FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN

INDIA 1

REPORT
ON
INVESTORS PREFERENCE
FOR MUTUAL FUNDS
IN INDIA

Submitted to: Submitted by:

Dr. P. Sashikala Prasoon Thakur-09BSHYD0577
Angela Thomas-09BSHYD0096
U Nataraj-09BSHYD0935
Nipun Malhotra-09BSHYD0524
Subrat Jain-09BSHYD0860

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 2

CONTENTS

Introduction…………………………………………………… 3

Objective…………………………………………………….. 5

Literature Study…………………………………………….. 6
Methodology
8
Sample Selection………………………………………………………….

Analysis of the Data Collected………………………………

Data Distribution…………………………………………………….. 10

Conclusion……………………………………………………
26
References ……………………………………………………
27

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 3

INTRODUCTION
The project contains the brief description of the mutual fund industry in general and its
preferences. A survey was conducted to gather primary data to judge the factors that influence
investors before they invest in any of the investment tools and thus the first part of the paper
scrutinizes the investor's perception and analyzes the relation between the features of the products and
the investors' requirements. With this back ground an attempt has been made in this paper to
categorize investors based on various demographic factors such as age, sex, income level and occupation.

It is widely believed that MF is a retail product designed to target small investors, salaried people
and others who are intimidated by the stock market but, nevertheless, like to reap the benefits of
stock market investing. At the retail level, investors are unique and are a highly heterogeneous group.
Hence, designing products that are customer tailored to the different needs is important. Currently
there are more than 2500 schemes with varied objectives and AMCs are competing against each
other by Launching new products or repositioning old ones. MF industry today is facing competition not
only from within the industry but also from other financial products that provide many of the same
economic functions as mutual funds but are not strictly MFs. Thus the paper attempts to study the
factors influencing the fund/scheme selection behavior of Retail Investors who invest in Mutual
funds.

INVESTMENTS

Savings form an important part of the economy of any nation. With the Savings invested in various
options available to the people, the money acts .As the driver for growth of the country. Indian financial
scene too presents a Plethora of avenues to the investors. Though certainly not the best or Deepest of
markets in the world, it has reasonable options for an ordinary Man to invest his savings.

An investment can be described as perfect if it satisfies all the needs of all Investors. So, the starting
point in searching for the perfect investment would be to examine investor needs. If all those needs are
met by the investment, then that investment can be termed the perfect investment.

Most investors and advisors spend a great deal of time understanding the merits of the thousands
of investments available in India. Little time however, is spent understanding the needs of the investor
and ensuring that the most appropriate investments are selected for him.

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 4

MUTUAL FUNDS

Mutual Funds over the years have gained immensely in their popularity. Apart from the
many advantages that investing in mutual funds provide like diversification, professional
management, the ease of investment process has proved to be a major enabling factor. However,
with the introduction of Innovative products, the world of mutual funds nowadays has a lot to
offer to its investors. With the introduction of diverse options, investors needs to choose a mutual
fund that meets his risk acceptance and his risk capacity levels and has similar investment
objectives as the investor.

With the plethora of schemes available in the Indian markets, an investors needs to evaluate and
consider various factors before making an investment decision. Since not everyone has the time
or inclination to invest and do the analysis himself, the job is best left to a professional. Since
Indian economy is no more a closed market, and has started integrating with the world
markets, external factors which are complex in nature affect us too. Factors such as an increase in
short-term US interest rates, the hike in crude prices, or any major happening in Asian market
have a deep impact on the Indian stock market. Although it is not possible for an individual
investor to understand Indian companies and investing in such an environment, the
process can become fairly time consuming. Mutual funds (whose fund managers are paid to
understand these issues and whose Asset Management Company invests in research) provide an
option of investing without getting lost in the complexities.

Most importantly, mutual funds provide risk diversification: diversification of a portfolio is

amongst the primary tenets of portfolio structuring, and a necessary one to reduce the level
of risk assumed by the portfolio holder. Most of the investors are not necessarily well qualified
to apply the theories of portfolio structuring to their holdings and hence would be better
off leaving that to a professional. Mutual funds represent one such option.

DEFINITION- A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through these
investments and the capital appreciation realized are shared by its unit holders in proportion
to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for
the common man as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost.

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 5

OBJECTIVE

 To categorize investors as being inclined towards investment products based on certain

characteristic such as age, occupation, annual income and objective of Investment.

