the strength of the transmission,
but find some evidence that family structure matters. Children with fewer siblings have risk
attitudes that are more closely aligned with those of their parents, compared to children in large
families. Similarly, firstborn children are more influenced by the parents’ risk attitudes,
compared to their younger siblings, although this latter effect is only marginally significant.
Interestingly, for trust we find no impact of family size or birth order. We also find evidence in
favor of what one might call “receptive types”. Children who are similar, or receptive to
themother also tend to be similar to the father, and children who are similar to their parents in
terms of risk attitudes also tend to be similar in terms of trust.
Investor Bulletin : Behavioral pattern of the US Investors( Article published by library of
congress federal research division)

Noise trading is one most recent developments in share market wherein the investors blindly
invest in stock without analysing the economic financial quantitative qualitative implications of
the investment that they have made. Noise traders generally take very huge risk as they invest
according to flow in the market. Noise traders overreact to rise and fall of the scrip prices. They
generally sustain only for a short period of time in the market. However there are circumstances
where the noise traders have made very abnormal profit. They have very poor timings and they
generally follow trends. Another characteristic feature of the Noise traders are that they follow
very naïve diversification. Although this wont result in huge loss but however it increases the
risk exposure of the investors.

In a research article published by Elias Alanko2009 ( What drives investors risk appetite:
Empirical evidence from private Finnish Investors) (Helsinki School Of Economics)
(Master Thesis) (Department Of Accounting And Finance)

According to him the investors risk appetite decreases as the age of the investors their savings
that they have made while they were still employed. They want to maintain their current standard
of income and so they tend to be very risk averse once they are retired. However the author
points out that research article published by some of his peers gives a varied result altogether.
That is the risk appetite increased with the increased age. The author states that those researchers
used to survey people who are mostly above 60 years of age, stating that 60 plus individuals are
more heterogenic in their data set suggesting sample bias as one the reason for their result. Some
of the other findings of his research article include that men are more over confident than that of
woman and they tend to take more risk than woman. He also further state that men take more
risks in situation where the risk might not be even rational. Based on the research article
published by Haarala in 2008 Investors tend to take more risks when they are experienced and
less risk when they are inexperienced. Also the researcher points out that person with more
wealth education and income tend to take more risks thatthose without the attributes.
Based on a research article published by Christine Kauffmann ,Martin Weber, Emily
Haisley ( The role of experience sampling and graphical displays of one’s investment risk
appetite)
(Management Science Vol No.59 February 2003, pp. 323-340 ISSN 0025-1909)
The manner in which people acquire knowledge about the risk of the investment product
determine the risk an investor is willing to undertake. There are two ways an investor acquire
knowledge about the risk of an investment product. They are through Description and
Experience. Incase of description the investor will refer the financial statements and ratings that
has been given by the credit rating agencies. If the credit rating is favorable then the instrument
is less risky one on the other hand if the credit rating is poor then the instrument is a very risky
one. Decisions based on description are based on explicitly stated probabilities associated with
the outcomes and decision based on experience are based on through feedback about the
outcomes of the previous decisions or observing outcomes in the market. On the survey that has
been made on the 133 graduates students it was found that 60.4% of the total population made
their decision based on description and 74.1% of the population made their decisionsbased on
experience.

In a research article published by Brad.M.Barber and Terrance Odean in September 2011

(Behavior of individual investors)

Investors generally are of two types. One type of investor feel that their decision is the most
superior one meaning that they personally feel that their success rate is very high. On the other
hand there are certain types of investor who feel that their decision is better than the average lot.
This explains the risk appetite of both the investors. While the former tend to have more risk
appetite than the latter. Ultimately the researcher feel that both the types of investor
underperform than the institutional investor.
In a research article published by Mr.P.Varadarahjan and Dr.P.Vikrraman( The study of
attitudinal behavior of the active market participants towards selection of portfolio in
Karur, Tamilnadu) (Journal Of Contemporary Research In Management October 2010)

Based on their research article it was found that most of the investors make their investment
choices based on intuition and value rather than market news and market condition. Further
majority of the respondent agreed that the pain of losing money is more than joy of gaining
money. Thus they fulfilled prospect theory. Majority of the respondent agreed that they will
regret making very wrong decisions. This also proves the regret theory. Majority of the
respondents agreed that they will not hold a losing investment till it reaches the purchase price.
Thus majority of the investors did not agree to Anchor Theory. Majority of the respondents
agreed that they will make the decisions based on group behavior. Thus they don’t agree with
theHerd Theory also. In general there is a significant relationship between the risk and the return.
The return is proportionate to risk. The above theories in general state the risk appetite of
individuals with respect to Karur district.

In a research article published by Mubeen Ashraf, FahimWaris, Sania Saeed of

Mohammad Ali Jinnah University, Islamabad Pakistan( Disposition effect: Evidence from
the Karachi stock exchange) (European Journal Of Business And Management Vol,6 No.11
2014) (ISSN 2222-1905)

This study investigated the disposition effect, holding period, illiquidity from the Karachi stock
exchange from a period of 2008 to 2012. The results shows that holding period is positively
associated with illiquidity and return. The researchers use various research article to explain the
Disposition effect which in plain sense means that the investors sell the winning stocks too soon
and hold losing stocks too long. This was further explained by Prospect theory which states the
risk appetite of the investors. In which the investors become risk averse after winning and risk
hungry after losing. They tend to hold the losing stock for long with an objective to avoid further
loss. Thereby they are willing to face more risks and they sell winning stocks too soon with an
objective of realizing profit soon. Thereby in this case they become risk averse. The researcher
make of the another article Da Costa Jr, N., Mineto, C., & Da Silva, S. (2008). Disposition
effect and gender. Applied Economics Letters ,Which states that females do not follow the
disposition effect which inturn signifies that they become more risk hungry after winning and
risk averse after losing. This is exactly opposite to the behavior explained in Prospect Theory. In
another research article published by Duque.L.R in 2012. Estimating loss from the disposition
effect. Which states that Disposition effect is more during the bull market than bear market. That
is during Bull phase investors become risk averse for winning stocks thereby selling it and risk
hungry for losing stock thereby holding it vice versa during Bull Phase. Another outcome of
their studies indicate that the disposition effect diminishes with experience which means the
investor become more risk averse to losing stocks and risk hunger to winning stocks.

