Final Association of Financial Literacy, Financial Exposure, and Investment Personality

INTERNATIONAL INSTITUTE OF PROFESSIONAL
STUDIES
RESEARCH TOPIC:
Association of Financial Literacy, Financial Exposure, and Investment Personality
of Individuals in Indore: An Investigation
GUIDED BY: SUBMITTED BY:

CS Dr. Manish Sitlani Maitri Kothari
MBA(MS)- 5 years
10th semester
IM-2K18-57
DECLARATION
This is to declare that the work presented under this dissertation entitled
“Association of Financial Literacy, Financial Exposure and Investment Personality of
Individuals in Indore: An Investigation” submitted by me is an outcome of my
original work carried on during the session Jan-May, 2023. I have duly
acknowledged all the sources from where ideas and extracts have been taken.
Maitri Kothari
MBA (MS), 5 years
10th semester
Roll no.: IM-2K18-57
2
II
CERTIFICATE
I hereby certify that the dissertation work entitled “Association of Financial Literacy,
Financial Exposure and Investment Personality of Individuals in Indore: An
Investigation”, is carried on by Maitri Kothari, student MBA(MS), 5 years, 10th
Semester (Jan-May, 2023), Roll No. IM-2K18-57. This is the original record of
research work carried on by her under my guidance and supervision. I am fully
satisfied with her work.
CS Dr. Manish Sitlani
Associate Professor,
IIPS, DAVV
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III
ACKNOWLEDGEMENT
A project is never an effort of single person; there is always a team and a mentor
who contribute in one or more ways. The credit for the completion of this research
project goes to all the people without whom a project would not have been a success.
I would like to thank all the people who directly and indirectly contributed in this
research. I would like to express my gratitude towards CS Dr. Manish Sitlani for his
inspiring thoughts and explanation. It is indeed a great pride for me to acknowledge
a deep gratitude for the valuable guidance and continuous assistance extended to me
by my guide. I am very thankful to my parents and friends who supported me in
every possible way and encouraged me throughout this research project. I would like
to thank Dr. Tripathi, director of International Institute of Professional Studies who
gave me this opportunity to do this research project.
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IV
TAbLE OF CONTENTs
Chapter Title Page No.
DECLARATION OF THE SCHOLAR I
CERTIFICATE OF SUPERVISOR II
ACKOWLEDGEMENT III
TABLE OF CONTENTS IV
LIST OF CHARTS AND DAIGRAM V
LIST OF TABLES VI
ABSTRACT VII
1. INTRODUCTION AND RATIONALE 11- 16
1.1 Introduction 12
1.2 Financial Literacy 13
1.3 Financial Exposure 13
1.4 Investment Personality 14
1.5 Rationale of Study 15
1.6 Expected Contribution 16
2. LITERATURE REVIEW 17- 25
2.1 Introduction 18
2.2 Review of Investment Personality of Individuals 18
2.3 Review of Financial Literacy of Individuals 20
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2.4 Review of Financial Exposure of Individuals 23

2.5 Research Gap 23
2.6 Problem Statement 24
2.7 Objective of study 24
3 RESEARCH METHEDOLOGY 26-33
3.1 The Study 27
3.2 Instrument for measuring Financial Exposure 27
3.3 Instrument for measuring Financial Literacy 29
3.4 Instrument for measuring Investment Personality 30
3.4.1 Reliability of the Instrument 30
3.5 Data collection and Data Analysis 31
3.6 Generation of Research Hypothesis 31
3.7 Conceptual Framework of Research 33
4 DATA PRESENTATION AND DATA ANALYSIS 34- 47
4.1 Demography of Respondents 35
4.2 Financial Exposure of Individual Respondents 38
4.3 Financial Literacy of Individual Respondents 39
4.4 Investment Personality of Individual Respondents 40
4.5 Association of Financial Exposure and Investment 41
Personality of Individuals in Indore
4.6 Association of Financial Literacy and Investment 44
Personality of Individuals in Indore
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4.7 Association of Financial Literacy and Financial Exposure 45

of Individuals in Indore
4.8 Discriminant Analysis. 46
5 48- 59
FINDINGS AND DISCUSSIONS
5.1 Major Discussions and Findings 49
5.1.1 Financial Exposure of Individuals in Indore 49
5.1.2 Financial Literacy of Individuals in Indore 50
5.1.3 Investment Personality of Individuals in Indore 50
5.1.4 Association of Financial Exposure and Investment 51
Personality of the Individuals in Indore.
5.1.5 Association of Financial Literacy and Investment 52
Personality of the Individuals in Indore.
5.1.6 Association of Financial Exposure and Financial Literacy 53
of the Individuals in Indore.
5.1.7 Impact of Investment Personality on Financial Exposure 53
of Individuals in Indore
5.2 PRACTICAL IMPLEMENTATIONS 54
5.3 LIMITATION OF STUDYS 55
5.4 SCOPE OF FUTURE RESEARCH 57
5.5 CONCLUSION 58
REFERENCES 60
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LIsT OF CHARTs
2.1 Snap shot of Review of Literature 18
3.7 Conceptual Diagram of Study 33
4.1 Demographic characteristics of Respondents 37
4.2 Frequency distribution of scores of Financial Exposure 38
of respondents
4.3 Frequency distribution of scores of Financial Literacy of 39
respondents
4.4 Frequency distribution of scores of Investment 40
Personality of respondents
4.5.1 count of financial exposure and Investment Personality 41
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VI
LIsT OF TAbLEs
2.2.1 Research paper supporting association of Financial 23
Literacy and Investment Personality
3.2.1 Dimensions of Financial Exposure 28
3.3.1 Dimensions of Financial Literacy 29
3.4.1(a) Reliability Analysis 30
4.4.1 Demographic characteristics of Respondents 36
4.5.1(a) Investment Personality and Financial Exposure 42
Crosstabulation
4.5.2 Mann Whitney Table 43
4.6.1 Chi-Square Tests of Financial literacy and Investment 44
Personality
4.7.1 Chi-Square Tests of Financial Literacy and Financial 45
Exposure
4.8.1 Discriminant Analysis 46
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VII
AbsTRACT
This research is attempted to explore the association of financial literacy and financial exposure
with investment personality of individuals in Indore and attempted to explore the impact of
investment personality on financial exposure. This is primary research for which questionnaire
was sent to 132 respondents out of which 101 respondents have filled the it. The questionnaire was
filled by fresh finance graduates who have recently joined the job, people who are doing business,
and people who are doing job from long time. The data analysis was done on software named
SPSS16 and data analysis technique used for this research is chi square. Various other techniques
like Mann Whitney U test and Discriminant analysis are also used to better understand the
association. It is evident that there is large number of research done on financial literacy of
individuals throughout the world but researchers have not explored financial exposure of
individuals thoroughly in area of behavioral finance. This study is conducted on individuals in
Indore. Findings of this research suggest that there is an association between financial exposure
and investment personality, the impact of this association is also studied using discriminant
analysis.
KEYWORDS: Investment Personality, Financial Literacy, and

Financial Exposure
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CHAPTER 1
INTRODUCTION AND RATIONALE
1.1 INTRODUCTION
1.2 FINANCIAL LITERACy
1.3 FINANCIAL ExPOsURE
1.4 INVEsTMENT PERsONALITy
1.5 RATIONALE OF THE sTUDy
1.6 ExPECTED CONTRIbUTION
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1.1 INTRODUCTION
While the sector of personal finance has largely grown in the last few years; there is still a need
for financial literacy to grow to make the sector easier to understand for consumers. As per a recent
report by SEBI, only 27% of the country’s population is financially literate. This highlights the
need to make people aware about financial literacy across the country, specially in Tier 2/ 3 cities
and beyond.
Covid has been a testimony to the importance of building a thought-through financial corpus.
People have faced financial shocks, because of sudden job losses, decrease in salary; businesses
across the globe faced huge challenges. But the other side of coin is that, people realized the
importance of savings and investments to tackle any emergency situation like COVID-19.
Consumers realized how helpful money management could become to secure their future.
Digitalization is growing on the rapid pace across the globe. The growth of fintech companies and
various digital solutions have been helping consumers with financial literacy and saving plans.
Multiple personal finance apps have been developed, which can track and keep a record of one’s
expenditure and investments, which in turn helps save money in a disciplinary manner, and check
and improve the credit score. Some apps even help consumers explore unwanted subscriptions so
that consumers can cancel them and focus on savings. Various apps come with investment guiding
tools and methods. Such apps can be considered as an important tool for consumers’ financial
literacy. However, consumers should check the credibility, and security of the apps and then start
using and recommending them.
After Covid, there has been a huge increase in number of seminars and conferences offering
financial literacy. Along with banks, financial platforms, personal finance companies, individual
financial experts have also started such virtual program to help consumers understand investment
tools. Involving in such conferences can boost confidence in young professionals, freshers, and
women take more informed financial decisions.
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1.2 FINANCIAL LITERACY