 In order to examine the issues raised above, this paper has the following objectives before it:
1) To understand the savings revenue preference among MF investors
2) To identify the features the investors look for in Mutual Fund products

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 6

LITERATURE STUDY

Mutual funds are a topic which is of enormous interest not only to researchers all over the
world, but also to investors. Mutual Funds as a medium-to-long term investment option are
preferred as a suitable investment option by investors. However, with several market entrants the
question is the choice of mutual fund. The study focuses on this problem of mutual fund
selection by investors. Though the investment objectives define investor’s preference among
fund types (balanced, growth, dividend etc.) the choice of fund based on a sponsor’s reputation
remains to be probed. Investment performance of mutual funds irrespective of whether they are
public-sector sponsored or Private-sector sponsored, researchers do not investigate the influence
of portfolio characteristics and the variable effect of diversification on mutual fund performance.

LITERATURE on mutual fund performance evaluation is enormous. A few research studies that
have influenced the preparation of this paper substantially are discussed in this section.
Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio performance.
Drawing on results obtained in the field of portfolio analysis, economist Jack L. Treynor has
suggested a new predictor of mutual fund performance, one that differs from virtually all those
used previously by incorporating the volatility of a fund's return in a simple yet meaningful
manner.

Bijan Roy, et. al., conducted an empirical study on conditional performance of Indian mutual
funds. This paper uses a technique called conditional performance evaluation on a sample of
eighty-nine Indian mutual fund schemes.
Zakri Y.Bello (2005) matched a sample of socially responsible stock mutual funds matched to
randomly select conventional funds of similar net assets to investigate differences in
characteristics of assets held, degree of portfolio diversification and variable effects of
diversification on investment performance. The study found that socially responsible funds do
not differ significantly from conventional funds In terms of any of these attributes.
Based on the diversity of studies made, we intend to concentrate on one aspect of it. By the end
of the project period we intend to reach a point where we have a better understanding of mutual
funds and investor preferences, also have clarity of markets, the risk and return aspect and other
factors, in the process.

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 7

This project has been influenced by the research we made, the feedback, diverse ideas and
opinions we got which not only helped us with the project but also helped us realize the diversity
in behavior and approach in dealing with mutual funds and other securities based on various
factors.

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 8

METHODOLOGY

In financial markets, "expectations" of the investors play a vital role. They influence the price of the
securities; the volume traded and determines quite a lot of things in actual practice. These expectations'
Of the investors are influenced by their "perception" and humans generally relate perception to action.

The objective of the survey was to categorize investors as being inclined towards investment
products based on certain characteristic such as sex, age, occupation, annual income etc. In
addition the time horizon of investment and the real need/purpose of investment were studied and
Categorized based on the above demographic factors.

It was also intended to examine the different intrinsic factors of a mutual fund scheme and different
environmental forces that motivate a investor to choose a particular mutual fund scheme.

MARKET SURVEY:

DESIGNING A QUESTIONAIRE

To understand the savings avenue preference, scheme preference, time horizon for investment and
objectives for investment in MFs, and to identify the information sources influencing scheme selection,
and the preferred mode of communication, a questionnaire was designed and
the respondents were asked to rank their preferences on a ranking scale. The ranks were
ascertained by obtaining the weighted mean value of the responses.

To identify the factors that influence the investors fund/scheme selection, 4 variables were identified
through evidence from past research. Based on theory, past research, and personal judgment, the
factors that could influence the investors in their selection of Mutual funds/schemes.

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 9

SAMPLE SELECTION

Survey was conducted on 75 investors. The survey was conducted during July-Aug 2009.
The required data was collected through a questionnaire which was Administered through different
techniques i.e. - through telephone, emails.

 Age Distribution in Sample

 Occupational Distribution in Sample

 Annual Income Distribution in Sample

 Objective for Investment in Mutual Fund

OBJECTIVE RANK
Safety 1
Liquidity 4
Tax Benefit 3
Dividend 2
Capital Appreciation 5

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 10

ANALYSIS OF THE DATA COLLECTED

ANALYSIS TOOLS
Here we are using two tools for analysis of the data collected. The objective is to determine
whether Mutual funds are preferred by the investors. The two tools involved are:

 CHI-SQUARE

A chi-square test (also chi-squared or χ2 test) is any statistical hypothesis test in

which the sampling distribution of the test statistic is a chi-square distribution when
the null hypothesis is true, or any in which this is asymptotically true, meaning that
the sampling distribution (if the null hypothesis is true) can be made to approximate a
chi-square distribution as closely as desired by making the sample size large enough.