In a Research article published by Chi.M.Liao in 2013 ( Risk taking begets risk taking :
Evidence from casino openings and investor portfolio) (Job Market Paper)

At the aggregate level, Saunders E.M (1993) (stock price and Wall Street weather in The
American Economic Review). Hirshleifer and Shumway (2003) (Good day sunshine in stock
market and weather) show that changes in mood due to the amount of sunshine on a particular
day can impact the stock market. Kamstra (2003) (Winter Blue: A sad stock market cycle in
The American Economic Review) demonstrate that depression and “winter blues” due to less
sunlight exposure in the winter months can also affect aggregate stock market returns. At an
individual-investor level, Malmendier and Nagel (2011)(Depression babies: Do
macroeconomic experiences affect risk taking? in The Quarterly Journal of
Economics) show that individual experiences of macroeconomic shocks can affect investor risk
taking; those who experienced low stock market performance over their lives are less likely to
invest in the stock market and invest a lower fraction of their liquid assets in stocks if they
participate. Additionally, the alignment of political climate with the political identity of investors
can also affect the portfolio investments and allocations of individuals (Bonaparte et al., 2012)
(.Political climate, optimism, and investment decisions in Working Paper). Increase
in risk aversion appears to be driven by fear, as opposed to standard factors such as wealth or
background risk. The psychology and neuroscience literatures have shown that parts of the brain
show activation in anticipation of monetary gains; activation in these parts of the brain have been
associated with positive emotions such as excitement (Breiter in 2001) (Functional imaging
of neural responses to expectancy and experience of monetary gains and losses.
Neuron). Kuhnen and Knutson (2011) (The influence of affect on beliefs, preferences,
and financial decisions in Journal of Financial and Quantitative Analysis) show that
changes in emotional states have the ability to alter both the beliefs and preferences of subjects’
risk-taking behavior. Further this research article stressed the fact that a person who has gambled
in a casino will double his risk taking attribute in a period of twenty four hours. Even though this
may not hold good from a stock market perspective it can be co-related to certain extent.

To conclude the author point out that “in the portfolios of those investors who are likely to visit
the casino to gamble, relative to those investors who are this paper, we show that individuals’
non-investment risk-taking behavior can affect their willingness to take risks in financial
investments. In particular, we use the initial legalization and opening of commercial casinos in
the U.S. as a natural experiment to show that the opening of a casino results in increased risk
taking not. This study offers the first evidence that exposure to increased risk taking through
casino-type gambling may result in increased financial risk taking, potentially induced by
excitement from the initial risk taking.
 RESEARCH METHODOLOGY

Methodology is an way to systematically solve research problems. It explains the various steps
that are generally adopted by a researcher in studying the research problem with the logic behind
them.

RESEARCH DESIGN

A research design is the detailed blue print used to guide a research study towards it’s
objectives. It helps to collect, measure and analysis of data. The present study seeks to find the
risk disposition of the investors with special reference to Nirmal Bang Securities Pvt.Ltd. The
study also aims to study the return expectations, their basis of decision with various
characteristics like occupation education etc. So this makes this study a descriptive one.

In this survey the design used is descriptive research design. It includes surveys and fact
finding enquiries of different kinds. The major purpose Descriptive research is description of
state of affairs, as it exists at present. The main characteristic of this research is that the
researcher has no control over the variables. The information are collected from the individuals
and analyzed with the help of different statistical tools.

SOURCES OF DATA COLLECTION

The collection of data is considered to be one of the most important aspects in the
research methodology. Both primary and secondary data is used in this study in order to meet the
requirements of the purpose.

PRIMARY DATA

Primary data are those data which are collected fot the first time and are thus fresh in nature.
They are first hand information.

Under this study primary data was collected by using structured questionnaire. Thestructured
questionnaire consists of both open ended and closed ended questions. The primary data has
been collected through the questionnaire by means of personal interview. The questionnaire
consists of number of questions printed in a definite order on a form. The primary data was
collected from investors of Nirmal Bang Securities Pvt.Ltd

SECONDARY DATA

The secondary data are sourced from various BSE and NSE websites, NISM( National Institute
of securities markets) website, magazines, books , periodical surveys.

SAMPLING DESIGN

Sampling is a method of selecting experimental units from a population so that we can make
decision about the population.

Sampling Design is design or a working plan, that specifies the population frame, sample size,
sample selection, and estimation method in detail. Objective of the sampling design is to know
the characteristic of the population.

POPULATION

The population of the Nirmal Bang Securities Pvt.Ltd is approximately five thousand which is
large in number, researcher was unable to collect information from all employees due to the
limitation of time. So part of the population is taken for analyzing and generating the findings,
which is applicable for total production.

SAMPLING TECHNIQUE

Non Probabilistic Convenient sampling method is used to collect the data.

SAMPLE SIZE

A sample size of 96 has been taken into consideration.

SAMPLE UNIT

The respondents of the study are part of the population of Nirmal Bang Securities Pvt.Ltd.
Each individual is considered to be the sampling unit.

TOOLS FOR DATA ANALYSIS

The data has been mainly analysed by using the following rudimentary methods and tests.

1. Percentage Analysis

2. Pearson Chi-Square Test

3. One Way Anova

PECENTAGE ANALYSIS

Percentage analysis can be calculated as follows

First the frequency (i.e) number of responses is noted in tabular form, and then the percentage is
calculated by dividing the frequency by total number of respondents multiplied by 100. Then the
values are noted in column as valid percent. Graphical Analysis is done after the percentage
analysis. Bar charts and pie charts are used to represent the percentage obtained.

CHI-SQUARE TEST

The Chi-Square test is one of the simplest and most widely used non-parametric tests in
statistical works. This test was first used by Karl Pearson in the year 1990. The quantity Chi-
Square describes the magnitude of the discrepancy between theory and observation.
 Karl Pearson developed a test for testing the significance of discrepancy between the
experimental values and the theoretical values obtained under some theory or hyphothesis.
The table value for this degree of freedom is seen using 5% or 1% of significance level. If the
calculated Chi-Square value is less than the table value of Chi-Square, hyphothesis is accepted or
otherwise rejected.
Frequency Table and Bar Chart

Table 4.1

Table and chart showing the age of the respondents.

Age
Frequency Percent
25-35 50 52.1

36-45 14 14.6

46-55 14 14.6

56 and above 18 18.8

Total 96 100.0
Inference
From this table and chart it can be understood that the age group of 25-35 form the majority of
the respondents, They constitute about 52.1%. of the respondents. The age group of 36-45
constitute about 14.6% of the respondents. The age group of 46-55 constitute about 14.6% of the
respondents. The age group of 56 and above constitute about 18.8% of the respondents.
Table 4.2

Table and chart showing the educational qualification of the respondents.

Educational Qualification

Frequency Percent
HSC/Diploma 6 6.3

Undergtraduate 44 45.8
post graduate 38 39.6

professionally qualified 8 8.3

Total 96 100.0

Inference
From the above table and chart it can be understood that majority of the respondents are
undergraduate They constitute about 45.8% of the respondents and post graduates constitute
about 39.6% of the respondents. HSC/Diploma constitute about 6.3% of the respondents and
8.3% of the respondents are professionally qualified.
Table 4.3

Table and chart showing the occupation of the respondents.