Lewis Mandell in his research paper namely Financial Literacy: If It’s So Important, Why Isn’t It
Improving? (April 2006) has defined financial literacy as something which every person should
know who is investing their money, in order to make financial decisions it is important for a person
to have financial knowledge. Lack of financial literacy can lead to bad financial decisions which
will lead to misery and debt.
Financial literacy is nothing but the ability to use one’s financial skills in such a manner that the
person can live a financially good life (Sanderson, 2015). If a person has good financial literacy
than he can use this knowledge to identify various financial products and helps to know in which
financial product he can invest keeping the risk, time and return factor in mind. Bonga and Mlambo
(2016) in their research paper wrote that financial literacy is important for all the people and it will
lead to financial stability amongst themselves. Hence more the people are financially literate more
will financial markets will develop and less frauds will take place.
Government is also taking interest in this field and it has introduced many policies and initiatives
in order to improve financial literacy among people. Worldwide, 35 percent of men are financially
literate, compared with 30 percent of women (Klapper,Lusardi and Oudheusden, 2015).
Financial literacy is the capacity to apprehend and correctly use various monetary competencies,
consisting of personal monetary control, budgeting, and making an investment. The that means of
economic literacy is the muse of your relationship with cash, and it's far a lifelong journey of
mastering. The earlier you start, the better off you may be due to the fact training is the key to
fulfillment on the subject of cash. (Investopedia)
1.3 FINANCIAL EXPOSURE

 Financial exposure is the amount an investor stands to lose in an funding have to the
investment fail. For instance, the monetary publicity worried in shopping a vehicle would
be the initial funding quantity minus the insured portion. Knowing and expertise economic
exposure, that's an opportunity name for danger, is a critical part of the investment method
 The only manner to reduce economic publicity is to spend money on foremost-covered
investments with little to no risk. Certificates of deposit (CDs) or savings debts are ways
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to reduce monetary publicity extensively. Federal Deposit Insurance Corporation (FDIC)

ensures both the investment in CDs and the financial savings account as much as the
certified coverage quantities of $250,000.
 Hedging is another manner to reduce financial exposure. There are many ways to hedge a
portfolio or an investment. Airlines often buy crude oil future contracts at modern expenses
in anticipation of destiny passenger load as a hedge. Later, if oil costs skyrocket and
purpose the airline industry to raise price tag prices and shrink margins, the ones hedged
Airlines can be able to preserve lower ticket fees and snatch marketplace percentage from
the competition.
 An investor can hedge within the stock marketplace by way of using alternatives, inverse
alternate-traded budget, or undergo-oriented price range. Gold is one of the most not
unusual hedges, and it usually appreciates with an inflating greenback or volatile markets.
1.4 INVESTMENT PERSONALITY

Personality of an individual is a combination of several characteristics. And personality may vary
according to these characteristics. A specific personality trait may affect behavior of person in
certain manner like it may affect spending, security and portfolio management (Mayfield et al.,
2008) and risk apatite (Nga & Yien, 2013), alcohol consumption (McAdams & Donnellan, 2009)
and political aspect (Gerber et al., 2011). Financially knowledgeable person takes financial
decisions that are beneficial for their family and loved ones (Hilgert et al., 2003). And those who
are less financially literate have no retirement plans (Hilgert et al., 2003; Lusardi and Mitchell,
2007), are mostly in debt (Lusardi and Tufano, 2015), have less profitable or loss-making portfolio
(Calvet et al., 2007). Personality as defined by Phares (1991) “is a pattern of characteristic
thoughts, feelings, and behaviours that distinguishes one person from another and that persists over
time and situation’. Personality influences the risk tolerance level of an individual which in turn
affects the investment decisions of an individual. (Olga and Manowar, 2015). Though individual
personality often differs from person to person even in the same age group
According to big five personality traits, personality can be classified as the following:
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 Neuroticism (N) High scores indicates that person is tensed, mood swings , anxiety,
depression and insecurity
 Extraversion (E) High scores indicates that the person is assertive, has social skills,
talkative in nature, optimistic, and being upbeat and energetic
 Openness (O) High scores indicates that person is creative an active imaginer, always
prefers variety, intellectual curiosity, and broad cultural interest
 Agreeableness (A) High scores indicates that the person is sympathetic towards others,
helpful and cooperative in nature, and has personal warmth,
 Conscientiousness (C) High scores indicates that the person has purposefulness, the person
is being strong willed, determined, organized, reliable, and punctual in nature.
1.5 RATIONALE OF STUDY

After Covid- 19 each person has understood the importance of second income. In other words,
having a source of income which is not affected by the primary or main source of income. For
example, many employees provide free lancing services in their free time, many start a small
business along with their job and some of them start investing their excess income. According to
Times of India 142 lakh new investors joined the share market after COVID- 19 and hence it is
very important to study the characteristics of this population who is investing. The increasing
interest of people in stock market has opened a new area of research in field of behavior finance.
This study helps understanding factors that affect investing personality of an individual which
affects the investing decisions. This study investigates whether financial literacy and risk-taking
capacity affects the investment behavior of investors.
This is an interesting topic to do research on because this would help to understand the terms
financial literacy and financial exposure practically. How people deal with these terms in real life.
Because according to me finance is much more than applying formulas. Bookish knowledge is not
enough for understanding finance.
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1.6 EXPECTED CONTRIBUTION

This study is conducted on individuals in Indore it contributes to understand the association of
financial exposure and financial literacy with investment personality of individuals in Indore. This
research will help the financial service providers in this region to develop certain financial products
that would fulfil financial needs of customers of Indore. Behavior of male and female of any metro
city is different from the behavior of male and female of Indore which is a tier II city, so their
needs are also different and hence different financial products are needed. This research work may
add knowledge to behavioral finance discipline.
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CHAPTER- 2
REVIEW OF LITERATURE
2.1 INTRODUCTION
2.2 REVIEW RELATED TO INVEsTMENT PERsONALITy OF

INDIVIDUALs
2.3 REVIEW RELATED TO FINANCIAL LITERACy OF INDIVIDUALs
2.4 REVIEW RELATED TO FINANCIAL ExPOsURE OF INDIVIDUALs
2.5 REsEARCH GAP
2.6 PRObLEM sTATEMENT
2.7 ObjECTIVEs OF THE sTUDy
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2.1 INTRODUCTION
The researcher attempted to explore the available body of knowledge related to Investment
Personality, Financial Literacy, Financial Exposure nationally and globally. Snapshot of literature
review is presented below.
INVESTMENT PERSONALITY
LITERATURE REVIEW FINANCIAL LITERACY
FINANCIAL EXPOSURE
2.2 REVIEW RELATED TO INVESTMENT PERSONALITY OF

INDIVIDUALS
Cliff Mayfield, Grady Perdue and Kevin Wooten in their research paper investment management and
personality type tried to study various psychological antecedents to both short-term and long-term
investment intentions, with specific focus on the Big Five personality taxonomy. They found out that those
who are willing to take risk generally invest in short term investments and those who want risk aversion
generally invest in long term investment assets.
Impact of financial literacy on the investment decisions: Mediating effect of big five personality trait model
explains that how financial literacy affects investment decisions. 235 samples were collected from Karachi,
Pakistan of which 166 were females and 69 were males. The conceptual framework is based on three
theories, i.e., theory of planned behavior (Ajzen, 1985), prospect theory (Kahneman & Tversky, 1979) and
five-factor personality model (Digman, 1990). For this study direct path analysis and indirect path analysis
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were used as data analysis tools and it was identified that financial literacy and all five mediators including
agreeableness, conscientiousness, extraversion, openness to experience and neuroticism can predict
investment decisions by 89.5 percent. Hence financial literacy and big five personality traits help to take
investment decision.
John O.P. and Srivastava in their research paper have described the scale that can me used to measure Big
Five Personality Traits. They have also mentioned about some articles that are related to environmental
influences on human psychological differences. There was another article written by Shiota, M.N., Keltner,
D., & John, O. P. (2006) which concluded about Positive emotion dispositions differentially associated with
Big Five personality and attachment style.
Miss. Sashikala V., Dr.P.Chitramani in their research paper ‘Personality of individual investors’ describes
about big five personality traits and what is its importance in investment area. A sample of 200 equity
investors from Coimbatore was taken. demographic factors were also considered in this research. According
to Fenton-O’Creevy et al., (2004) the big five personality traits are directly related to styles of affective
processing and impulse control. Investors tend to be emotionally stable, introverted, and open to new
experiences. A questionnaire including of Demographic trends, trading behavior and nature was developed
for the study. The result of this study shows that demographic factors do not have any significant effect on
equity investors personality traits though according to other researchers demographic factors do affect
personality trait of equity investors (Kiran and Rao, 2005; Olga and Monowar, 2015).
Research paper namely Big Five Personality Traits and Sustainable Investments (2019) written by Amanda
Hellbom & Erika Jigholm investigated that which personality type, on the basis of the Big Five personality
taxonomy, would be willing to exchange revenue for a higher ESG rating in a hypothetical investment fund,
the result was that private investors were willing to pay more for a more sustainable investment. The target
audience were the ones who had invested in Sweden stock market. Econometric approach and regression
were used as data analysis tools. In this research paper all the five traits of big five personality taxonomy
have been described in brief.
The Impact Of Investor’s Personality Traits Over Their Investment Decisions With The Mediating Role Of
Finanicial Self Efficacy And Emotional Biases And The Moderating Role Of Need For Cognition And The
Individual Mood In Pakistan Stock Exchange (2021) written by Nisar Khan, Abid Usman, Muhammad
Farooq Jan shows the impact of investor’s personality traits over their investment decisions with the
mediating role of financial self-efficacy and emotional biases and the moderating role of need for cognition
and the individual mood in Pakistan stock exchange. Questionnaire was filled by almost 500 people and
was analyzed using SPSS and single regression and multiple regression was used. The results show that the
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personality traits with respect to short- and long-term decision making only neuroticism is not supported
rest openness and consciousness result showed support towards long- and short-term decision making.
2.3 REVIEW RELATED TO FINANCIAL LITERACY OF