 ANOVA

In statistics, analysis of variance (ANOVA) is a collection of statistical models, and their

associated procedures, in which the observed variance is partitioned into components due
to different explanatory variables, usually called factors in Design of experiments. The
initial techniques of the analysis of variance were pioneered by the statistician and
geneticist R. A. Fisher in the 1920s and 1930s, and are sometimes known as Fisher's
ANOVA or Fisher's analysis of variance, due to the use of Fisher's F-distribution as part
of the test of statistical significance.

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 11

DATA Distribution for different Investments in India

Age Wise
Distribution

Postal
Mutual Fixed Service Stock Provident
Age Fund Deposit Life Insurance s s Fund
below 30 9 0 1 0 4 2
30-40 6 4 2 1 3 3
40-50 5 3 3 1 3 5
Above 50 5 1 6 3 2 3
Total 25 8 12 5 12 13

Occupation Wise Distribution

Postal
Mutual Fixed Service Stock Provident
Occupation Fund Deposit Life Insurance s s Fund
Businessma
n 8 2 4 0 6 0
Salaried 13 4 1 2 4 9
Retired 4 2 7 3 2 4
Total 25 8 12 5 12 13

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 12

Annual Income Wise Distribution

Postal
Mutual Fixed Service Stock Provident
Income Fund Deposit Life Insurance s s Fund
<150000 2 0 0 5 1 1
150000-
300000 11 2 2 0 2 2
300000-
400000 7 4 5 0 5 3
>400000 5 2 5 0 4 7
Total 25 8 12 5 12 13

Objective for Investment

Life
Mutual Fixed Insuranc Postal Provident
Objective Fund Deposit e Services Stocks Fund
Tax Benefit: 10 0 3 0 3 7
Capital
Appreciation
: 8 0 0 0 4 0
Return 5 3 4 2 2 2
Liquidity 0 0 0 0 3 0
Safety 2 5 5 3 0 4
Total 25 8 12 5 12 13

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 13

(1) Age Wise Distribution

(a)Calculation for Chi-Square

H0 : Preference for type of investment does not depend on age

H1 : Preference for type of investment does depend on age

Mutual Fixed Life Postal Provident

Age Fund Deposit Insurance Services Stocks Fund Total
below
30 9 0 1 0 4 2 16
30-40 6 4 2 1 3 3 19
40-50 5 3 3 1 3 5 20
Above
50 5 1 6 3 2 3 20
Total 25 8 12 5 12 13 75

(f0 -
Row Column f0 fe = RT*CT/n f0 - f e fe)2 (f0 - fe)2/fe

1 1 9 5.33 3.67 13.444 2.521

1 2 0 1.71 -1.71 2.913 1.707
1 3 1 2.56 -1.56 2.434 0.951
1 4 0 1.07 -1.07 1.138 1.067
1 5 4 2.56 1.44 2.074 0.810
1 6 2 2.77 -0.77 0.598 0.216
2 1 6 6.33 -0.33 0.111 0.018
2 2 4 2.03 1.97 3.894 1.921
2 3 2 3.04 -1.04 1.082 0.356
2 4 1 1.27 -0.27 0.071 0.056
2 5 3 3.04 -0.04 0.002 0.001
2 6 3 3.29 -0.29 0.086 0.026
3 1 5 6.67 -1.67 2.778 0.417
3 2 3 2.13 0.87 0.751 0.352
3 3 3 3.20 -0.20 0.040 0.013
IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 14

3 4 1 1.33 -0.33 0.111 0.083

3 5 3 3.20 -0.20 0.040 0.013
3 6 5 3.47 1.53 2.351 0.678
4 1 5 6.67 -1.67 2.778 0.417
4 2 1 2.13 -1.13 1.284 0.602
4 3 6 3.20 2.80 7.840 2.450
4 4 3 1.33 1.67 2.778 2.083
4 5 2 3.20 -1.20 1.440 0.450
4 6 3 3.47 -0.47 0.218 0.063
χ2 17.268
Degrees of freedom = (4-1) x (6-1) = 15
For α = 0.05 , tabulated Chi-Square = 24.996
Hence, we accept H0 which says that preference for type of investment does not depend on
age.

(b) Calculation for ANOVA

H01: α1= α2= α3=…………..= αi <--- All rows effect are Homogeneous.

H02: β1= β2= β3……………….= βi<-- All columns effect are Homogeneous.