Occupation

Frequency Percent
Business Man 14 14.6

Professional 4 4.2

salaried employee 60 62.5

self em[ployed 6 6.3

full time business in share trading 10 10.4

Others 2 2.1
Total 96 100.0
Inference
From the above table and chart, it can be understood that salaried employee constitute about
62.1% of the employees. Businessman constitute about 14.6% of the respondents and people
who do full time business in share trading constitute about 10.4% of the respondents.
Professionals constitute about4.2% of the respondents. Self employed constitute about 6.3% of
the respondents. Others are 2.1% of the respondents.
Table 4.4

Table and chart showing the investment preference of the respondents.

Investment preference

Frequency Percent

Government securities 20 20.8

cash market 54 56.3

Derivative market 16 16.7

Others 6 6.3

Total 96 100.0
Inference
From the above table and chart it can be understood that majority of the respondents prefer cash
market, they constitute about 56.3%. People who prefer government securities are 20.8% and
people who choose derivative market constitute about 16.7% and people who prefer securities
other than the aforementioned securities constitute about 6.3% of the total respondents.
Table 4.5

Table and chart showing the share preference of the respondents

Share Preference

Frequency Percent

Well established company 74 77.1

Relatively Unknown company 2 2.1

Well established company
10 10.4
making an IPO

relatively unknown company

2 2.1
making an IPO

New company making an IPO 8 8.3

Total 96 100.0
Inference
From the above table and chart it can be found that people who prefer the shares of a well
established companies constitute majority of the respondents. They are about 77.1% and people
who prefer well established company making an IPO is about 10.4%,. People who prefer
relatively unknown company share and it’s IPO constitute about 2.1%. The people who prefer
new company making an IPO constitute about 8.3%.
Table 4.6

Table and chart showing the risk preference of securities of the investors

Risk preference of securities

Frequency Percent
Highly Fluctuating or very risky
10 10.4
securities

securities with moderate risk 20 20.8

low risk securities which has

48 50.0
stable income

Standard Earners 18 18.8

Total 96 100.0
Inference
From the above table and chart it can be understood that people who prefer low risk securities
that give stable income constitute about 50% of the respondents and majority of them fall under
that group. The people who prefer securities with moderate risk constitute about 20.8%. People
who prefer standard earners constitute about 18.8% and people who prefer highly fluctuating
securities constitute about 10.4%.
Table 4.7

Table and chart shwoing the share trading experience of the respondents

Share Trading Experience

Frequency Percent
one year or more than one year 34 35.4

one to five years 28 29.2

five to ten years 16 16.7

more than ten years 18 18.8

Total 96 100.0
Inference
From the above table and chart it can be inferred that majority of the people have one year or less
than one year of experience. They constitute about 35.4%. People who are having one to five
years of experience constitute about 29.2%. People who are having five to ten years of
experience constitute about 16.7%. People who have more than ten years experience constitute
about 18.8%
Table 4.8

Table and cahrt showing the basis of investment of the respondents.

Basis of investment

Frequency Percent
Gut Sense 8 8.3

Through fundamental and

38 39.6
technichal ananlysis

Based on brokers advice 12 12.5

Market news 38 39.6

Total 96 100.0
Inference
From the above table and chart it can be inferred that majority of people make their investment
decision in share market by fundamental and technical analysis, market news. Both of those
people constitute about 39.6% of the respondents respectively. People who make their
investment decision based on broker’s advice constitute about 12.5% of the respondents. People
who make investment decision based on gut sense constitute about 8.3%.
Table 4.9

Table and chart showing the level of satisfaction of the respondents with respect to equity
segment.

Level of satisfaction

Frequency Percent
Highly satisfied 10 10.4

Satisfied 52 54.2
Neutral 30 31.3

Dissatisfied 4 4.2
Total 96 100.0
Inference
From the above table and chart it can be inferred that 54.2% of the respondents are satisfied with
their investment decisions with respect to equity segment. 31.3% of the respondents are neutral
about their returns. 10.4% of the respondents ate highly satisfied with their decision on equity
segment. While 4.2% of the population are dissatisfied with their investment decisions with
respect to equity segment.
Table 4.10

Table and chart showing the sense of protection of the respondents by SEBI.

Protection by SEBI

| Frequency Percent

yes 88 91.7

No 8 8.3

Total 96 100.0
Inference
From the above table and chart it can be understood that 91.7% of the respondents feels that
SEBI regulations protects them whole 8.3% of the population are not satisfied with the
protection from SEBI.
Table 4.11

Table and chart showing the source of investment of the respondents.

Source of investment
Frequency Percent

Salary/Pledging 48 50.0

Borrowing 6 6.3

Personal Savings 40 41.7

Disposing Personal Property 2 2.1

Total 96 100.0
Inference
From the above table and chart it can be understood that majority of the respondents use their
own salary or pledge their own securities to make investment. They constitute about 50% of the
population. The people who use their personal savings constitute about 41,7%. People who
borrow funds to make investment constitute about 6.3%. People who dispose their personal
property to make their investment constitute about 2.1%.
Table 4.12

Table and chart showing the most beneficial investment of the respondents.

Most beneficial investment

Frequency Percent

Bank fixed deposits 32 33.3

Shares 28 29.2
Investment in land 22 22.9

Insurance or mutual funds 2 2.1

Gold 12 12.5

Total 96 100.0
Inference
From the above table and chart it can be understood that majority of the respondents feel that
bank fixed deposit is more beneficial. They constitute about 33.3% of the respondents. People
who consider shares as most beneficial constitute about 29.2% of the respondents. The people
who feel investment in land is more beneficial constitute about 22.9% of the respondents. The
people who feel that insurance or mutual funds is more beneficial constitute about 2.1%. The
people who feel gold as more beneficial constitute about 12.5% of the respondents.
 CHI-SQUARE TESTS

Table 4.2.1

Education * Most beneficial investment

H0: There is no significant association between education and investment option

H1: There is a significant association between education and investment option

Crosstab
Most beneficial investment Total

Bank Shares Investment Insurance Gold

fixed in land or mutual
deposits funds

Count 20 14 6 2 8 50
Expected
16.7 14.6 11.5 1.0 6.3 50.0
Count

% within
40.0% 28.0% 12.0% 4.0% 16.0% 100.0%
Diploma/ Undergraduate Education1

% within
Most
62.5% 50.0% 27.3% 100.0% 66.7% 52.1%
beneficial
investment
Education
Count 12 14 16 0 4 46

Expected
15.3 13.4 10.5 1.0 5.8 46.0
Count

% within
26.1% 30.4% 34.8% 0.0% 8.7% 100.0%
Professional/Postgraduate Education1

% within
Most
37.5% 50.0% 72.7% 0.0% 33.3% 47.9%
beneficial
investment
Count 32 28 22 2 12 96

Expected
32.0 28.0 22.0 2.0 12.0 96.0
Total Count

% within
33.3% 29.2% 22.9% 2.1% 12.5% 100.0%
Education1
 % within
Most
100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
beneficial
investment

Chi-Square Tests

Value Df Asymp. Sig. (2-

sided)
a
Pearson Chi-Square 9.729 4 .045
Likelihood Ratio 10.703 4 .030
Linear-by-Linear Association .065 1 .798
N of Valid Cases 96

a. 2 cells (20.0%) have expected count less than 5. The minimum expected count is
.96.
Inference

