2

REVIEW OF LITERATURE

The emerging economic environment of competitive markets signifying

individuals’ sovereignty has profound implications for the savings and their
investment in India. The term investment refers to funds invested in various
saving schemes, consisting of deposit in banks, post office, Government and
Semi-Government securities, loans, mutual funds shares and debentures of
companies. The financial and economic meaning of investment is related to each
other, because investment is a part of savings of individuals, which flows into the
capital market either directly or through institutions divided into new and
secondary capital financing. According to F. Amling- ‘Investment may be defined
as the purchase by an individual or institutional investor of a financial or real
assets that produces a return proportional to the risk assumed over some future
investment period.

A review of literature consigns a research study in proper perspective by

showing the quantity of work already carried out in the related area of the study.
The purpose of this part is to understand the results of various studies already
undertaken in the relevant field and to find out the research gap in the present
study. The literature concerning to the topic “Determinants of Investment
Behaviour of Individual Investors” is presented in the following headings:

2.1 Preference of Various Investment Avenues

2.2 Awareness on Investment

2.3 Attitude of Individual Investors

2.4 Factors Influencing Investment Decisions

2.5 Determinants of Investment Behaviour

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Review of Literature

A large number of studies on the investment behaviour have been

performed during the past few years all over the world. In this modern era, so
many types of investments are available. Each type of investment has its own
advantage and disadvantages. An investor can also choose the type of
investment which suits his needs. The following are the extracts of various
articles published by different authors in several magazines and journals.

2.1 Preference of Various Investment Avenues

Joseph et al (2014) has carried “A Study on Preferred Investment

Avenues among the People and Factors Considered for Investment”. The study
has been undertaken with the objective, to analyze the investment choice of
people in few cities in Bangalore. The study is based on using a structured
questionnaire. The study concludes that all the age groups among the
respondents give more importance to invest in bank deposit and insurance.
Income level of a respondent is an important factor which affects investment
portfolio of the respondent. Respondents are more aware about various
investment avenues like insurance, bank deposits, small savings like post office
savings etc. Many people are not willing to take risk for their funds, so many
prefer to invest in bank deposits, insurance, post office saving etc., The study
suggested to every respondents that, they have to acquire a specific knowledge
of various kinds of investment opportunities available in the financial market and
appraisal of investment for avoiding loss.

Pandian et al (2013) carried out a study on “A Study of Investors

Preference towards Various Investments Avenues in Dehradun District”. The
study was conducted to understand the awareness of people towards various
investment avenues and the investors’ preference towards various investment
avenues in Dehradun Districts. The investors are selected by convenient
sampling technique. Accordingly, the researcher has selected 120 investors in
the study area. The investigation shows that, majority of the investors invest their
money in equity shares only and also the majority invest their money for the
purpose of capital appreciation. The study revealed that when comparing the

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Review of Literature

earnings and the loss incurred by the investors in stock market. It is heartening to
note that most of the investors incurred loss only. The study offered suggestion
to the investors that; the investor has to invest their money in less risky securities
like mutual fund and debenture.
Sireesha et al (2013) has carried out a study on impact of demographics
on select investment avenues: a case study of twin cities of Hyderabad and
Secunderabad, India. The research study seeks to reveal the relationship
between the demographic factors and investment avenues selected by investors.
A survey method is adopted to gather information from 165 respondents through
questionnaire in Hyderabad and Secunderabad and the samples were selected
at random from different age groups, occupations, income levels, and
qualifications. Points were allotted to the preferences specified by the
respondents through the questionnaires. The study finally concludes that income
and amount saved has an impact on the purpose of investment made by the
investors. Most of the investors preferred to invest their money in the bank and
post office savings schemes and this reflects the conservative nature of an
investor i.e., the investor wants their money to be safe and they do not require
any higher return and capital appreciation. The study offers a suggestion to the
wealth manager to design a portfolio to their client according to their income
pattern.
Malekar et al (2012) in their article entitled “A study of investor behaviour
on investment avenues in Mumbai Fenil” stated that investor‘s perception will
provide a way to accurately measure how the investors think about the products
and services provided by the company. The objective of the study is to find out
the need of the current and future investors and to study on investor behaviour. A
sample of 100 investors was taken for the study. Most of the investors were
making conservative decisions that reflecting a survival mode in the business
operation. During these difficult times, understanding what investors decide on
an ongoing basis is critical for survival. Therefore, the study is identified that
people like to invest in stock market as compared to any other markets, even if
they face huge losses.