H11: All rows effect is not homogeneous

H12: All columns effect is not homogeneous

ANOVA: Two-Factor Without

Replication

Su Averag Varian
SUMMARY Count m e ce
2.6666 11.8666
Row 1 6 16 67 7
3.1666 2.96666
Row 2 6 19 67 7
3.3333 2.26666
Row 3 6 20 33 7
3.3333 3.46666
Row 4 6 20 33 7

3.58333
Column 1 4 25 6.25 3
3.33333
Column 2 4 8 2 3
IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 15

4.66666
Column 3 4 12 3 7
1.58333
Column 4 4 5 1.25 3
0.66666
Column 5 4 12 3 7
1.58333
Column 6 4 13 3.25 3

ANOVA
Source of P-
Variation SS df MS F value F crit
1.7916 0.5972 0.8937 3.28738
Rows 67 3 22 0.2015 27 2
3.93908 0.0175 2.90129
Columns 58.375 5 11.675 2 98 5
44.458 2.9638
Error 33 15 89

104.62
Total 5 23        

Conclusion:

(i)Row Wise

As Fcritical is greater than Fcomputed therefore H01 is accepted.

(ii)Column Wise

As Fcritical is less than Fcomputed therefore H12 is accepted.

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 16

(2)Occupation Wise
Distribution

Mutual Fixed Life Postal Provident

Occupation Fund Deposit Insurance Services Stocks Fund Total
Businessman 8 2 4 0 6 0 20
Salaried 13 4 1 2 4 9 33
Retired 4 2 7 3 2 4 22
Total 25 8 12 5 12 13 75

(a)Calculation for Chi-Square

Ho:Preference for Type of Investment and Occupation are independent
H1:Preference for Type of Investment is dependent on Occupation
a=0.05
Degrees of (Total rows-1)*(Total
Freedom= Columns-)
(3-1)*(6-1)
10

Row Column ((fo-

Row Column f0 Total(RT) Total(CT) fe=(RT*CT)/n fe)^2)/fe
1 1 8 20 25 6.666667 0.2666667
1 2 2 20 8 2.133333 0.0083333
1 3 4 20 12 3.2 0.2
1 4 0 20 5 1.333333 1.3333333
1 5 6 20 12 3.2 2.45
1 6 0 20 13 3.466667 3.4666667
2 1 13 33 25 11 0.3636364
2 2 4 33 8 3.52 0.0654545
2 3 1 33 12 5.28 3.4693939
2 4 2 33 5 2.2 0.0181818
2 5 4 33 12 5.28 0.310303
2 6 9 33 13 5.72 1.8808392
IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 17

3 1 4 22 25 7.333333 1.5151515
3 2 2 22 8 2.346667 0.0512121
3 3 7 22 12 3.52 3.4404545
3 4 3 22 5 1.466667 1.6030303
3 5 2 22 12 3.52 0.6563636
3 6 4 22 13 3.813333 0.0091375
χ2 21.108159

Tabulated Value at 0.05 Significance Level= 18.307

Computed value= 21.108

Here the Computed Value comes out to be greater than the Tabulated value hence the
Null Hypothesis is rejected.
Conclusion: H1 is accepted i.e. Preference for Type of Investment is dependent
On Occupation.

(b) Calculation for ANOVA

ANOVA: Two-Factor Without
Replication

H01: α1= α2= α3=…………..= αi <--- All

rows effect are Homogeneous.

H02: β1= β2= β3……………….= βi<-- All

columns effect are Homogeneous.

H11: All rows effect is not

homogeneous

H12: All columns effect is not

homogeneous

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 18

Su Varianc
SUMMARY Count m Average e
3.33333 10.6666
Row 1 6 20 3 7
Row 2 6 33 5.5 21.1
3.66666 3.46666
Row 3 6 22 7 7

8.33333 20.3333
Column 1 3 25 3 3
2.66666 1.33333
Column 2 3 8 7 3
Column 3 3 12 4 9
1.66666 2.33333
Column 4 3 5 7 3
Column 5 3 12 4 4
4.33333 20.3333
Column 6 3 13 3 3

ANOVA
Source of
Variation SS df MS F P-value F crit
16.3333 8.16666 0.83050 0.46378 4.10282
Rows 3 2 7 8 6 1
77.8333 15.5666 1.58305 0.25059 3.32583
Columns 3 5 7 1 1 5
98.3333 9.83333
Error 3 10 3

Total 192.5 17        

Conclusion:

(i)Row Wise
IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 19

As Fcritical is greater than Fcomputed therefore H01 is accepted.