Since the asymptotic significance of the Pearson chi-square value is .045 which is less than .05
there exists a significant relationship between the education and most beneficial investment.
Therefore the alternate hyphothesis is accepted. From the above tables and chart it can be found
that majority of the respondents who are qualified as diploma/undergraduates prefer bank fixed
deposits followed by shares, investment in land, Insurance/Mutual Funds, Gold. While majority
of the persons who are qualified as post graduates prefer investment in land followed by shares,
bank fixed deposits gold. While none of the post graduates prefer investment in insurance or
mutual funds.
Table 4.2.2

Education * sharepreference

H0: There is no significant association between education and investment option

H1: There is a significant association between education and investment option

Crosstab

Sharepreference Total
Well Relatively Well
Established unknown established
Company company/ IPO of company
relatively unknown making an
company/unknown IPO
company

Count 34 12 4 50

Expected Count 38.5 6.3 5.2 50.0

% within
Diploma/ Undergraduate 68.0% 24.0% 8.0% 100.0%
Education1

% within
45.9% 100.0% 40.0% 52.1%
sharepreference
Education1
Count 40 0 6 46

Expected Count 35.5 5.8 4.8 46.0

% within
Professional/Postgraduate 87.0% 0.0% 13.0% 100.0%
Education1

% within
54.1% 0.0% 60.0% 47.9%
sharepreference
Count 74 12 10 96

Expected Count 74.0 12.0 10.0 96.0

% within
Total 77.1% 12.5% 10.4% 100.0%
Education1

% within
100.0% 100.0% 100.0% 100.0%
sharepreference
Chi-Square Tests

Value df Asymp. Sig. (2-

sided)

Pearson Chi-Square 12.742a 2 .002

Likelihood Ratio 17.359 2 .000
Linear-by-Linear Association 1.066 1 .302
N of Valid Cases 96
a. 1 cells (16.7%) have expected count less than 5. The minimum expected count is
4.79.
Inference

Since the asymptotic significance of the Pearson chi-square value is .002 which is less than .05
there exists a significant relationship between the education of the respondents and their share
preference. Therefore the alternate hyphothesis is accepted From the above table and chart it can
be found that majority of the respondents who are qualified as Diploma/Undergraduates prefer
shares of well established company followed by relatively unknown company which makes IPO
or it’s shares and IPO of an Unknown company. Only few of the respondents prefer shares of an
well established company making an IPO. Incase of persons who are qualified as post graduates
majority of them prefer shares of an well established company followed by well established
company making an IPO. While none of the post graduates prefer shares of an relatively
unknown company or unknown company.

Table 4.2.3
Education * source of investment

H0: There is no significant association between education and investment option

H1: There is a significant association between education and investment option

Crosstab

sourceofinvestment Total

Salary/Borrowing/Disposing Personal
of personal property Savings

Count 34 16 50
Expected Count 29.2 20.8 50.0
Diploma/ Undergraduate % within Education1 68.0% 32.0% 100.0%

% within
60.7% 40.0% 52.1%
sourceofinvestment
Education1
Count 22 24 46

Expected Count 26.8 19.2 46.0

Professional/Postgraduate % within Education1 47.8% 52.2% 100.0%

% within
39.3% 60.0% 47.9%
sourceofinvestment
Count 56 40 96
Expected Count 56.0 40.0 96.0
Total % within Education1 58.3% 41.7% 100.0%

% within
100.0% 100.0% 100.0%
sourceofinvestment
Chi-Square Tests

Value df Asymp. Sig. (2- Exact Sig. (2- Exact Sig. (1-
sided) sided) sided)
a
Pearson Chi-Square 4.012 1 .045
b
Continuity Correction 3.225 1 .073
Likelihood Ratio 4.036 1 .045
Fisher's Exact Test .062 .036
Linear-by-Linear Association 3.970 1 .046
N of Valid Cases 96

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 19.17.
b. Computed only for a 2x2 table
Inference
Since the asymptotic significance of person Chi-Square value(.045) which is less than .05 there
exists a significant relationship between the education qualification and the source of investment
of the investors. Therefore the alternate hyphothesis is accepted. From the above table and chart
it can be found that majority of the respondents who are qualified as Diploma/Undergraduates
use salary/Borrowing/Disposing of personal property as their source of income. While few of
them use personal savings as their source of income. Incase of postgraduates half of them use
personal savings as their source of income followed by the other half who use
salary/Borrowing/Disposing of the personal property as their source of income for investment.
Table 4.2.4

Education * Basis of investment

H0: There is no significant association between education and investment option

H1: There is a significant association between education and investment option

Crosstab

Basis of investment Total

Gut Through Based on Market

Sense fundamental brokers news
and advice
technichal
ananlysis

Count 0 24 6 20 50

Expected Count 4.2 19.8 6.3 19.8 50.0

% within
Diploma/ Undergraduate 0.0% 48.0% 12.0% 40.0% 100.0%
Education1

% within Basis of
0.0% 63.2% 50.0% 52.6% 52.1%
investment
Education1
Count 8 14 6 18 46

Expected Count 3.8 18.2 5.8 18.2 46.0

% within
Professional/Postgraduate 17.4% 30.4% 13.0% 39.1% 100.0%
Education1

% within Basis of
100.0% 36.8% 50.0% 47.4% 47.9%
investment
Count 8 38 12 38 96

Expected Count 8.0 38.0 12.0 38.0 96.0

% within
Total 8.3% 39.6% 12.5% 39.6% 100.0%
Education1

% within Basis of
100.0% 100.0% 100.0% 100.0% 100.0%
investment
Chi-Square Tests

Value df Asymp. Sig. (2-

sided)
a
Pearson Chi-Square 10.589 3 .014
Likelihood Ratio 13.692 3 .003
Linear-by-Linear Association .707 1 .400
N of Valid Cases 96

a. 2 cells (25.0%) have expected count less than 5. The minimum expected count is
3.83.
Inference
Since the asymptotic significance of pearson chi-square value (.014) which is less than .05, there
exists a significant relationship between the educational qualification and the basis of investment
decision making of the investors. Therefore the alternate hyphothesis is accepted. From the
above table and chart it can be found that majority of the respondents who are qualified as
Diploma/Undergraduates make their investment by doing Fundamental/Technical Analysis
followed by people who make their investment on the basis of market news. While very few of
them make their investment decision using broker’s advice. None of the undergraduates/Diploma
make theirv investments using gut sense. Incase of respondent who are post graduates majority
of the respondents make their investment using market news followed by Fundamental/Technical
analysis/Gut sense/ Broker’s advice.
Table 4.2.5

Education * Risk preference of securities

H0: There is no significant association between education and investment option

H1: There is a significant association between education and investment option

Crosstab

Risk preference of securities Total

Highly securities low risk Standard

Fluctuating with securities Earners
or very moderate which
risky risk has
securities stable
income
Count 8 6 22 14 50