INDIVIDUALS
The effect of personality traits on households’ financial literacy, written by Teerapong Pinjisakikool aims
at justifying the relationship between personality of investors and their financial literacy level. The result
was that those who have controlling nature has more level of financial literacy than compared to other
personality traits. Linear regression model was used for analysis keeping financial literacy as dependent
variable and the independent variable were personality traits and other information like education,
demographic information and status. A questionnaire was filled by people of Dutch.
Impact of Personality Traits on Investment Intention: The Mediating Role of Risk Behavior and the
Moderating Role of Financial Literacy Article in Journal of Finance & Economic Research, March 2019
investigates that how risk is affecting personality traits and investment goals. The sample size of this
research is 284 students having finance background. Regression was the tool used as analysis in this
research. The result of this study was that risk behavior affects the short-term investment intention and long
term investment intention, but it affects partially.
The valuable subject matter of research paper namely A Study on level of Financial Literacy among Indian
Women (May 2018) elaborates on the financial literacy of the ladies inside the monetary quarter of Jaipur.
Based on the reactions, research located out that the economic literacy stage of women is based on their
financial know-how, mindset, and behavior. During the studies paintings following set of questions became
requested from the working women belonging to the Jaipur town. These questions were asked from around
a hundred and fifty respondents out of which a hundred spoke back as it should be and hence most effective
responses of a hundred respondents have been taken for evaluation and interpretation. Results from the
evaluation have found out that the working ladies of Jaipur such as the ones residing in urban regions aren't
much aware to one of a kind economic concept . The important cause in the back of that is that females are
notably ignorant approximately the current economic innovations in the market.
In research paper namely Financial Literacy: If It is So Important, Why Isn’t It Improving? (2006) author
Mr. Lewis Mandell measured financial literacy scores among various level of students. The research
included graduates of a small to medium sized Midwestern city which offered a well-regarded financial
literacy program in their high schools. The results were not at all good. Those who opted for that finance
course had very little financial knowledge. The researcher noticed that even after taking the financial
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literacy classes which taught how to open savings account, how to fill a cheque book and many more things,
there was no difference in manner of taking financial decisions. In this research it was also seen that those
students who play the stock market game had a better financial literacy score than other students. So, this
research is suggesting to play stock market game in order to improve financial literacy scores.
Financial Literacy Improvement among Women in Developing Nations: A Case for Zimbabwe. The aim of
this research paper was to identify things that would help to improve the financial literacy among women.
In the research it is assumed that the financial literacy score of men is much higher than that of women. 32
various methods were identified to make a positive impact on financial literacy of women. This research
was done on the population of Zimbabwe. Literacy rate in Zimbabwe is almost 90%. Researchers used an
Electronic Survey approach to collect data using the Monkey Survey site. The scale ranges from weak
impact (1) through to strongest impact (5). Almost 102 respondents filled the questionnaire. RII was used
as the tool of analysis for this research.
The paper reviews research of a examine at the influence of diverse socio-demographic elements on unique
dimensions of economic literacy most of the working young in city India. While the have an effect on of
numerous elements inclusive of gender, education and profits is just like what has been mentioned in other
contexts, some elements precise to India, such as joint-family and consultative selection making manner
are found to substantially have an effect on economic literacy. The look at additionally investigates the
connection among the dimensions of economic literacy. Adding to the growing empirical expertise of
financial literacy across international locations, the study affords an analytical basis for enunciating
coverage for enhancing financial literacy of children in India.
Financial expertise is a essential variable for measuring monetary literacy. Lusardi and Mitchell
(2011b) designed 3 questions, referred to as the “Big Three”, to assess economic knowledge based
at the ideas of compound hobby charges, actual go back quotes (and the effect of inflation), and
threat diversification. These questions were used all over the global and are conventional through
many scholars. However, others (e.G., Hastings, Madrian & Skimmyhorn 2013) criticize them,
claiming that they're incapable of measuring humans actual financial information. Indeed, each
Lusardi and Mitchell (2011a) and van Rooij (2011) talked about how financial expertise questions
suffer of sensitivity to framing associated with the interpretation of questions on financial
knowledge, so as to make comparisons among exclusive nations. Furthermore, one of the
maximum elaborate elements in measuring monetary literacy is the assessment among the most
mentioned definitions of monetary literacy and the variables used inside the literature to degree it
(Fernandes, Lynch & Netemeyer, 2014). Under the research paper A Proposal for a New Financial
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Literacy Questionnaire researchers have described the questionnaire for financial literacy.
Researchers tested the questionnaire on 269 respondents. They conducted exploratory factor
analysis to verify the validity, reliability, and applicability of the questionnaire. The result showed
that the questionnaire data is worth for determining the level of financial literacy.
Financial illiteracy could be very excessive amongst particular age, gender, earnings and
qualification (Lusardi and Mitchell, 2007b; 2008) Evidence of much less education and much less
financial sophistication is likewise proven in much less age respondents. Financial illiteracy has
essential results; folks that lack literacy will no longer be capable of makeplan for retirement
(Lusardi and Mitchell, 2006; 2007a; 2007c), could have less wealth near to retirement for this
reason can be having less potential to spend money on stocks (Vaan Rooij, et al., 2007; Kimball
and Shumway, 2006; Yoong, 2007), and will borrow at excessive hobby price (Lusardi and Tufano,
2009).
TABLE 2.2.1 research paper supporting association of financial literacy and investment personality
Impact of Financial Literacy and Investment Experience on Risk Tolerance and Investment
Decisions: Empirical Evidence from Pakistan, Mustabsar Awais, M. Fahad Laber, Nilofer
Rasheed, Aisha Khursheed, International Journal of Economics and Financial Issues, 2016, 6(1),
73-79.
The effect of personality traits on households’ financial literacy, Teerapong Pinjisakikool,

Citizenship, Social and Economics Education, 2017
Impact of Personality Traits on Investment Intention: The Mediating Role of Risk Behaviour
and the Moderating Role of Financial Literacy, Muhammad Nauman Sadiq & Raja Ased Azad
Khan, March 2019
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2.4 REVIEW RELATED TO FINANCIAL EXPOSURE OF

INDIVIDUALS
Financial exposure is basically the risk which an individual is exposed to. On an investigation it
was found that not much relevant literature is available nationally and globally on financial
exposure and behavioral finance it is a newer concept. The existing body of literature focuses on
risk tolerance, risk preferences, rationality, and irrationality, etc., financial exposure represents the
level of risks that one will face on taking a financial decision. An individual may face high financial
exposure because of many reasons like high number of dependents in family, low income, little
experience of taking financial decisions, high expense to income ratio, poor financial strength of
family and many other reasons. This literature is reviewed from a research paper done by CS Pinky
Shrivastava (2016) and scale for measuring financial exposure was taken from the research paper
of Sitlani and Sharma (2013).
2.5 RESEARCH GAP