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Review of Literature

Giridhari et al (2011) have carried out a study on “Investment

Preferences among Urban Investors in Orissa”. They discuss that people were
irrational in their decision making about investment in securities. They make
cognitive or emotional mistakes in decision making. It happens due to various
biases which are being discussed in the field of behavioural finance. It explains
that investment decisions and risk tolerance of investors depend on age, sex,
income, marital status, education, family background, occupation and also the
environment on which people lived. The investors of urban areas were targeted
for this research study. This research study also cleared that male investors are
more risk seeker and more active than compare to female investors. The types of
investors are also discussed in this study. Structured Questionnaire and
statements used for conducting this research and the sample size was 210. The
results of study show that individuals invest to full fill their needs and also take
other benefits like safety, tax benefits, high capital gains, liquidity, secured future
and for future needs.

Thirupath (2011) has conducted a study on “Investment Patterns and Tax

Planning of Salaried Class Investors in Vellore District”. The focus of this study is
on the individual salaried class investors. Keeping in view the potential savings of
the salaried class investors, this study outlines the conceptual background with
focus on investment and tax planning, examines the profile and awareness of the
salaried class investors, analyses the attitude and satisfaction of the salaried
class investors towards investments, evaluates the factors motivating the
investors for investments and expected rate of return on investment, analyses
the awareness and attitude of investors towards tax planning and offers
suggestions for increasing investments in Government sectors and on balanced
investment patterns for individual investors.

Bandgar (2000) has conducted “A Study of Middle Class Investors

Preference for Financial Instruments in Greater Bombay”. The main objective is
to study the existing pattern of financial instruments in India and the preference
of middle class investors, their behaviour and problems. A questionnaire was

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Review of Literature

used to collect data. Average, skewness, Chi-square test and Fisher Irving tests
were used to analyse the data. The study disclosed that only 16 per cent of the
investors were facing difficulties in buying and selling of securities. Middle class
investors were highly educated but they were lacking skill and knowledge to
invest. Female investors preferred to invest in risky securities as compared to
male investors. The study also revealed that there was a moderate and
continuing shift from bank deposits to shares and debentures and a massive shift
towards traditional financial instruments namely, LIC policies and Government
securities.

Stephan et al (2009) in their article entitled “Investment Avenues for

Senior Citizens” stated that it is necessary on the part of the elders to find a
definite source of income for themselves. The senior citizens have various
alternative avenues of investments for their savings in accordance to their
preference. A definite idea about investment will provide senior citizens a steady
income which helps them in the phase of rising cost in future. Hence, it is the
need of the hour for the elders to think and act wisely in their investment
decision. As all the investments are not equally good, awareness of various
schemes and the privileges for the aged will help them to select the best suitable
investment avenue.

Vijayalakshmi (2009) in her article entitled “Liquidity Preference among

Employed Women” identified that all the respondents preferred the liquid cash for
transaction and precautionary motives. They have no speculative motive
regarding bank deposits. They did not pre-pone or postpone their deposits
according to the fluctuations in interest rates. Most of the respondents preferred
to invest in chit funds than bank deposits. They felt that there are many
formalities in bank transactions and also it is time consuming. Moreover
investments in chit funds are more beneficial than the meager interest rate from
bank deposits. Thus, from the study it is concluded that chit funds are more
beneficiary.