Expected Count 5.2 10.4 25.0 9.4 50.0

% within
16.0% 12.0% 44.0% 28.0% 100.0%
Diploma/ Undergraduate Education1

% within Risk
preference of 80.0% 30.0% 45.8% 77.8% 52.1%
securities
Education1
Count 2 14 26 4 46

Expected Count 4.8 9.6 23.0 8.6 46.0

% within
4.3% 30.4% 56.5% 8.7% 100.0%
Professional/Postgraduate Education1

% within Risk
preference of 20.0% 70.0% 54.2% 22.2% 47.9%
securities
Count 10 20 48 18 96
Total
Expected Count 10.0 20.0 48.0 18.0 96.0
 % within
10.4% 20.8% 50.0% 18.8% 100.0%
Education1

% within Risk
preference of 100.0% 100.0% 100.0% 100.0% 100.0%
securities

Chi-Square Tests

Value df Asymp. Sig. (2-

sided)
a
Pearson Chi-Square 12.544 3 .006
Likelihood Ratio 13.197 3 .004
Linear-by-Linear Association .650 1 .420
N of Valid Cases 96

a. 1 cells (12.5%) have expected count less than 5. The minimum expected count is
4.79.
Inference
Since the asymptotic significance of pearson Chi-Square value(.006) which is less than .05, there
exists a significant relationship between the educational qualification and risk preference of
securities of the investors. Therefore the alternate hyphothesis is accepted. From the above table
and chart it can be found that majority of the respondents who are qualified as
Diploma/Undergraduate prefer low risk securities which earn stable income followed by
standard earners, Highly fluctuating or risky securities and securities with moderate risk. Incase
of persons who are qualified as professional/postgraduates prefer low risk securities which has
stable income, followed by securities with moderate risk, standard earners and highly fluctuating
or risky securities.
Table 4.2.6

Occupation * Basis of investment

H0: There is no significant association between education and investment option

H1: There is a significant association between education and investment option

Crosstab

Basis of investment Total

Gut Through Based on Market

Sense fundamental brokers news
and advice
technichal
ananlysis

Count 6 10 2 8 26

Expected Count 2.2 10.3 3.3 10.3 26.0

Businessman % within Occupation1 23.1% 38.5% 7.7% 30.8% 100.0%

% within Basis of
75.0% 26.3% 16.7% 21.1% 27.1%
investment

Count 0 24 8 28 60

Expected Count 5.0 23.8 7.5 23.8 60.0

Occupation1 Salaried % within Occupation1 0.0% 40.0% 13.3% 46.7% 100.0%

% within Basis of
0.0% 63.2% 66.7% 73.7% 62.5%
investment

Count 2 4 2 2 10

Expected Count .8 4.0 1.3 4.0 10.0

Share trader % within Occupation1 20.0% 40.0% 20.0% 20.0% 100.0%

% within Basis of
25.0% 10.5% 16.7% 5.3% 10.4%
investment
Count 8 38 12 38 96
Expected Count 8.0 38.0 12.0 38.0 96.0
Total % within Occupation1 8.3% 39.6% 12.5% 39.6% 100.0%

% within Basis of
100.0% 100.0% 100.0% 100.0% 100.0%
investment
Chi-Square Tests

Value df Asymp. Sig. (2-

sided)

Pearson Chi-Square 16.630a 6 .011

Likelihood Ratio 19.165 6 .004
Linear-by-Linear Association .770 1 .380
N of Valid Cases 96
a. 6 cells (50.0%) have expected count less than 5. The minimum expected count is
.83.
Inference
Since the asymptotic significance of pearson Chi-Square value (.011) which is less than .05
there exists a significant relationship between the occupation of the respondents and their basis
of investment decision making. Therefore the alternate hyphothesis is accepted. From the above
table and chart it can be found that majority of the respondents who are Businessman make their
investments through fundamental and technical analysis followed by those who react to market
news, gut sense. While very few businessman make their decision based on broker’s advice.
Majority of the respondents who were salaried employee make their investment decision based
on market news followed by those who use fundamental and technical analysis. Only few of the
salaried employee make their decision based on broker’s advice. Incase of respondents whose
full time job was share trading make their decision based on fundamental and technical analysis
followed by market news, broker’s advice and gut sense.
Table 4.2.7

Occupation * Risk preference of securities

H0: There is no significant association between education and investment option

H1: There is a significant association between education and investment option

Crosstab

Risk preference of securities Total

Highly securities low risk Standard

Fluctuating with securities Earners
or very moderate which has
risky risk stable
securities income

Count 6 8 10 2 26

Expected Count 2.7 5.4 13.0 4.9 26.0

% within
23.1% 30.8% 38.5% 7.7% 100.0%
Businessman Occupation1

% within Risk
preference of 60.0% 40.0% 20.8% 11.1% 27.1%
securities

Count 2 12 34 12 60
Expected Count 6.3 12.5 30.0 11.3 60.0
Occupation1
% within
3.3% 20.0% 56.7% 20.0% 100.0%
Salaried Occupation1

% within Risk
preference of 20.0% 60.0% 70.8% 66.7% 62.5%
securities

Count 2 0 4 4 10
Expected Count 1.0 2.1 5.0 1.9 10.0
Share trader
% within
20.0% 0.0% 40.0% 40.0% 100.0%
Occupation1
 % within Risk
preference of 20.0% 0.0% 8.3% 22.2% 10.4%
securities
Count 10 20 48 18 96

Expected Count 10.0 20.0 48.0 18.0 96.0

% within
10.4% 20.8% 50.0% 18.8% 100.0%
Total Occupation1

% within Risk
preference of 100.0% 100.0% 100.0% 100.0% 100.0%
securities

Chi-Square Tests

Value df Asymp. Sig. (2-

sided)

Pearson Chi-Square 16.687a 6 .011

Likelihood Ratio 18.382 6 .005
Linear-by-Linear Association 8.025 1 .005
N of Valid Cases 96

a. 5 cells (41.7%) have expected count less than 5. The minimum expected count is
1.04.
Inference
Since the asymptotic significance of the Pearson Chi-Square value(.011) which is less than .05
there exists a significant relationship between the occupation of the respondents and the risk
preference of securities of the investors. Therefore the alternate hyphothesis is accepted. From
the above table and chart it can be found that majority of the respondents who were business man
prefer low risk securities which has a stable income followed by securities with moderate risk,
highly fluctuating or risky securities and standard earners. Incase of respondents salaried
employee majority of them prefer low risk securities which has stable income followed by
securities with moderate risk and standard earners. Only few of the salaried employee prefer
highly fluctuating/risky securities. Incase of respondents hose full time business was share
trading most of them prefer low risk securities which has stable income and followed by standard
earners, followed by highly fluctuating or risky securities. None of the respondents who were
share traders prefer securities with moderate risk.
ONE-WAY ANOVA

RETURN EXPECTATION * BASIS OF INVESTMENT OF THE INVESTOR .