Based on the extensive review of the literature. The researcher could identify the major gaps which
are as follows:
1. The literature available in the area of behavioral finance focuses on risk tolerance of
individuals which is psychological in nature. Some research paper focused on investment
personality and investment experience of individuals whereas other research papers
focused on financial literacy of individuals. But researchers could not come across any
notable study focusing on financial exposure of individuals.
2. Large number of studies are existing in available literature that are focusing on financial
literacy and investment personality of individuals from the perspective of developed
countries, i.e., the sample is drawn from developed city/ country or any metropolitan city.
No research has considered small towns or villages or tier II cities like Indore. Very little
attempts have been made on the similar lines on tier II cities in general and Indore
specifically.
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3. This study proves to be a milestone for future researchers while incorporating association
of financial exposure and financial literacy with the investing personality in Indore. On the
other hand, it will help investors as well on how much knowledge they should have to cope
up with risky situation.
2.6 PROBLEM STATEMENT

Based on the existing literature and rationale of the study, following problem statements have been
identified and this research is trying to answer these problem statement.
What is financial exposure, financial literacy, and investment personality of individuals in

Indore? Is financial exposure, financial literacy, and investment personality of individuals in
Indore associated to each other? Is there any impact of investment personality on financial
exposure?
2.7 OBJECTIVES OF STUDY

A person makes many selections on routine life. Some are of vital nature and one must have
intelligence to make the ones choices. Human being is not always impartial in making decisions,
there are number of things which affect the selection of character. Emotions are one of those
factors. Ability to renovate statistics into new concept is intelligence. Financial exposure means
the financial risk an individual is facing. Financial exposure is a very important factor which an
individual considers while taking any financial decision. The more will be the financial exposure
the more an individual will think before taking any financial decision. The discussion above says
that there is significant impact of financial exposure on investment decision and hence investment
personality of the person. Hence one of the objectives of this study is to explore the relationship
of Financial Exposure and Investment Personality.
Money is most important thing in anyone’s life. An individual works hard to earn money and thinks
a lot before spending it. It is very important to think before deciding where to invest that money
so that adequate returns can be generated and the money could be easily withdrawn in case of any
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emergency. Financial literacy is group of financial knowledge, financial skills and application level
in order to make any decision related to investment and finance (Altman, 2012). Educated people
know more about changing financial environment and financial markets. It is believed that those
who are outgoing and those who talk to their colleagues and friends are more aware of current
happenings in financial markets. Word of-mouth communication conveys information effectively
due to geographical closeness (Bönte& Filipiak, 2012). Financial literacy plays important role
taking any the investment decision (Rooij, Lusardi, & Alessie, 2007; Al-Tamimi & Kalli, 2009;
Rooij & Lusardi, 2009). If individuals have positive attitude to take risky decisions that can be
improved by participation in the decision-making process and it can also be corrected with a
facilitation of quality information to decision makers (Altman, 2012). Another objective of this
study is to explore the relationship of Financial Literacy and Investment Personality.
Broad objectives of study on the basis of above discussions are as follows:
1. To explore/ measure Financial Exposure, Financial Literature, and Investment personality

of individuals of Indore
2. To explore the relationship of Financial Exposure and Investment Personality.
3. To explore the relationship of Financial Literacy and Investment Personality.
4. To explore the relationship of Financial Literacy and Financial Exposure.
5. Explore the discriminant ability of Investment Personality of individuals in Indore from
the perspective of their Financial Exposure
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CHAPTER- 3
REsEARCH METHEDOLOGy
3.1 THE sTUDy
3.2 INsTRUMENT FOR MEAsURING FINANCIAL ExPOsURE
3.3 INsTRUMENT FOR MEAsURING FINANCIAL LITERACy
3.4 INsTRUMENT FOR MEAsURING INVEsTMENT PERsONALITy
3.5 DATA COLLECTION AND DATA ANALysIs TOOLs
3.6 GENERATION OF REsEARCH HyPOTHEsIs
3.7 CONCEPTUAL FRAMEWORK OF REsEARCH
26
3.1 The Study

The main objective of this research work is to explore association of financial exposure and
financial literacy with investment personality of individuals. For this research, an empirical
investigation was conducted on the respondents of Indore city. The rationale behind choosing this
research topic is that this is an upcoming research field in area of finance. Moreover, individuals
that are earning are more aware towards investing and having a second source of income.
This research is largely descriptive in nature and primary data has been collected in the form of
questionnaires to meet various objectives. No special importance was given to anyone while
identifying respondent individuals. The questionnaire was floated through LinkedIn, Instagram,
and WhatsApp. It was sent to total of 132 respondents out of which 101 respondents filled the
questionnaire. The response rate was around 76.51%.
3.2 Instrument for measuring Financial Exposure

One of the important objectives of this study is to identify the association between financial
exposure and investment personality of the individuals of Indore. After performing intense
investigation for instrument of measuring the financial exposure the researcher could not find an
appropriate instrument and hence an unpublished scale which was developed by Sitlani M. was
considered for the purpose. The scale comprised of 9 items measuring the various dimensions of
financial exposure of individuals. The score of 1-4 was given to each item, where a low score
means that the financial exposure of individual is low and vice- versa.
27
Following table shows the dimensions of financial exposure represented by each of the 10 items.
Table 3.2.1: Dimensions of Financial Exposure
ITEM NO. ON Dimensions of Financial exposure

SCALE
1 Financial knowledge
2 Coverage of Financial Risk
3 Spending Habits
4 Nature of Portfolio
5 Financial Background
6 Financial Knowledge
7 Multiplicity of income
8 No. of dependents
9 Investment experience
SOURCE: Sitlani M.
These dimensions helped to measure financial exposure of individuals.
28
3.3 Instrument for measuring Financial Literacy
Another important objective of this research is to identify the association between financial literacy
and investment personality. After the intense research for finding the appropriate scale to measure
financial literacy it was decided to consider the scale proposed by of Gian Paolo Stella, Umberto
Filotto, and Enrico Maria Cervellati in the research paper namely ‘A Proposal for a New Financial
Literacy Questionnaire’ (2019). The scale to measure financial literacy used in this research is
inspired from the above research. A total of 8 items were taken to understand financial literacy
among individuals, each item representing a dimension of financial literacy.
Following table shows the dimensions of financial literacy represented by each of the 8 items.
Table 3.3.1: Dimensions of Financial Literacy
No of items Dimensions
4 Financial Skills
5 Financial Skills
6 Financial Attitude
Source: Gian Paolo Stella, Umberto Filotto, and Enrico Maria Cervellati
29
3.4 Instrument to measure Investment Personality
In this research it is considered that there are mainly five types of investment personality
extraversion, agreeableness, conscientiousness, openness, neurotism. These are also known as big
five personality traits. To measure investment personality of an individual the scale considered is
inspired from the scale of John, O. P., & Srivastava, S. (1999). The Big-Five trait taxonomy:
History, measurement, and theoretical perspectives. In L. A. Pervin & O. P. John (Eds.), Handbook
of personality: Theory and research (Vol. 2, pp. 102–138). New York: Guilford Press. For this
research ‘20’ items scale was undertaken in which every personality type was measured using 4
items. Each item could be measured on 5- point liquored scale. Each of the items of the scale were
assigned weights starting from 1- 5, starting from 1 which was allotted to strongly disagree to 5
which was allotted to strongly agree.
3.4.1 Reliability of the Instrument

Here reliability test is used on the data of investment personality. This test is used to measure the
internal consistency among different constructs that are used in the study. It is said that a construct
is reliable if the construct lies between 0 and 1. A reliability is said to be good when the value of
alpha is greater than 0.70 (Hair et al, 2013). Construct reliability in this study was assessed using
Cronbach’s Alpha. The results reveal that Extraversion has an alpha of 0.756, Agreeableness has
an alpha of 0.434, Conscientiousness has an alpha of 0.409, Neuroticism has an alpha of 0.701 and
Openness has an alpha of 0.704. hence all the constructs are reliable. Extraversion, Neuroticism
and Openness are highly reliable.
Table 3.4.1.(a) Reliability analysis is summarized in the following table.