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2.2 Awareness on Investment

Puneet (2014) has carried out a study to analyse the awareness level
and investment behaviour of salaried individuals towards financial products. All
those salaried individuals of Himachal Pradesh were considered as the
population for this study. A sample of 516 respondents was used for the purpose
of this study. Results of the study suggest that respondents are quite aware
about traditional and safe financial products whereas awareness level of new age
financial products among the population is low. Also majority of the respondents
park their money in traditional and safe investment avenues.

Mane et al (2014) analysed the “Awareness and Selection of Different

Financial Investment Avenues for the Investor in Pune City”. This study deals
with the behaviour of the investor to identify the better investment avenues
available in Pune. The study mainly focused to identify the investors’ preference
towards the investment. The sample size of the study is 784, drawn from Krejcie
and Morgan table. This study confirms the earlier findings with regard to the
relationship between age and income level of the individual investors. It
concludes that large numbers of portfolio is not good for healthy investment and
women are the deciding factor of the family.

Mazumdar (2014) carried out a study on “Individual Investment Behaviour

with Respect to Financial Knowledge and Investment Risk Preference”. This
study attempts to understand the relationship between the level of knowledge
and investment behaviour. It examines, if individuals with high financial
knowledge, tend to invest more in any particular investment avenue like equity,
fixed deposits, gold or real estate. The study also tries to understand if an
individual’s financial risk preference affects investment behaviour. It examines if
risk averse investors, moderate risk takers and aggressive investors differ with
respect to their investment behaviour. It also gauges the association of financial
knowledge and investment risk preference. It shows that there is no significant
relationship between knowledge and individual investment behaviour. No
significant relationship is seen between investor risk preference and individual

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Review of Literature

investment behaviour. This finding is contradictory to the previous studies as

seen in literature. Indian investors may tend to be basing their investment
decisions based on cultural upbringing, or may be influenced by social norms
and psychological biases. Role of friends, relatives and financial advisors may be
a major influencing factor. They found that investors with high financial
knowledge tend to invest more in risky avenues. This finding supports result from
previous research studies.

Umamaheswari et al (2014) has carried out a study on “Coimbatore

based Salaried Investors’ Awareness, Attitude, Expectation and Satisfaction over
their investments”. This paper is outlining the relationship between the dominant
societal and demographic factors of the salaried middle class that affects the
investment criteria namely, investment awareness, investment attitude and
investment returns. Precisely, this study pursued on the salaried middle class of
Coimbatore District, Tamilnadu, India is executed with a focus to comprehend the
utilities of financial policies favouring public and the sample group of salaried
class investors comprising 1000 members. A significant percentage of the
salaried investors of Coimbatore know to make good investment decisions, one
third of salaried-class of Coimbatore do not opt for the right financial plan due to
lack of investment awareness and only 50 per cent of the salaried-class of
Coimbatore has knowledge about the percentage of savings they have to opt for
future.

Chavare (2013) has undertaken a study to know the investment practices

of senior college teachers in Western Maharashtra. The findings reveal that, the
investors were having high level of knowledge about various investment
avenues. Also, most of the investors have taken the assistance of investment
planners during the decision making of investment. The investors have mostly
preferred low risk avenues comparative to others. They wanted to invest their
funds in safer avenues and want to live comfortable. Researcher has found that,
there was a relationship between annual income and terms of investments. But,
an age of investors and the amount of investment is not interrelated. Although a

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Review of Literature

majority of the investors were having a high level of knowledge, it is suggested

that, the investors should have thorough knowledge before making investment in
different avenues.

Jayabal et al (2011) has conducted a study on “Sources of Information

among different Segment of Investors”. The study revealed that the investment
decision is important for every individual because it involves commitment of
capital. It also produces return which will have impact on standard of living of
investors. To take right decision, the investors collect information from various
sources. The different kind of people use different sources of information and the
selection of particular source depend on characteristics of people and the
outcome of decision is based on quality of information which in turn depends on
right source. The study revealed that the source of information used is having
indirect effect on both size of saving and choice of securities. Therefore, it is very
important to know about the source of information used by investors to
understand their saving behaviours.