ONE WAY ANOVA TEST.

Null hypothesis (H0)

There is no significant difference between basis of investment and the return

expectation of the investor.

Alternative hypothesis (H1)

There is significant difference between basis of investment and the return

expectation of the investor.

Table 4.3.1

Return Expectation
Sum of Squares Df Mean Square F Sig.

Between Groups 10.344 3 3.448 4.035 .010

Within Groups 78.614 92 .855
Total 88.958 95
Post Hoc Tests
Homogeneous Subsets

Return Expectation
Duncan

Basis of investment N Subset for alpha = 0.05

1 2

Based on brokers advice 12 3.1667

Market news 38 3.8421
Through fundamental and
38 4.0526
technichal ananlysis
Gut Sense 8 4.5000
Sig. 1.000 .065

Means for groups in homogeneous subsets are displayed.

a. Uses Harmonic Mean Sample Size = 15.328.
b. The group sizes are unequal. The harmonic mean of the group sizes is
used. Type I error levels are not guaranteed.

Inference
There is a significant difference between the basis of investment and the return expectation of the
investors .The level of significance is .010 which is lesser than .05, the alternate hyphothesis is
hence accepted. From the post-hoc analysis it can be observed that people who make investment
decision based on fundamental technical analysis and gut sense expect more return than people
who tend to make their decision with respect to investment based on the advices given by the
broker.
ONE-WAY ANOVA

RISK DISPOSITION * RISK PREFERENCE OF SECURITIES. ONE WAY ANOVA

TEST.

Null hypothesis (H0)

There is no significant difference between risk disposition and risk preference of

securities of the investor.

Alternative hypothesis (H1)

There is significant difference between risk disposition and risk preference of securities
of the investor.

Table 4.3.2

Riskdisposition

Sum of Squares df Mean Square F Sig.

Between Groups 84.867 3 28.289 3.082 .031

Within Groups 844.467 92 9.179
Total 929.333 95
Post Hoc Tests
Homogeneous Subsets

Riskdisposition
Duncan

Risk preference of securities N Subset for alpha = 0.05

1 2

Standard Earners 18 13.0000

low risk securities which has
48 15.0833
stable income
securities with moderate risk 20 15.2000
Highly Fluctuating or very risky
10 16.2000
securities
Sig. 1.000 .307

Means for groups in homogeneous subsets are displayed.

a. Uses Harmonic Mean Sample Size = 17.669.
b. The group sizes are unequal. The harmonic mean of the group sizes is
used. Type I error levels are not guaranteed.

Inference
There is a significant difference between the risk disposition and the type of security that an
investor is choosing. The level of significance is .031 which is lesser than .05 the alternate
hyphothesis is hence accepted.From the post-hoc analysis it can observed that the people who
invest in low risk securities, securities with moderate risk or highly fluctuating securities are
willing to take more risk than people who invest in standard earners.
ONE-WAY ANOVA

RETURN EXPECTATION * RISK PREFERENCE OF SECURITIES OF THE

INVESTOR . ONE WAY ANOVA TEST.

Null hypothesis (H0)

There is no significant difference between return expectations and risk preference of

securities of the investor.

Alternative hypothesis (H1)

There is significant difference between return expectations and risk preference of

securities of the investor.

Table 4.3.3

Return Expectation

Sum of Squares df Mean Square F Sig.

Between Groups 8.581 3 2.860 3.274 .025

Within Groups 80.378 92 .874
Total 88.958 95
Post Hoc Tests
Homogeneous Subsets

Return Expectation
Duncan

Risk preference of securities N Subset for alpha = 0.05

1 2
Highly Fluctuating or very risky
10 3.6000
securities
low risk securities which has
48 3.6667 3.6667
stable income
Standard Earners 18 4.2222 4.2222
securities with moderate risk 20 4.3000
Sig. .064 .059

Means for groups in homogeneous subsets are displayed.

a. Uses Harmonic Mean Sample Size = 17.669.
b. The group sizes are unequal. The harmonic mean of the group sizes is
used. Type I error levels are not guaranteed.

Inference
The level of significance is .025 which is lesser than .05 therefore the alternate hyphothesis is
accepted. Therefore there is a significant difference between the return expectations and the type
of share that an investor prefer. From the post-hoc analysis it can be observed that people who
invest in fluctuating or risky securities expect lesser return than people who invest in securities
with moderate risks. However the people who invest in low risk securities or standard earners
does not come under either of category, meaning they don’t expect either high or low return. .
ONE-WAY ANOVA

RETURN EXPECTATION * SHARE TRADING EXPERIENCE . ONE WAY ANOVA

TEST.

Null hypothesis (H0)

There is no significant difference between return expectations and the share trading
experience.

Alternative hypothesis (H1)

There is significant difference between return expectation and share trading experience.

Table 4.3.4

Return Expectation

Sum of Squares df Mean Square F Sig.

Between Groups 18.329 3 6.110 7.958 .000

Within Groups 70.629 92 .768
Total 88.958 95
Post Hoc Tests
Homogeneous Subsets

Return Expectation
Duncan

Share Trading Experience N Subset for alpha = 0.05

1 2

one year or more than one year 34 3.4706

one to five years 28 3.7143
more than ten years 18 4.4444
five to ten years 16 4.5000
Sig. .360 .835
Means for groups in homogeneous subsets are displayed.
a. Uses Harmonic Mean Sample Size = 21.836.
b. The group sizes are unequal. The harmonic mean of the group sizes is
used. Type I error levels are not guaranteed.

Inference
The level of significance is .000 which is lesser than .05. Therefore the alternate hyphothesis is
accepted. There is a significant difference between the years of experience and the trading
experience of the investors. From the post-hoc analysis it can be observed that the people
Who have one year or more than one year experience or people with one to five years experience
have lower return expectations. However people with five to ten years and more than ten years
experience have more return expectations.
ONE-WAY ANOVA
RISK DISPOSITION * SHARE TRADING EXPERIENCE . ONE WAY ANOVA TEST.

Null hypothesis (H0)

There is no significant difference between risk disposition and the share trading
experience.

Alternative hypothesis (H1)

There is significant difference between risk disposition and the share trading experience.

Table 4.3.5

Riskdisposition

Sum of Squares df Mean Square F Sig.

Between Groups 115.068 3 38.356 4.334 .007
Within Groups 814.265 92 8.851
Total 929.333 95
Post Hoc Tests
Homogeneous Subsets

Riskdisposition
Duncan

Share Trading Experience N Subset for alpha = 0.05

1 2

five to ten years 16 13.2500

more than ten years 18 14.1111
one year or more than one year 34 14.7059 14.7059
one to five years 28 16.3571
Sig. .130 .070

Means for groups in homogeneous subsets are displayed.

a. Uses Harmonic Mean Sample Size = 21.836.
b. The group sizes are unequal. The harmonic mean of the group sizes is
used. Type I error levels are not guaranteed.