Constructs No. of Items Alpha
Extraversion 4 0.756
Agreeableness 4 0.434
Conscientiousness 4 0.409
Neuroticism 4 0.701
Openness 4 0.704
Reliability analysis was only performed on scale of investment personality because this was on 5-
point liquored scale and scale of measuring financial literacy and financial exposure are not
30
grouped on 5- point liquored scale. Also, these scales are already on valid scale so no reliability
test was performed on scale of financial literacy and financial exposure.
3.5 Data Collection and Data Analysis Technique

This study is largely descriptive in nature but some part of this research is exploratory. This study
is conducted to explore the association between financial exposure, financial literacy and
investment personality which is why it is descriptive research. The study also measures these
variables on a valid scale and hence it is exploratory research also.
The population size for this research is all the people who are working in Indore and are investing.
It is assumed that all the individuals that are filling the questionnaire are having a graduate degree.
The questionnaire was sent to 132 people from which it was filled by 101 people. The medium
through which questionnaire was sent to individuals was digital i.e., LinkedIn, Instagram, and
WhatsApp.
The research is primary research as it involves collecting data from people about their personality,
financial literacy, and financial exposure. For this research, survey forms were the best option, so
a questionnaire was prepared which was filled by sample population.
In this research, the hypothesis is set to identify association between financial literacy, financial
exposure and Investment personality, as the data is qualitative in nature so chi square is the best
technique that can be used in this research. Mann Whitney U test (which is refined version of chi-
square) and Discriminant Analysis test were also used to further clarify the association.
3.6 Generation of Research Hypothesis
One of the key objectives of this study is to explore the association between financial exposure
and investment personality of individuals. Financial exposure is the financial risk which an
individual is facing. According to rational human behavior when the financial exposure is high it
means, the individual has high financial risk due to which individual tends to take tension and
remain in stress, such individuals have neurotism and conscientiousness as their personality.
Additionally, those who have less financial exposure have less financial risk and they tend to
remain happy and calm. Such people can be classified as extravert, agreeableness, openness, and
conscientiousness. According to the explanation following hypothesis could be set
31
H01: There is no significant association of Financial Exposure and Investment Personality of

the Individuals in Indore.
Another objective of this study is identifying the association between financial literacy and
investment personality. It is said that knowledge comes with experience. More the individual has
good and bad experiences more the individual knows what probable outcome could be. If an
individual has good financial literacy than he will be more conscious and aware while taking any
financial decision and will fall under the personality of conscientiousness. Moreover, if the
financial literacy is good than individual can already predict the result and so he will be less tensed
and stressed. This furthermore classifies that personality of individual will not be neurotism. This
research work has hypothised that:
H02: There is no significant association of Financial Literacy and Investment Personality of

In this study there are two important variables i.e., financial literacy and financial exposure. One
of the objectives of this study is to explore the association of financial literacy and financial
exposure. If an individual has a good level of financial literacy than he is said to be aware and
chances of taking any wrong decision will be very less, so his financial exposure will also be less.
Similarly, if the financial literacy of the individual is low than his financial exposure will probably
be high. Standing on this premise this research work has hypothised that:
H03: There is no significant association of Financial Literacy and Financial Exposure of the
Individuals in Indore.
One of the major objectives of this research is to explore impact of investment personality on
financial exposure. The existing literature largely supports the notion that investment personality
does not impact financial exposure of the individual. In the light of this background, the following
hypothesis is generated:
H04: Investment personality of Individuals in Indore has no significant discriminant ability

as far as their financial exposure is concerned.
32
3.7 CONCEPTUAL MODEL OF RESEARCH
H04
Financial Exposure
H01
Investment
H03
Personality
Financial Literacy
H02
------------------------------------------------------
33
CHAPTER- 4
DATA PREsENTATION AND ANALysIs
4.1 DEMOGRAPHy OF REsPONDENTs
4.2 FINANCIAL ExPOsURE OF REsPONDENT INDIVIDUALs
4.3 FINANCIAL LITERACy OF REsPONDENT INDIVIDUALs
4.4 INVEsTMENT PERsONALITy OF REsPONDENT INDIVIDUALs
4.5 AssOCIATION OF FINANCIAL ExPOsURE AND INVEsTMENT

PERsONALITy OF THE INDIVIDUALs IN INDORE.
4.6 AssOCIATION OF FINANCIAL LITERACy AND INVEsTMENT

PERsONALITy OF THE INDIVIDUALs IN INDORE.
4.7 AssOCIATION OF FINANCIAL LITERACy AND FINANCIAL

ExPOsURE OF THE INDIVIDUALs IN INDORE.
4.8 IMPACT OF INVEsTMENT PERsONALITy ON FINANCIAL

ExPOsURE
34
4.1 DEMOGRAPHY OF RESPONDENTS
The information collected on demography of respondents is presented in the form of frequencies

and percentages. As shown in table 4.1 out of total valid respondents i.e., 101 respondents 59
(58.4%) were male respondents and 42 (41.6%) were female respondents and it clearly shows that
male respondents were more as compare to female.
The respondents were divided into 3 age categories in which 60 (59.4%) respondents belong to
category of ‘21- 35’, next 32 (31.7%) respondents belong to age group of ‘36-50’ and 9 (8.9%)
respondents belong to ‘more than 50’ category clearly shows that majority of respondents belong
to category of ‘21- 35’. This means that percentage of freshers and young adults who are investing
is more.
Another category taken in demography is income of individual. According to the data collected 74
respondents belong to income category of ‘less than 700000, next 19 respondents belong to income
group of ‘700000- 1500000’ and 8 respondents belong to ‘more than 1500000’ category. This
clearly shows that majority of respondents belong to income category of ‘less than 700000’.
The next important demographic characteristic of this study is marital status. It was found that 44
respondents were married and 57 respondents were unmarried and it was interesting to know that
54.6% of sample was unmarried and number of unmarried respondents was more than the married
respondents.
The demographic profile of respondents has been summarized in table below:
35
Table 4.1.1 Demographic characteristics of Respondents
Variable Frequency percentage
GENDER
male 59 58.4
female 42 41.6
AGE
21- 35 60 59.4
36-50 32 31.7
more than 50 9 8.9
INCOME
less than 700000 74 73.3
700000- 1500000 19 18.8
more than 1500000 8 7.9
MARITAL STATUS
married 44 43.6
unmarried 57 56.4
36
GRAPHICAL REPRESENTATION OF DEMOGRAPHIC CHARACTERS
CHART 4.1 Demographic characteristics of Respondents
GENDER AGE
9
42
32
59 60
male female 21- 35 36-50 more than 50
INCOME MARITAL STATUS
8
19
44
74 57
less than 700000 700000- 1500000

more than 1500000 married unmarried
37
4.2 FINANCIAL EXPOSURE OF RESPONDENT INDIVIDUALS
The scale used to measure the financial exposure of individuals in this research was inspired by
the unpublished scale developed by Sitlani M., a total of 9 items were considered which measured
various dimensions of financial exposure. Each item had options associated with it and each option
was assigned a score, and total of all the scores was considered the financial exposure of individual.
Higher the score higher the financial exposure and vice versa.
The data collected of financial exposure was analyzed. The range of score of respondent
individuals of Indore was found to be between 13- 29. Maximum score that an individual can get
was 33. The frequency distribution of scores of financial exposure of respondents of Indore is
exhibited in bar graph below.
Chart 4.2 Frequency distribution of scores of Financial Exposure of respondents
FINANCIAL EXPOSURE
18 17
16
16
14
12 11
Frequency
10 10
10
8
8
6
6 5
4 4 4
4
2
2 1 1 1 1
0
0
13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
score
The score of financial exposure was classified into two broad categories, first “high financial
exposure” and second “low financial exposure” those individuals whose scores lie between 13- 20
were classified in category of low financial exposure and those individuals that lie between 21- 29
were classified in category of high financial exposure. There are total of 80 individuals that come
under low financial exposure and 21 individuals who come under low financial exposure.
38
4.3 FINANCIAL LITERACY OF RESPONDENT INDIVIDUALS
The scale used to measure the financial literacy of individuals in this research was inspired by the
scale developed by Gian Paolo Stella, Umberto Filotto, and Enrico Maria Cervellati, a total of 8
items were considered which measured various dimensions of financial literacy. Each item had
options associated with it and each option was assigned a score, and total of all the scores was
considered the financial literacy of individual. Higher the score higher the financial literacy and
vice versa.
The data collected for financial literacy was analyzed. The range of score of respondent individuals
of Indore was found to be between 7- 20. Maximum score that an individual can get was 20. The
frequency distribution of score of financial literacy of respondents of Indore is exhibited in bar
graph below.
Chart 4.3 Frequency distribution of scores of Financial Literacy of respondents
FINANCIAL LITERACY
25 23
20
15
FREQUENCY
15 14
10
10 9
8
5 5
5 3 3 3
1 1 1
0
7 8 9 10 11 12 13 14 15 16 17 18 19 20
SCORES
The score of financial literacy was classified into two broad categories, first “high financial
literacy” and second “low financial literacy” those individuals whose scores lie between 7-14 were
classified in category of low financial exposure and those individuals that lie between 15- 20 were
classified in category of high financial exposure. There are total of 37 individuals that come under
low financial literacy and 64 individuals who come under high financial literacy.
39
4.4 INVESTMENT PERSONALITY OF RESPONDENT