(ii)Column Wise

As Fcritical is greater than Fcomputed therefore H02 is accepted.

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 20

(3)Annual Income Wise

Distribution

Fixed Life Postal

Mutua Deposi Insuranc Service Provide
Income l Fund t e s Stocks nt Fund Total
<150000 2 0 0 5 1 1 9
150000-
300000 11 2 2 0 2 2 19
300000-
400000 7 4 5 0 5 3 24
>400000 5 2 5 0 4 7 23
Total 25 8 12 5 12 13 75

(a)Chi-
square
We have to check if a person's choice is affected by the income of that person or not.
This can be checked using chi-square.

Ho: Income and preference are independent <--- Null hypothesis

H1: Preference depends on income <---alternate
hypothesis

level of significance=α=0.05

colum (fo- (fo-

Row n fo Fe fo-fe fe)^2 fe)^2/fe
1 1 2 3 -1 1 0.33333
1 2 0 0.96 -0.96 0.9216 0.96
1 3 0 1.44 -1.44 2.0736 1.44
1 4 5 0.6 4.4 19.36 32.2667
1 5 1 1.44 -0.44 0.1936 0.13444
1 6 1 1.56 -0.56 0.3136 0.20103
4.6666 21.7777
2 1 11 6.333333 7 8 3.4386
0.00071
2 2 2 2.026667 -0.0267 1 0.00035
2 3 2 3.04 -1.04 1.0816 0.35579
1.60444
2 4 0 1.266667 -1.2667 4 1.26667
2 5 2 3.04 -1.04 1.0816 0.35579
IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 21

1.67271
2 6 2 3.293333 -1.2933 1 0.50791
3 1 7 8 -1 1 0.125
3 2 4 2.56 1.44 2.0736 0.81
3 3 5 3.84 1.16 1.3456 0.35042
3 4 0 1.6 -1.6 2.56 1.6
3 5 5 3.84 1.16 1.3456 0.35042
3 6 3 4.16 -1.16 1.3456 0.32346
7.11111
4 1 5 7.666667 -2.6667 1 0.92754
0.20551
4 2 2 2.453333 -0.4533 1 0.08377
4 3 5 3.68 1.32 1.7424 0.47348
2.35111
4 4 0 1.533333 -1.5333 1 1.53333
4 5 4 3.68 0.32 0.1024 0.02783
3.0133 9.08017
4 6 7 3.986667 3 8 2.27764
2
χ 50.1434

Degrees of freedom=(row-1)(column-1)=(4-1)(6-
1)=3*5=15
therefore, from the table, the value is 24.996

Here, the calculated value is much higher than the table

value.
i.e., the value lies outside the acceptance region so we reject the null
hypothesis
and accept the alternate hypothesis that the preference and income are dependent on each
other.

(b) Calculation for ANOVA

H01: α1= α2= α3=…………..= αi <--- All rows effect are Homogeneous.

H02: β1= β2= β3……………….= βi<-- All columns effect are Homogeneous.

H11: All rows effect is not homogeneous

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 22

H12: All columns effect is not homogeneous

ANOVA: Two-Factor Without Replication

Su Varianc
SUMMARY Count m Average e
Row 1 6 9 1.5 3.5
Row 2 6 19 3.166667 15.36667
Row 3 6 24 4 5.6
Row 4 6 23 3.833333 6.166667

Column 1 4 25 6.25 14.25

Column 2 4 8 2 2.666667
Column 3 4 12 3 6
Column 4 4 5 1.25 6.25
Column 5 4 12 3 3.333333
Column 6 4 13 3.25 6.916667

ANOVA
Source of
Variation SS df MS F P-value F crit
0.33097
Rows 23.45833 3 7.819444 1.237363 3 3.287382
0.16393
Columns 58.375 5 11.675 1.847473 2 2.901295
Error 94.79167 15 6.319444

Total 176.625 23        

Conclusion:

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 23

(i)Row Wise

As Fcritical is greater than Fcomputed therefore H01 is accepted.

(ii)Column Wise

As Fcritical is greater than Fcomputed therefore H02 is accepted.