Inference
The level of significance is lesser that is .007 which is lesser than .05. Therefore the alternate
hyphothesis is accepted. There is a significant difference between the years of experience and
risk disposition of the investors. From the post-hoc analysis it can be observed that the people
with five to ten years experience and more than ten years experience have lower risk appetite.
People with one to five years experience have more risk appetite. People with one year or more
than one year experience does not come under either of the category.
ONE-WAY ANOVA
RISK DISPOSITION * SHARE PREFERENCE OF THE INVESTOR . ONE WAY
ANOVA TEST.

Null hypothesis (H0)

There is no significant difference between risk disposition and the share preference of the
investor.

Alternative hypothesis (H1)

There is significant difference between risk disposition and share preference of the
investor.

Table 4.3.6

Riskdisposition

Sum of Squares df Mean Square F Sig.

Between Groups 55.753 2 27.877 2.968 .048

Within Groups 873.580 93 9.393
Total 929.333 95
Post Hoc Tests
Homogeneous Subsets

Riskdisposition
Duncan

Sharepreference N Subset for alpha = 0.05

1 2

Well established company

10 12.6000
making an IPO
Well Established Company 74 15.0811
Relatively unknown company/
IPO of relatively unknown 12 15.1667
company/unknown company
Sig. 1.000 .939
Means for groups in homogeneous subsets are displayed.
a. Uses Harmonic Mean Sample Size = 15.240.
b. The group sizes are unequal. The harmonic mean of the group sizes is
used. Type I error levels are not guaranteed.

Inference
The level of significance is .048 which is lesser than .05. Therefore the alternate hyphothesis is
accepted. There is a significant difference between the share preference and risk disposition.
From the post hoc analysis it can be observed that people who prefer well established company
making an IPO have lesser risk appetite than people who prefer scrips of well established
company/realatively unknown company/ IPO of relatively unknown company/Unknown
company
ONE-WAY ANOVA

BASIS OF DECISION * SHARE PREFERENCE OF THE INVESTOR . ONE WAY

ANOVA TEST.

Null hypothesis (H0)

There is no significant difference between basis of decision and the share preference of
the investor.

Alternative hypothesis (H1)

There is significant difference between basis of decision and the share preference of the
investor.

Table 4.3.7

Basisofdecision

Sum of Squares df Mean Square F Sig.

Between Groups 45.902 2 22.951 3.410 .037

Within Groups 625.932 93 6.730
Total 671.833 95
Post Hoc Tests
Homogeneous Subsets

Basisofdecision
Duncan
Sharepreference N Subset for alpha = 0.05

1 2

Relatively unknown company/

IPO of relatively unknown 12 11.6667
company/unknown company
Well established company
10 12.6000 12.6000
making an IPO
Well Established Company 74 13.6486
Sig. .323 .267

Means for groups in homogeneous subsets are displayed.

a. Uses Harmonic Mean Sample Size = 15.240.
b. The group sizes are unequal. The harmonic mean of the group sizes is
used. Type I error levels are not guaranteed.

Inference
The level of significance is .037 which is lesser than .05, hence the alternate hyphothesis is
accepted. There is a significant difference between the basis of decision and the share preference
of the investors. From the post-hoc analysis it can be observed that people who make investment
in well established company rely more on fundamental technical analysis than people who make
investment in relatively unknown company/IPO of an relatively unknown company.
ONE-WAY ANOVA

BASIS OF DECISION * INVESTMENT PRERERENCE OF THE INVESTOR . ONE

WAY ANOVA TEST.

Null hypothesis (H0)

There is no significant difference between basis of decision and the investment

preference of the investor.

Alternative hypothesis (H1)

There is significant difference between basis of decision and the investment preference of
the investor.

Table 4.3.8

Basisofdecision

Sum of Squares df Mean Square F Sig.

Between Groups 65.046 3 21.682 3.287 .024

Within Groups 606.787 92 6.596
Total 671.833 95
Post Hoc Tests
Homogeneous Subsets

Basisofdecision
Duncan

Investment preference N Subset for alpha = 0.05

1 2

Others 6 10.6667
cash market 54 13.0741
Government securities 20 14.0000
Derivative market 16 14.1250
Sig. 1.000 .322
Means for groups in homogeneous subsets are displayed.
a. Uses Harmonic Mean Sample Size = 13.437.
b. The group sizes are unequal. The harmonic mean of the group sizes is
used. Type I error levels are not guaranteed.

Inference
The level of significance is .024 which is lesser than .05. The alternate hyphothesis is hence
accepted. There is a significant difference between the Investment preference and the basis of
decision of the investors.From the post-hoc analysis it can be observed that people who invest in
cash market,govt securities and derivative market rely more on fundamental technical analysis.
However people who invest in other types of securities rely less on fundamental technical
analysis.
Findings

From Frequencies and Bar Charts

1. Majority of the respondents belonged to the age group of 25-35

2.Majority of the respondents were qualified as undergraduates.45.8% of the respondents were

undergraduates.

3.Majority of the respondents were salaried employees who constituted 62.5% of respondents.

4. 56.3% of the respondents preferred investment in the cash market.

5.Majoriry of the respondents preferred shares of well established company.

6.Higher Percentage of the respondents preferred investing in low risk securities which earn
stable income.

7.Higher percentage of the investor had an investment experience of one year or more than one
year.

8. Majority of the respondents made their investment decision from either market news or by
making fundamental and technical analysis.

9.Majority of the respondents were satisfied with their investment decision with respect to equity
segment.

10.Except few respondents, majority of the respondents felt safe with the SEBI regulations.

11.Major portion of the respondents source of investment was from their salary/pledging of
personal property.

12.Majority of the respondents felt that bank fixed deposits were most beneficial investment.
From Pearson Chi-Square Test

1. Respondents educational background played a major role in their perception about most
beneficial investment. Majority of the Diploma/Undergraduates preferred bank fixed deposits.
Whereas majority of the respondents preferred investment in land.

2. Respondents educational background played a major role in their perception in their

preference of scrips. Majority of the respondents who were qualified as
Diploma/Undergraduates or even post graduates preferred scrips of well established company.

3. Respondents educational background played a major role in their source of investment.

Respondents who were qualified as Diploma/Undergraduates used their monthly salary as their
source of investment. While respondents who were qualified as postgraduates used their
personal savings as their source of investment.

4. Respondents educational background played a major role in their investment decision

making. Majority of the respondents who were qualified as Diploma/undergraduates made
their decision through fundamental and technical analysis. While respondents who were
qualified as post graduates made their decision based on market news.

5. Respondents educational background played a major role in their perception risk preference
of securities. Majority of the respondents who were qualified as Diploma/Undergraduates or
post graduates preferred securities which had low risk but earned stable income.

6. Respondents occupation played a major role in their investment decision making. Majority
of the respondents who were business man or had a full time business in share trading made
their investment decision by making fundamental and technical analysis. While salaried
respondents made their decision on the basis of market news.