INDIVIDUALS
The scale used to measure the investment personality of individuals in this research was inspired
by the scale used in research paper of John, O. P., & Srivastava, S. (1999). “The Big-Five trait
taxonomy: History, measurement, and theoretical perspectives. In L. A. Pervin & O. P. John (Eds.),
Handbook of personality: Theory and research (Vol. 2, pp. 102–138)”. New York: Guilford Press,
a total of 20 items were considered which measured 5 types of investment personality. Each item
was measured in 5-point liquored scale and each option was assigned a score. Personality with the
highest score was considered as investment personality of that respondent individual.
The frequency distribution of score of investment personality of respondents of Indore is exhibited

in bar graph below.
Chart 4.4 Frequency distribution of scores of Investment Personality of respondents
INVESTMENT PERSONALITY
45
41
40
35
30
frequency
25
20
20 18
15
15
10 7
5
0
agreeableness openess conscientiosness neuroticism extraversion
personality type
40
Chart 4.4.1 count of financial exposure and investment personality
The above chart 4.4.1 depicts the visual representation of association of financial exposure and
investment personality. It states that the highest association between two variables is when the
financial exposure is low and investment personality is openness (those who are creative and open
to change), and the lowest association is when the investment personality is extraversion (those
who are outgoing person) and the financial exposure is high. i.e., this highlights that most of the
people who have openness as their personality their financial exposure is low and those individuals
who are extravert in nature do not have high financial exposure.
4.5 Association of Financial Exposure and Investment Personality of

In order to investigate the association between financial exposure categories and investment
personalities of individuals in Indore chi square technique is used. Once the data was collected
then it was analyzed using chi square test with the help of SPSS 16 the results generated are
exhibited below:
41
TABLE 4.5.1(a): Investment personality * financial exposure

Crosstabulation
Count
Financial exposure
high low Total
Investment agreeableness 4 14 18
personality
openness 5 36 41
extraversion 0 7 7
counscientness 4 16 20
neurotism 8 7 15
Total 21 80 101
Table 4.5.1(a) classifies the respondents according to their financial exposure and personality. For
example: there are 7 individuals who are extravert in nature and have low financial exposure.
Similarly, this table shows the frequency of individuals having high and low financial exposure
and how many individuals belong to a particular personality.
Table- 4.5.1(b): Chi-Square Tests
Asymp. Sig. (2-

Value df sided)
Pearson Chi-Square 13.352a 4 .010
Likelihood Ratio 13.042 4 .011
Linear-by-Linear Association 5.149 1 .023
N of Valid Cases 101
a. 4 cells (40.0%) have expected count less than 5. The minimum

expected count is 1.46.
Assumption for chi square is that the expected count should not be less than 5 or 20% of the cells
should have expected count less than 5. In the table 4.5.1(b) one can see that expected count is
40% i.e., 40% of the cells have expected count less than 5, so the assumption is violated. Due to
which we will not consider Pearson chi- square Asymp sig. (2- sided) instead we will consider
likelihood ratio. Which means we will compare likelihood ratio significance (2- sided) with the
42
alpha value of 0.05, as the likelihood ratio is 0.011 it is less than alpha value 0.05 which conveys
that the result is statistically significant, hence the null hypothesis is rejected and alternate
hypothesis is retained. In other words, there is significant association between financial exposure
and investment personality. Additionally, financial exposure or investment personality are not
independent of each other, the coefficient of Likelihood ratio value is positive which proposes that
there is positive association between investment personality and financial exposure.
Hence the hypothesis H01 “there is no significant association of financial exposure and
investment personality of the individuals in Indore” stands rejected and alternate hypothesis
“there is significant association of financial exposure and investment personality of the
individuals in Indore” is retained.
In order to explore more clear association of financial exposure and investment personality of
individuals in Indore statistically, Mann Whitney U test was conducted including investment
personality types of respondents in high and low level of financial exposure and the results are as
follows:
Table 4.5.2(b) Test Statisticsa
Table 4.5.2(a): Ranks
Investment
Financial Mean Sum of personality
exposure N Rank Ranks
Mann-Whitney U 620.000
Investment high 21 61.48 1291.00
Wilcoxon W 3860.000
personality
low 80 48.25 3860.00 Z -1.923
Total 101 Asymp. Sig. (2-tailed) .050
a. Grouping Variable: financial exposure
According to table 5.5.2(b), the p- value of this test is 0.050 which is equal to the significant p-
value. So, the null hypothesis is rejected and alternate hypothesis is retained i.e., there is
significance difference between groups of investment personalities in terms of financial
exposure categories of individuals in Indore. In other words, respondents of sample belong to
different population in terms of their financial exposure and investment personality. but we can
also conclude that the responses are collected from same sample size. The Z value is negative -
43
1.923 which indicates second group has greater values than first group. In other words, high
financial exposure has greater values of investment personality than low financial exposure
group.
Additionally, we can say that responses in “high” category of financial exposure and responses in
“low” category of financial exposure belong to the same population.
4.6 Association of Financial Literacy and Investment Personality of

In order to investigate the association between financial literacy categories and investment
personalities of individuals in Indore chi square technique is used. The data collected was analyzed
using chi square test with the help of SPSS 16 the results generated are displayed below:
Table 4.6.1: Chi-Square Tests
Asymp. Sig. (2-

Value df sided)
Linear-by-Linear Association .599 1 .439
N of Valid Cases 101
Above table 4.6.1 demonstrates that the Pearson chi- square p- value is 0.904 which is higher than
alpha value of 0.05 which contradicts the association between financial literacy and investment
personality. According to the result null hypothesis will be retained and alternate hypothesis will
be rejected. Chi- square test indicates that there is no significant association between financial
literacy and investment personality.
44
In other words, the hypothesis H02 “there is no significant association of financial literacy and
investment personality of the individuals in Indore” does not stand rejected.
4.7 Association of Financial Literacy and Financial Exposure of

Individuals in Indore.
Chi square test to explore association between financial literacy and financial exposure was done
on SPSS 16. The results are as follows:
TABLE 4.7.1 Chi-Square Tests
Asymp. Sig. (2- Exact Sig. (2- Exact Sig. (1-

Value df sided) sided) sided)
Continuity Correctionb 8.733 1 .003
Fisher's Exact Test .002 .002
N of Valid Casesb 101
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 7.69.
b. Computed only for a 2x2 table
Above table 4.7.1 demonstrates that the Pearson chi- square p- value is 0.001 which is less than
alpha value of 0.05 which favors the association between financial literacy and investment
personality. According to the result null hypothesis will be rejected and alternate hypothesis will
be accepted. Chi- square test indicates that there is significant association between financial
literacy and financial exposure of individual respondents in Indore. Additionally, the coefficient of
chi square value is positive which proposes that there is positive association between financial
literacy and financial exposure.
In other words, the hypothesis H03 “there is no significant association of financial literacy and
financial exposure of the individuals in Indore” stands rejected and alternative hypothesis
“there is significant association of financial literacy and financial exposure of the individuals
in Indore” is retained.
45
4.8 Investment Personality of Individuals in Indore has no significant

Discriminant Ability as far as their Financial Exposure is concerned.
Discriminant analysis calculates the variation in dependent variable due to independent variable,
where both dependent and independent variable are non- metric and categorical in nature. In this
case discriminant analysis is used to find the association between financial exposure and
investment personality. Considering financial exposure is dependent variable and investment
personality is independent variable.
TABLE 4.8.1 Analysis Case Processing Summary
Unweighted Cases N Percent
Valid 101 100.0
Excluded Missing or out-of-range

0 .0
group codes
At least one missing

0 .0
discriminating variable
Both missing or out-of-range

group codes and at least one
0 .0
missing discriminating
variable
Total 0 .0
Total 101 100.0
The above table shows that there are 101 cases and no missing cases are there.
Summary of Canonical Discriminant Functions
TABLE 4.8.2 Eigenvalues
Functio Canonical
n Eigenvalue % of Variance Cumulative % Correlation
1 .054a 100.0 100.0 .227
a. First 1 canonical discriminant functions were used in the analysis.
46
TABLE 4.8.3 Wilks' Lambda
Test of
Functio
n(s) Wilks' Lambda Chi-square df Sig.
1 .949 5.207 1 .022
As exhibited in table 4.8.3 the statistical value of wilk’s lambda is 0.949 which clearly indicates
that 94.9% variation in financial exposure is due to other factors and remaining 5.1% variation is
because of investment personality of the individuals in Indore. Moreover, significance value is
0.022 which is less than the alpha value of 0.05, hence it can be concluded that the impact of
investment personality on financial exposure of individuals is highly statistically significant.
Specifically, the variation in financial exposure of individual due to investment personality is only
5.1% but this variation of 5.1% is highly significant, in other words investment personality has
significantly discriminant impact on financial exposure. It can be further confirmed by the
canonical correlation value in table 5.8.2, it shows that canonical correlation value is 0.227 which
means investment personality and financial exposure has a relation of 22.7%. Hence, one can
conclude that investment personality impacts financial exposure of an individual but the impact is
not strong.
Therefore, the null hypothesis H04 “Investment personality of individuals in Indore has no
significant discriminant ability as their financial exposure is concerned” stand rejected and
the alternative hypothesis “Investment personality of individuals in Indore has significant
discriminant ability as their financial exposure is concerned” is retained.
----------------------------------------
47
CHAPTER- 5
FINDINGs AND DIsCUssIONs
5.1 MAjOR FINDINGs AND DIsCUssIONs
5.2 PRACTICAL IMPLEMENTATION
5.3 LIMITATION OF THE sTUDy
5.4 sCOPE OF REsEARCH
5.5 CONCLUsION OF REsEARCH
48
FINDINGS AND DISCUSSIONS
5.1 MAJOR RESEARCH FINDINGS