(4)Objective for
Investment
Postal
Mutual Life Service Provident
Objective Fund Fixed Deposit Insurance s Stocks Fund Total
Tax Benefit:
10 0 3 0 3 7 23
Capital
Appreciation:
8 0 0 0 4 0 12
Return 5 3 4 2 2 2 18
Liquidity 0 0 0 0 3 0 3
Safety 2 5 5 3 0 4 19
Total 25 8 12 5 12 13 75

(a)Calculation for Chi-Square

Ho:Preference for Type of Investment and Objective are independent

H1:Preference for Type of Investment is dependent on Objective
a=0.05
Degrees of Freedom= (Total rows-1)*(Total Columns-1)
(5-1)*(6-1)
20

Row Total Column (fo-

Row Column (RT) Total(CT) fo fe fe)^2/fe
1 1 23 25 10 7.67 0.71
1 2 23 8 0 2.45 2.45
1 3 23 12 3 3.68 0.13
IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 24

1 4 23 5 0 1.53 1.53
1 5 23 12 3 3.68 0.13
1 6 23 13 7 3.99 2.28
2 1 12 25 8 4.00 4.00
2 2 12 8 0 1.28 1.28
2 3 12 12 0 1.92 1.92
2 4 12 5 0 0.80 0.80
2 5 12 12 4 1.92 2.25
2 6 12 13 0 2.08 2.08
3 1 18 25 5 6.00 0.17
3 2 18 8 3 1.92 0.61
3 3 18 12 4 2.88 0.44
3 4 18 5 2 1.20 0.53
3 5 18 12 2 2.88 0.27
3 6 18 13 2 3.12 0.40
4 1 3 25 0 1.00 1.00
4 2 3 8 0 0.32 0.32
4 3 3 12 0 0.48 0.48
4 4 3 5 0 0.20 0.20
4 5 3 12 3 0.48 13.23
4 6 3 13 0 0.52 0.52
5 1 19 25 2 6.33 2.96
5 2 19 8 5 2.03 4.36
5 3 19 12 5 3.04 1.26
5 4 19 5 3 1.27 2.37
5 5 19 12 0 3.04 3.04
5 6 19 13 4 3.29 0.15
χ2 51.88

Tabulated Value at 0.05 Significance Level= 31.41

Computed value= 51.8774

Here the Computed Value comes out to be greater than the Tabulated value hence the Null

Hypothesis is rejected

To conclude H1 is accepted i.e. Preference for Type of Investment is dependent on Objective

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 25

(b) Calculation for ANOVA

H01: α1= α2= α3=…………..= αi <--- All rows effect are Homogeneous.

H02: β1= β2= β3……………….= βi<-- All columns effect are Homogeneous.

H11: All rows effect is not homogeneous

H12: All columns effect is not homogeneous

ANOVA: Two-Factor Without Replication

Su Varianc
SUMMARY Count m Average e
Row 1 6 23 3.833333 15.76667
Row 2 6 12 2 11.2
Row 3 6 18 3 1.6
Row 4 6 3 0.5 1.5
Row 5 6 19 3.166667 3.766667

Column 1 5 25 5 17
Column 2 5 8 1.6 5.3
Column 3 5 12 2.4 5.3
Column 4 5 5 1 2
Column 5 5 12 2.4 2.3
Column 6 5 13 2.6 8.8

ANOVA
IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 26

Source of
Variation SS Df MS F P-value F crit
Rows 40.33333 4 10.08333 1.646707 0.20179 2.866081
0.22671
Columns 46.7 5 9.34 1.525313 2 2.71089
Error 122.4667 20 6.123333

Total 209.5 29        

Conclusion:

(i)Row Wise

As Fcritical is greater than Fcomputed therefore H01 is accepted.

(ii)Column Wise

As Fcritical is greater than Fcomputed therefore H02 is accepted.

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 27

CONCLUSION
As per the calculation, the preference for investment type is affected/not affected by different
variables as follows:

As per Chi-Square:

Factor Effect
Age No
Occupation Yes
Annual Income Yes
Objective of Investment Yes

It is evident from the above analysis the choice of investment depends upon all the factors except
Age.

As per ANOVA:
The Calculations of ANOVA reveal that there is Homogeneity within the whole set of data with
respect to type of investment and annual income, type of investment and objective of investment
and type of investment and occupation of the investor except for the type of investment and age
factor.

IBS HYDERABAD
 FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN
INDIA 28

REFERENCES
1. www.moneycontrol.com

2. www.amfiindia.com

3. www.wikepedia.com

4. www.investopedia.com

5. Statistics for management (Pearson) by Richard I.Levin and David S.Rubin

IBS HYDERABAD