7. Respondents occupation played a major role in investor risk preference of securities.

Majority of the respondents from various categories like salaried persons, businessman and
persons who had full time business in share trading preferred low risk securities which earned
stable income.
From Anova Table

1. People who made investment decision based on fundamental and technical analysis and gut
sense expected more return than people who made investment decision based on broker’s advice.

2. It was found that people who invest in low risk securities that earn stable income, highly
fluctuating or risky securities, securities with moderate risk are willing to take more risk than
people who invest in standard earners.

3. People who invest in highly fluctuating or risky securities expect lesser return than people who
invest in securities with moderate risk.

4. People who have one year or more than one year and people who have experience ranging
from one to five years have lesser return expectation than people who have five to ten years or
more than ten years experience in share trading.

5. People who have five to ten years experience and people who have more than ten years
experience in share trading have lesser risk appetite than people who have experience ranging
from one to five years experience.

6. People who prefer scrips of well established company making an IPO have lesser risk appetite
than people who prefer scrips of well established company/realatively unknown company/ IPO
of relatively unknown company/Unknown company

7. People who make investment in well established company rely more on fundamental technical
analysis than people who make investment in relatively unknown company/IPO of an relatively
unknown company.

8. People who invest in cash market, govt.securities and derivative market rely more on
fundamental technical analysis. However people who invest in other types of securities rely less
on fundamental technical analysis.
SUGGESTION

1.From the study it has been found that various people have various risk expectations. Based on
their risk expectations their investment preferences also will vary. So based on the respondents
the company can give investment advice to it’s present and prospective clients. People who have
five to ten years experience and people who have more than ten years experience have lower risk
appetite than people who have experience ranging from one to five years. Therefore the
investment preferences also vary accordingly. So the company can give investment advices
accordingly.

2. From the study it has been found that the broker’s do their best in assisting their clients all
ways. A meeting for clients can be held which through which various clients can have a common
meeting place and discuss investment ideas. It will be a good brainstorming session.

3. Investment fair can be held by which the broker’s can explain about share markets and various
instrument and the risk that has been associated with it.

4. Representatives from the company can go to various colleges to give seminars about stock
market and various matters associated with it. This will attract prospective investors as well as
prospective broker’s for the firm.
CONCLUSION

From the study it is evident that different investors have different return expectation and risk
disposition. Although it cannot be said that this will be permanent, this sort of behaviour of the
respondents may remain over a certain period of time and may change on happening of some
even. For instance an investor who says he wont take more risks may take higher risks if he get’s
better return. Both the category of people are likely to change their behaviour constantly. This
remains to be a perennial process.
 BIBLIOGRAPHY

REFERENCES

1. Mohan.S.Kumar and Avinash Persaud (2001), “Pure contagion and investors shifting risk
appetite” IMF Working paper, WP/01/134

2. Brenda Gonzalez-Hermosillo(2008), “Investors risk appetite and global financial market

conditions” IMF Working Paper, WP/08/85.

3. Fenghua Wen, Zhifang He, Xu Gong, and Aiming Liu (2014), “ Investors’ Risk Preference
Characteristics Based on Different Reference Point ”, Discrete Dynamics in Nature and Society,
vol. 2014, pp. 1–9, 2014.

4. N.Barberis and W.Xiong (2012) , “Realization Ulility”, Journal Of Finanacial Economics

104 , pp.251-271.

5. Kahneman and Tversky (1979), “Prospect Theory”, Institute of empirical research in

economics university of Zurich, Working Paper Series ISSN 1424-0459.

6. Matt King (2012), “Why momentum exists; A perspective investors behavior” Bell Investment
Advisors : A Momentum For Life 36(6) : 643-60.

7. Thomas Armin and David and Uwe in (2006), “Intergeneration transmission of risk and trust
attitude” Discussion Paper Series IZA DP No.2380.

8. Christine Kauffmann ,Martin Weber, Emily Haisley, “ The role of experience sampling and
graphical displays of one’s investment risk appetite” Management Science Vol No.59 February
2003, pp. 323-340 ISSN 0025-1909.
WEBSITES

WWW.BSE.COM

WWW.NSE.COM

http://en.wikipedia.org/wiki/share_markets

http://en.wikipedia.org/wiki/stockexchage

WWW.NISM.COM
 Questionnaire

1.Name :

2.Age
A.25 - 35
B.36-45
C.46-55
D. 56 and above

3. Education Qualification
A. HSC/Diploma
B. Under Graduate
C.Post Graduate
D.Professionally qualified

4.Occupation
A.Business Man.
B. Professional.
C. Salaried Employee(Specify public and private sector).
D. Self Employed.
E. Full Time Business Of Share Trading.
F. Others.

5. Invesment Preferences.
A. Govt Securities
B. Cash Market(Equity Shares Or Preference Shares).
C. Derivative Market(Please specify whether options or futures)
D.Bonds and Debentures
E. Others

6.Which company’s shares do you prefer

A.Well established company.
B. Relatively unknown company.
C. well established company making an IPO.
 D. Relatively unknown company making an IPO.
E. New company making an IPO .

7.What kind of securities do you generally prefer.

A.Higly Fluctuating or very risky securities.
B. Securities with moderate risk.
C. Low risk securities which earn stable income.
D. Standard earners.

8.Your experience in share trading

A.One year or more than one year.
B.One to five years.
C.Five to ten years.
D.More than ten years.

9.You make your investment based on.

A.Your gut sense.
B. Thorough fundamental and technichal analysis.
C. Based on Broker’s advice.
D.Market News

10.What is the source of your investment.

A. Own Funds(salary,Pledging of jewelsetc)
B. Borrowing
C. Personal Savings
D. Disposing personal property

11.Are you satisfied by your investment decisions with respect to Equity segment.
A.Highly Satisfied
B. Satisfied
C.Neutral
D.Dissatisfied
E.Highly Dissatisfied

12.As an investor do you feel protected by SEBI regulations.

A.Yes
B. No
13.Whic is the more beneficial investment(Also rate your preference in the order you prefer
these investment)
A. Bank Fixed Deposits.
B. Shares.
C. Investment in land
D. Insurance or mutual funds
E. Gold
 SA A N D SD

Kindly give your level of agreement for the

following statements
Risk Disposition
I always feel that high risk will give me higher
returns
I am ready to take risk even when there is shortage
of funds with me.
I feel that current market conditions are suitable to
take high risk.
It is always right to take risk for better returns.
Return Expectations
Equity market always gives me higher returns.
I always expect a higher return from my
investments.
I prefer only scrip that gives me higher returns.
I expect higher returns irrespective of the risk I
undertake.
Basis for Decision
Technical analysis gives the true picture of market.
I make investment decisions according to market
sentiments.
I do not rely on broker’s advice for my investment
decisions.
Fundamental analysis is not the best way to make
safer investment.

SA- Strongly agree

A- Agree
N- Neutral
D- Disagree
SD- Strongly Disagree