Sanchita (2008) has conducted a study on “Investment Avenues and

Investor’s Choice”. The article studied the investment avenues of equities, mutual
funds, fixed income securities, insurance products and features in a financial
planning portfolio. The investment of shares is the most preferred investment
form which is followed by mutual funds. This shows the increasing investors
preference or indication towards the market linked securities as against the
traditional or conventional investment instruments. It was finally spelled that,
trend may continue in the near future but may not find the same response with
the decline of the bull market.

Moorthy (2007) in his article titled a study on investment pattern and

awareness of the salaried class investors in Nilgiris District was an attempt has
been made by the researcher to study the profile and awareness of salaried
class investors. Among the identified 13 investment avenues, all the investors
recognized bank deposits followed by insurance products which were known to
81 percent of the sample investors. Almost, equal number of sample investors

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recognized provident fund and PPF investments, 63 percent of the investors

were familiar with postal savings and deposits. 42 per cent of investors were
aware of gold and jewellery investment and 38.2 per cent of the sample investors
had knowledge about investment in chit fund.

Reddy et al (2007) in the paper “Demographics and Investments Choice

among Indian Investors” investigates how invest choice gets affected by the
demographics of the investors. Such knowledge will be highly useful to the
financial advisors as it will help them advise their clients regarding investment
which are appropriate with respect to their demographic profile. The study is
especially relevant for the financial advisors and consultants. The insight of how
an invest choice gets affected by the demographic variables helps the financial
advisors to advise their clients better. This study thus, will certainly improve the
mutual trust between the advisor and his client. Similar studies with adverse
samples will help in understanding the investment psychology better. They finally
concluded that, the investment choice depends on and is affected by the
demographic variables.

Shobhaba et al (2006) has carried out a study on investor’s awareness

and preferences. They examined the level of investor awareness regarding
investment choice and investment risks. The study discovered that the
investment in real estate is preferred by popularity of the respondents. The
second most favoured investment is bank deposits. Responsiveness about
investment options and risks are high among aged, highly educated and those
who are professionals by career. Demographic variables such as age and
education do not have significant authority over investor’s responsiveness where
as difference in occupational status leads to difference in the awareness level of
investors.

2.3 Attitude of Individual Investors

Anitha et al (2014) carried out a study on “Investors’ Perception towards

Investment”. This study attempts to know the preferences and analyze the
significance of demographic factors that influence the investor's decision towards

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Review of Literature

making investments. This study attempts to find out the significance of

demographic factors of population such as gender, age, education, occupation,
income, savings and family size over several elements of investment decisions
like priorities based on characteristics of investments, period of investment, reach
of information source, frequency of investment and analytical abilities and
different demographic variables are considered and its effect on decision making
behaviour in a risky situation. The direct effects of these demographic factors on
risk perception and propensity ultimately on risky decision making have been
established in the study. The study finally concludes that, elderly investors have
more risk perception while the young investors perceive the risk differently.
Gender effects the decision in a manner that females have less risk preferences
than males and thus affects the risky decision-making behaviour negatively and
are reluctant to take risky decision.

Kanagaraj et al (2014) has analyzed the perception of women investors

towards investments. An attempt has been made by the researcher to identify the
factors influencing investors’ behaviour, evaluation of the level of awareness
among women investors’ and to analyses the preference of investors towards
various investments outlets. The study insists that investment has been an
activity confined to the risk and business class in the past. This can be attributed
to the fact that availability of investable funds is a prerequisite to development of
funds, so that the women investors’ may enjoy the benefits of capital
appreciation. Government should enact legislation for protecting the investors
against illegal speculative dealings.

Senthilkumar et al (2014) has conducted a study on “Investors’ Attitude

towards Savings in Post Office”. The objective of the study was to identify the
rural investors’ attitude and to evaluate the different factors influencing postal
investment decisions. Majority of the investors irrespective of their age group,
education, income and opinion of savings, agree that savings on imperative
household investment will help for economic development of the country and
finally concludes that savings create a feeling of security and investment should
be treated as an item of expenditure.