Main objective of this research is to explore the association of financial exposure and financial
literacy with investment personality. this was followed by finding the impact of investment
personality on financial exposure of individuals in Indore. The major findings of this research are
discussed below in detail.
5.1.1 Financial Exposure of individuals in Indore
In this research individual respondents have been classified in two categories on the basis of
financial exposure, these are high level of financial exposure and low level of financial exposure.
Individuals of Indore generally play safe in the game of investing considering their investment
experience, financial knowledge and risk bearing capacity. This research got high respondents
from young adults, i.e., there were 60 respondents whose age was between 21- 35, out of which
71% of them had low financial exposure. With this information one can conclude that young adults
have become more careful in terms of saving and spending their income. As most of them had low
financial exposure one can conclude that young adults are investing their money wisely and after
full research.
One of the objectives of this research was to explore the impact of investment personality on
financial exposure of individuals in Indore. To achieve this objective financial exposure was
classified in two categories. Indore is a growing city and people are having stable jobs but they are
still struggling with their income i.e., people have just started earning and their salary is less, they
have responsibilities, they live in joint family where financial dependents are more, so they are
able to meet their basic requirements only, so they are conscious with investing and taking risks.
In the research it was found that out of 12 out of 42 women had high financial exposure this could
be because males invest in the name of females or non-earning member of the family in order to
save tax.
Hence a different lifestyle pattern can be seen in individuals of Indore, due to which people have
limited incomes with responsibilities of their family members. So, this never allow individuals to
49
have high financial exposure. This could be confirmed by the research which says out of 101
respondents 80 respondents have low level of financial exposure.
Study goes in line with research paper of Mustabsar Awais, M. Fahad Laber, Nilofer Rasheed,
Aisha Khursheed which concludes that financial risk impacts investment decision which in turn
impacts investment personality.
5.1.2 Financial Literacy of Individuals in Indore
During this research financial literacy of 101 respondents in Indore was measured using a scale
developed by. Respondents were classified broadly in two groups High financial literacy and low
financial literacy. Almost 64 respondent individuals came under the category of high financial
literacy out of which 42 were male respondents and 22 were female respondents. One conclusion
that can be drawn that Indore is developing city, females over here are getting opportunity and
females are using that opportunity, this number will increase with the passage of time.
It was found out that young adults who have recently started earning have high financial literacy,
which is a good sign for development of any city. Almost 65% of young adults whose age is
between 21- 53 have high financial literacy which means before investing they do full research
and then only take any investment decision.
Indore is a city which is growing very fast, here there are prestigious educational institutions and
many successful MNCs have started their offices in Indore. So, it is obvious that financial literacy
of individuals is high. Even with the passage of time more and more people will be aware of
financial literacy and people will develop interest towards investments.
5.1.3 Investment Personality of Individuals in Indore
The findings of this research suggest that there are 41 respondent individuals whose investment
personality is openness and this is the highest number, i.e., 2 out of every 5 individuals has
openness as their personality in Indore. This is followed by counscientness which has 20 individual
respondents. It was also seen that people having extraversion as their personality do not have high
financial exposure and they also have high financial literacy. So logically extraversion is the most
efficient and effective investment personality.
50
5.1.4 Association of Financial Exposure and Investment Personality of the Individuals in

Indore.
It was found in this research that there is a significant statistical association between financial
exposure and investment personality of individuals in Indore. This finding of the research work is
confirmed by some researches earlier evidencing that the individual investors are rational in their
behavior and the decisions are guided by their inner drives and their own research.
The analysis revealed that the maximum individuals with the low level of financial exposure have
openness as their personality. a total of 80 individuals has low level of financial exposure out of
which 36 individuals had openness as their personality i.e., almost 50% of individuals have
openness as their personality.
Whereas, the individual respondents who have high level of financial exposure are very less. There
are 21 individuals who have high level of financial exposure out of which there is no individual
who has extraversion as their personality.
The findings of this study suggest that there is positive association between financial exposure and
investment personality, which means whatever is the investment personality of individual will
positively affect the financial exposure.
Logically if an individual is highly exposed to financial risk, then he would remain tense and
stressed while taking any investment decision and will prefer in investing less risky assets. Or if a
person has its personality as openness, then he/ she is open to change and try new options in order
to reduce its risk. Hence financial exposure will be low.
Also, to evaluate the difference between investment personality of high and low level of financial
exposure of respondents was tested using Mann Whitney U Test and the test revealed that there
was no difference between investment personality of individuals on the basis of high and low level
of financial exposure.
51
5.1.5 Association of Financial Literacy and Investment Personality of the Individuals in

Indore.
After performing chi square test, it was found out that there is no statistically significant association
between financial literacy and investment personality.
In other words, financial literacy is completely different from investment personality they are not
connected. High financial literacy of an individual means high financial knowledge but it does not
affect the investment personality traits of an individuals.
It was observed that almost 65% of individuals of Indore have high financial literacy, i.e., out of
101 respondents 64 individual respondents have high financial literacy. This could be because
Indore is a developing city and people here are evolving along with time hence people are
becoming more aware about what is happening and what is good for them. Many people who have
high financial literacy do no have any degree in finance.
Logically it is said that financial literacy has an impact on investment decisions which in turn
affects the investment personality. higher the financial literacy is more the individual is conscious
while taking any decision and higher the financial literacy is, the individual will be less tensed
about the result as the risk will be calculated. Also, the individual will be open to accept new things.
So, if the person has high level of financial literacy than he/ she will more likely to have personality
like counscientness and openness also such individuals will less likely to have personality like
neurotism.
This finding of the study supports the theory of irrationality that says that individuals are irrational
in their behavior while taking any investment decision and their decisions are driven by their
personality, market sentiments, socio- economic factors and many other factors. Their investment
decisions are not affected by financial literacy they possess
52
5.1.6 Association of Financial Exposure and Financial Literacy of the Individuals in Indore.
After applying chi square test on financial literacy and financial exposure, the finding suggests
that there exists a statistically significant association between financial exposure and financial
literacy.
One can conclude that citizens of Indore are intelligent and aware enough that they can relate their
financial literacy in order to calculate their financial exposure. With the help of this they can have
maximum returns with minimum risk according to their financial exposure and financial literacy.
Findings suggest that there are 57 individual respondents in Indore who have high level of financial
literacy and low level of financial exposure. Findings also suggest that all the 7 individuals who
have extraversion as their personality have high financial literacy and low financial exposure.
The findings of this study suggest that financial exposure and financial literacy are positively
associated, i.e., if an individual has high financial literacy than his financial exposure will also be
high and vice versa. This is because if an individual is financially literate than he/ she will be
interested to assume more risk while taking any financial decision. If financial literacy is low than
individuals are less likely to take risk because they don’t have enough knowledge.
5.1.7 Impact of Investment Personality on Financial Exposure of Individuals in Indore.
This research work empirically evidenced that there is a statistically significant impact of
investment personality on financial exposure of individuals in Indore. The impact created is of
only 5.1% but it is a significant impact. Earlier researches in behavioral finance have established
the fact that investment personality of individual is an irrational phenomenon and individuals are
more or less guided by demographic, psychometric, and other variables in their investment
decisions.
Earlier researchers have empirically evidenced that individuals are more or less irrational while
taking investment decisions and are risk averse in nature. Later studies in area of behavioral finance
have explored that there are large number of other factors including psychological and
demographic factors that indicate that investors are more or less irrational while making
53
investment decisions. But findings of this research contradict the theory of irrationality, not fully
but partially.
5.2 PRACTICAL IMPLEMENTATIONS