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Thulasipriya (2014) carried a study on investment pattern of Government

employees - an empirical study. The objectives of the study was to analyze the
stage of investment invested by the Government employees in a range of
investment options and to classify the profitable investment option opted by
Government employees. The learning reveals that in most cases Government
employees’ across higher age categories found them to be safer with taking up
the bank deposits. A significant portion of employees’ also shows keen favorite
towards provident fund and private chit so as to get short term gains. It is also
observed that mainly the female employees’ show their fervor towards the bank
deposits so as to get tax benefits, life protection and average profitable
investment avenues. Higher income group shows fairly high preference towards
investment in share market, while the lower and average income group shows
keen preference towards insurance and banks as the most preferred investment
avenues.

Veeramani et al (2014) has conducted an analytical study on “Risk

Perception and Return for Individual Investment”. This study aims to gain
knowledge about key factors that influence investment behaviour and the ways
these factors impact investment risk tolerance and decision making process
among men and women and among different age groups. Fifty investors were
selected for the study, on the basis of areas whether they belong to rural or
urban areas, on the basis of profession whether they are working in Government
or Private Sector and on the basis of annual income and annual amount they
invest. The study concludes that investing was not a game but a serious subject
that can have a major impact on investor's future well-being. Even if the
individual does not select specific assets such as stock, investments are still
made through participation in pension plan and employee saving programme or
in banks or in saving schemes of post offices. The study concludes that
investors’ perception on the total investment risk and return predominantly
decides the capacity of investors.

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Samita et al (2013) has carried out “A Study of Investment Pattern of

Central Government Employees after the Implementation of Sixth Pay” the main
objective of the study was to find out the impact of change in income on the
investment pattern of central government employees. The primary data was
collected from the central government employees by survey method, using a
questionnaire from 100 respondents. The quantum of investment in each
investment areas have increased as well as diversification of investment areas
have taken place i.e. now the employees are venturing investment in areas which
were untouched before the implementation of sixth pay commission. The
maximum share of investment income is towards the Insurance Sector followed
by PPF and bank fixed deposits. The investment in Insurance Sector may be
attributed to the fact that investment in this sector comes with tax benefits and
high security. Also the employees prefer low risk satisfactory return.

Sellappan et al (2013) studied the Investment Attitude of Women towards

Different Sources of Securities - A Factor Analysis Approach. The study aims to
gain knowledge about the marital status and age factors influencing the
investment behaviour of women towards financial instruments with special
reference to Erode District. Descriptive study is carried out to identify about these
factors which influencing the investment decision. Convenient sampling
techniques are used to identify the respondents and it is limited to Erode District.
The study concludes that married women are more curious in making investment
than the unmarried. The younger women are mostly likely to invest in shares
mutual funds, insurance and fixed deposits than the older women. The middle
aged persons prefer to invest in real estate source of investment and also
suggested that the Government, Bankers and Financial institutions can introduce
lot of schemes of investment based on segmentation of the age and marital
status factors to acquire more funds.

Kumara (2013) conducted a study on “Investment Attitude of Rural

Investors”. The study aims at investigating the rural investor’s behaviour towards
purchasing the financial instruments. Five variables i.e. risk, return, peer’s

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Review of Literature

influence, self efficacy, financial advisor’s influence, have been taken into
account as determinants of investment decisions of rural people. The constructs
have been scaled down and validated with the help of Principal Component
Analysis. Data has been analyzed using correlation and regression coefficients. It
has been found that all the rural investors consider the risk and return on
investment and most of them are also dependent on financial advisor’s opinion
because of lacking the depth knowledge of market. But generalization of the
study is subject to its limitations like unwillingness of respondents, limited period
of time, lack of literacy of rural investors etc. It is concluded that psychological
theory planned behaviour reflects in rural people’s investment decisions along
with a finance theory concepts i.e. risk and return equilibrium/trade off.

Arti et al (2011) conducted a study on “Difference in Gender Attitude in

Investment Decision Making in India”. This report emphasized the increasing
importance of female investors in the investment industry. The objective of this
study is to identify the differences in the Investment Decision Making (IDM)
process between female and male investors. In this study, chi-square test has
been applied as statistical tool. The findings of this study are higher level of
awareness for males than females for different investment avenues and female
investors tend to display less confidence in their investment decisions and hence
have lower satisfaction levels.

Jothilingam et al (2011) conducted a study to find out the main objective

of the investors in Namakkal District towards making investments and to assess
the investors’ attitude towards the investment avenues. In this study, the
researcher has used the primary data obtained from 300 respondents selected in
simple random sampling method. The statistical tools applied for analysis of data
include percentage analysis, analysis of variance and Garrett Ranking technique.
The study concludes that investors prefer less-risky investment avenues like
gold, mutual funds and bank deposits. This could be probably because of their
tendency to avoid high risks. However, if the high risk investment avenues are
designed with higher returns in a organized manner, the investors would come
forward to prefer those avenues.

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Mittal et al (2011) conducted “A Study of Psychological Reasons for

Gender Differences in Preferences for Risk and Investment Decision”. It
investigates whether women are more risk averse than men and the reasons
suggested by psychologists for the same. The study indicates that men engage
in more risk taking and are more over confident than women. Women tend to put
in a major portion of their funds in low risk- low return investments. The study
indicates that, the view of men and women are different in allocation of funds to
their portfolio and have varying choices for the investment avenues. The study
also establishes that, over confidence level of the investors varies with gender.
Men have more confidence in their abilities than women.

Ranjith, (2002) in his article titled “Risk Preference of Investors in the City
of Ahmedabad” revealed that the increase in age leads to the increase in
tendency to invest and to take risk declines. Working class people were actively
involved in share business. The respondents were graduates who actively
participated in investment activities. The investors’ awareness about the
investment decisions is limited to financial performance of the company.

Rajarajan (2000) conducted a study titled “Investors Life Cycle and

Investment Characteristics” with the objective of analysing the investors life style
and to analyse the investment size, pattern, preference of individual investor on
the basis of their life style. Data was collected from 405 investors in Madras
using questionnaire method. The investors were classified into three group’s viz.
active investors, individualists and passive investors. Cluster analysis,
Correspondence analysis and Krushal Wallis test were used to study the
association between life style groups and various investment related
characteristics. Active investors group was dominated by officers, individuals
group by clerical cadre and passive investors group by professionals. The
expected rate of return from investment varied between investment styles. The
study clearly indicated that market position of the shares, company‘s operating
level, capital performance and the expectation of the investor were found to
influence the risk perception of the investor.

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Ajay et al (1979) the article captioned, “A Study of certain aspects of

Household Savings Behaviour in New Delhi”, studied the reasons for savings,
attitude towards savings and extent of risk taken by respondents in Delhi. The
authors have said that, while investing, savings behaviour, risk tolerance, savings
ratio and satisfaction with the level of savings and the change in reasons to save,
the need of households varies as the household heads progress in age and
occupational status. The author found that the satisfaction level of savings is
higher for household heads belonging to Delhi or those who have stayed for
more than 41 years in Delhi. Persons who are residing in their own houses, have
higher income, higher savings, more than two earners and no dependent girl are
found to be more satisfied with their savings.