This research will help the financial service providers in this region to develop certain financial
products that would fulfil financial needs of customers of Indore.
Whenever players of financial markets go for selling their financial products then they can study
the investment personality of an individual so that they could provide accurate financial product
to individual according to their investment personality in other words they could provide less or
more risky products to individual according to their personality, because in our study findings say
that financial exposure is affected by investment personality. Moreover, this would increase the
conversion rate of financial service providers. Agents will sell products in an efficient manner if
he already knows that a specific individual likes to take risk or not and then according to the
information, he will provide the financial product to that individual. Hence, one should judge the
investment personality of an individual then financial products should be offered because level of
financial exposure of an individual is directed associated to the investment personality of the
individual.
Another implication of this study is that one should not focus on financial literacy of the individual
while selling them the financial product. The agent should not worry that the individual is of
finance background or not. He should only focus on the investment personality and financial
exposure of the individual.
54
5.3 LIMITATIONS OF THE STUDY

The horizon for conducting the research in the area of behavioral finance is huge and dynamic. No
single study can cover all the aspects of behavioral finance. Hence, there are certain limitations of
the present study. Main limitations one can focus on are as follows:
1. For this study questionnaire was filled by the individuals in Indore only. So, this study
measured financial literacy, financial exposure and investment personality of individuals
in Indore only which may not be an accurate representation of these dimensions. This can
be considered as a technical limitation of the study.
2. For this study, responses were collected by 101 individual respondents. Although the
number is statistically acceptable but it may not show the true reflection of all the
individuals in Indore.
3. In this research only two factors were considered while finding their association with
investment personality. but there are various other factors that affect investment decision
of an individual such as peer pressure, market sentiments, etc. these factors can also be
used in order to find their association with investment personality.
4. Sample from which the results were collected was heterogenous in nature, in other words
it included all the types of individuals, and it may not be applicable to any specific group
of individuals with specific demographic and social characters like personality type,
service class individuals or business class individuals, highly educated individuals, etc.
5. Indore is a very small city of India and the results generated after using this place as a
sample cannot be generalized, i.e., this result may not be applicable to any metropolitan
city or whole India or individuals in small town and village or any III tier city.
55
6. This study has not considered how demographic factors affects the investment personality
of an individual in Indore. Demographic factors like gender, income, marital status,
education do affect investment personality of an individual. This is a very important
limitation which needs to be considered.
56
5.4 SCOPE OF RESEARCH

Behavioral finance is a vast area for research. It is very difficult to cover all the aspects of
behavioral finance in one research. Each study drew differentiated findings based on
variation in different factors including economic conditions of the country, education level
of people of a particular city, risk tolerance of individuals, cultural and social traits, etc.,
Hence, below are some points future researchers can include while conducting research in
this area and on this topic.
1. Similar researches can be conducted by other researchers drawing larger samples from the
population of cities and towns including Indore, so that findings and result could be more
realistic and generalized.
2. Similar researches can be conducted by researchers in future with same number of sample
size and data collection tool. The results would vary as the face of industry, demographic
conditions, socio- economic conditions would have change in future and that may affect
the findings off the research.
3. Researchers in future can also do comparative research in this area of behavioral finance,
in this research only one aspect i.e., Indore was only covered but future researchers can
conduct research in which they are comparing results of various metro cities, tier II and tier
III cities.
57
5.5 CONCLUSION
The following conclusions are drawn from the findings of this empirical work. It shows that there
are that there
Behavioral finance and investment personality has been an interesting topic and many researchers
have done contradicting researches in this area from different dimensions in different course of
time.
The present study attempted to explore the association of investment personality and financial
exposure and financial literacy. Parallelly, this research tried to find the impact of investment
personality on financial exposure of individuals in Indore.
Indore is a tier II town in central India, it represents a different set of individual demography
generated due to increase in business and service class inhabitants reason being it a perfect
population for investigating the investment personality of respondents under the study. Some
findings of this research are supporting the existing literature and some are contradicting the
existing literature this is because uniqueness of data has its impact also.
The results of present study are somewhat similar to previous research which suggests that basic
theory does not change with change in time, demography and sample.
It was observed that all those individuals who have extraversion as their personality have high
financial literacy and low financial exposure, it was observed that their investment experience was
also between average and good.
Further there were almost 73% of individuals who had income less than 700000 out of which 75%
of individuals had low financial exposure. So one can conclude that people with less income are
playing safe and are investing in such a way that their financial risk and financial exposure is
minimum.
This research got high respondents from young adults, i.e., there were 60 respondents whose age
was between 21- 35, out of which 71% of them had low financial exposure. With this information
one can conclude that young adults have become more careful in terms of saving and spending
their income. As most of them had low financial exposure one can conclude that young adults are
investing their money wisely and after full research.
58
The following broad conclusions are drawn from the findings of this empirical work. It shows that
there are that there is an association between financial exposure and investors personality. The data
used in this research is qualitative in nature i.e., financial exposure is measured using the scale of
high and low and investors personality is classified in five groups agreeableness…. The reason
why there is an association between financial exposure and investment personality is that
investment personality impacts the investment decisions and financial exposure is one of the major
topics when it comes to investment decision. Hence, financial exposure and investment personality
are associated directly.
According to the research there is no association between financial literacy and investment
personality. One reason could be that most of the respondents are holding financial degree
irrespective of however their financial exposure and their investments are. Another reason for not
having an association between financial literacy and investment personality is that most of the
respondents are finance graduate who have started investing recently, so they do not have enough
funds to invest but they have adequate knowledge of finance.
-------------------------
59
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INTERNATIONAL INSTITUTE OF PROFESSIONAL

GUIDED BY: SUBMITTED BY:

MBA (MS), 5 years

Roll no.: IM-2K18-57

CS Dr. Manish Sitlani

2.4 Review of Financial Exposure of Individuals 23

4.7 Association of Financial Literacy and Financial Exposure 45

KEYWORDS: Investment Personality, Financial Literacy, and

INTRODUCTION AND RATIONALE

1.2 FINANCIAL LITERACy

1.3 FINANCIAL ExPOsURE

1.4 INVEsTMENT PERsONALITy

1.5 RATIONALE OF THE sTUDy

1.6 ExPECTED CONTRIbUTION

1.2 FINANCIAL LITERACY

1.3 FINANCIAL EXPOSURE

to reduce monetary publicity extensively. Federal Deposit Insurance Corporation (FDIC)

1.4 INVESTMENT PERSONALITY

1.5 RATIONALE OF STUDY

1.6 EXPECTED CONTRIBUTION

2.2 REVIEW RELATED TO INVEsTMENT PERsONALITy OF

2.3 REVIEW RELATED TO FINANCIAL LITERACy OF INDIVIDUALs

2.4 REVIEW RELATED TO FINANCIAL ExPOsURE OF INDIVIDUALs

2.5 REsEARCH GAP

2.6 PRObLEM sTATEMENT

2.7 ObjECTIVEs OF THE sTUDy

LITERATURE REVIEW FINANCIAL LITERACY

2.2 REVIEW RELATED TO INVESTMENT PERSONALITY OF

2.3 REVIEW RELATED TO FINANCIAL LITERACY OF

The effect of personality traits on households’ financial literacy, Teerapong Pinjisakikool,

2.4 REVIEW RELATED TO FINANCIAL EXPOSURE OF

2.5 RESEARCH GAP

2.6 PROBLEM STATEMENT

What is financial exposure, financial literacy, and investment personality of individuals in

2.7 OBJECTIVES OF STUDY

Broad objectives of study on the basis of above discussions are as follows:

1. To explore/ measure Financial Exposure, Financial Literature, and Investment personality

3.1 THE sTUDy

3.2 INsTRUMENT FOR MEAsURING FINANCIAL ExPOsURE

3.3 INsTRUMENT FOR MEAsURING FINANCIAL LITERACy

3.4 INsTRUMENT FOR MEAsURING INVEsTMENT PERsONALITy

3.5 DATA COLLECTION AND DATA ANALysIs TOOLs

3.6 GENERATION OF REsEARCH HyPOTHEsIs

3.7 CONCEPTUAL FRAMEWORK OF REsEARCH

3.1 The Study

3.2 Instrument for measuring Financial Exposure

Table 3.2.1: Dimensions of Financial Exposure

ITEM NO. ON Dimensions of Financial exposure

2 Coverage of Financial Risk

These dimensions helped to measure financial exposure of individuals.

3.3 Instrument for measuring Financial Literacy

Table 3.3.1: Dimensions of Financial Literacy

3.4 Instrument to measure Investment Personality

3.4.1 Reliability of the Instrument

Table 3.4.1.(a) Reliability analysis is summarized in the following table.

3.5 Data Collection and Data Analysis Technique

3.6 Generation of Research Hypothesis

H01: There is no significant association of Financial Exposure and Investment Personality of

H02: There is no significant association of Financial Literacy and Investment Personality of

H04: Investment personality of Individuals in Indore has no significant discriminant ability

3.7 CONCEPTUAL MODEL OF RESEARCH

4.1 DEMOGRAPHy OF REsPONDENTs

4.2 FINANCIAL ExPOsURE OF REsPONDENT INDIVIDUALs