2.4 Factors Influencing Investment Decisions

Lodhi (2014) has conducted a study on “Factors Influencing Individual

Investor Behaviour: An Empirical Study of City Karachi”. In this study he
examined the impact of financial literacy, accounting information, openness to
experience and information asymmetry on individual investors’ decision making
through the empirical research of the people living in Karachi city. Quantitative
research has been carried out to find out the relationship between desired
explanatory and response variables. They have taken five independent variables
including; financial literacy, high experience, use of accounting information,
importance of analyzing financial statements and age that might affect the
investment decision of any individual and chose five different dependent
variables from the questionnaire to find a conclusion they were; risk taking,
preference investment in risky investment, risk aversion, information asymmetry
and shares investment. In this they found that in lowering information asymmetry,
the financial literacy and accounting information were playing an important role
and allows investors to invest in risky instruments. But on some occasions the
investors preference changes to less risky investments, due to the age and
experience, it does not mean that investor does not prefer to invest in risky

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investment avenues, they will but with the intension of getting regular income
when compare to capital gain.

Das et al (2014) conducted “A study on the influence of demographical

variables on the factors of investment- a perspective on the Guwahati Region”.
This paper focuses on the relationship between the four demographic variables
i.e., age, gender, education and occupation with the four most important
objectives of investment such as risk, return, retirement and tax which influences
the buying behaviour of the investors. The respondents were investors from
among the residents in and around the Guwahati city of Assam. A sample size of
150 customers was personally interviewed and data was collected for this
statistical study. The study emphasizes the fact that demographic variables
indeed play a role on the mindset of the investor community which is driven by
age and educational qualification. Thus, the study reveals that the various
demographical variables have an association with the objectives of investment.
Among the demographic variables considered for the study, gender and the
occupation are the most influential variables on the objectives of investment.

Dinesh et al (2013) has conducted a study to analyze the significance of

demographic factors, on the factors that influence the investor’s decision towards
making investments. From previous studies, various demographic factors that
compel investors to invest were identified. The hypotheses have been developed
considering its relevancy to the research objectives. The literature has been
reviewed from various secondary sources and primary data were collected
through structured questionnaire by interviewing 384 respondents among the
population of Thane city. The study reveals that some of the demographic factors
have significant relationship with the factors influencing investor’s decision and
insignificant in others too. It has been found that bank fixed deposit and life
insurance is the preferred investment avenue followed by gold, silver, real estate,
mutual fund and others.

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Review of Literature

Panda et al (2012) conducted a study to gain knowledge about key

factors that influence investment behaviour and ways these factors impact
investment risk tolerance and decision making process among men and women
and among different age groups. The target groups chosen for this study were
from the regular investors, which was limited to 50. Virtually everyone makes
investments. Even if the individual does not select specific assets such as stock,
investments are still made through participation in pension plan, and employee
saving programme or through purchase of life insurance or a home or by some
other mode of investment like investing in real estate (Property) or in Banks or in
saving schemes of post offices.

Shaikhm et al (2011) conducted a study on “Analysis of Retail Investor’s

Behaviour in Belgaum District, Karnataka State”. The study reveals that
knowledge level significantly leverages the returns on the investments and there
is a negative correlation between the occupation of retail investor and the level of
risk. This has been identified on the basis of cross analysis by applying
correlation analysis. Investors having extensive investment knowledge has the
return expectation of multifold when compared to other knowledge categories
and the correlation analysis between the occupation of investor and the level of
risk assume shows that there is a negative correlation between these two
variables. The study finally concludes that knowledge plays a significant role in
the investment decision making process.

Dashl (2010) has carried out a study on “Factors Influencing Investment

Decision of Generations in India: An Econometric Study”. The main objectives of
the study is to find out the key factors that influence investment behaviour and
ways these factors impact investment risk tolerance and decision making
process among men and women and among different age groups. The study
states that, the individuals may be equal in all aspects may even be living next
door, but their financial planning needs are very different. The study concludes
that investors’ age and gender predominantly decides the risk taking capacity of
investors.

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Review of Literature

Devi et al (2008) in the article titled a study on investment behaviours of

salaried persons in Coimbatore City stated that the response of the salaried
income group towards various savings schemes and investment is poor. Their
intention is tax savings and for this, their preferences are provident fund and life
insurance policies. Steps should be taken to create awareness among the
investors about other savings schemes and investment avenues. The
advertisements for various investment schemes are not adequate as a majority
of the respondents are aware of the various schemes only through friends and
relatives. Therefore, it is recommended to various financial institutions to adopt a
broad advertising strategy in order to enable the investors to know the details of
the various investment schemes. Majority of the respondents have not preferred
to invest their savings in UTI and Mutual funds which are the latest investment
schemes and hence the Government should take appropriate steps to persuade
the investors to invest in the above schemes.

2.5 Determinants of Investment Behaviour

Sondari et al (2015) the study tested the applicability of theory of planned

behaviour on civil servant of Indonesia. The main objective of the study is to
identify the intention to invest. To test the relationship they used partial least
square (PLS) and concluded that attitude towards investment and subjective
norms have significantly influenced intention to invest, while data of the other
antecedent, self efficacy have failed to show significance influence.

Kengatharan et al (2014) has conducted a study to identify the influence

of behavioural factors in investors’ decision at the Colombo Stock Exchange.
Furthermore, the relations between these factors and investment performance
are also examined. The result shows that there are four behavioural factors
affecting the investment decisions of individual investors at the Colombo Stock
Exchange which are Herding, Heuristics, Prospect and Market. Most of the
variables from all factors have moderate impacts whereas anchoring variable
from heuristic factor has high influence and choice of stock variable from herding
factor has low influence on investment decision.

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Preethi et al (2014) studied the “Influence of Personality and

Demographics in Investment Choice”. The primary objective of this paper was to
find out the variation in investment pattern based upon demographic and
personality factor. For which, the data is collected through questionnaire. This
study has been conducted among the commerce and business administration
department faculties who were working in the colleges of Tirunelveli city.
110 responses were used for data analysis. To determine the personality of the
respondents, Big Five Inventory-10 has been used. It was found out that, based
upon demographic and personalities, the investment pattern varied. Psychology
factor of personality also influences the choice of the respondents.

Jurevicience et al (2013) conducted a study on “Behavioural Finance:

Theory and Survey”. The paper analyses the importance of behavioural finance
theories in household decision-making process. Behavioural finance theories
investigate emotional characteristics to explain subjective factors and irrational
anomalies in financial markets. In this regard, behavioural theories and
behavioural anomalies in the decision-making process are examined and the
application opportunities in the financial market are described. The aim of
investigation is to determine the basic features and slopes of behavioural finance
in concordance with financial decisions of a household. The survey method was
applied to ascertain financial behaviour of literate households. They found that
the investors could be non-conscious of their financial decisions, as they can’t
always justify the financial motives, and, with a degree of uncertainty, their
behaviour is irrational in terms of a certain risk level. They concluded that, it is
the necessity to consider behavioural factors in managing financial decisions of
an individual.

Lakshmi et al (2013) conducted a research to investigate to what extent

long term and short term stock investors share different behavioural
characteristics. A structural model is employed to compare the traits of the
investors and examine how investment decision making and behavioural biases
are related, as well compared the relative differences of behavioural biases such
as Herding, Social Contagion, Representative Heuristic, Over Confidence, Risk

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Aversion, Disposition Effect and Cognitive Dissonance. Identification of

behavioural traits commonly associated with investment tenure aids in providing
opinions and framing trading strategies. The psychological impact of investment
decision making among investors is studied through a sampling survey of 318
valid respondents from voluntary retail investors in India between January 2012
and May 2012. Structure Equation Modeling [SEM] and path analysis is
performed on how investment decision making and the proposed behavioural
biases are related. Analytical results indicate that the structural path model
closely fits to the sample data, implying the role of behavioural biases in
investment decision making among individuals. The study also demonstrates that
long term and short term investors significantly differ in behavioural traits.

Sharma et al (2013) conducted “An Empirical Study of Gender

Differences in Risk Aversion and Overconfidence in Investment Decision
making”. The purpose of the research paper is to study possible gender effects
on risk aversion and overconfidence in investment decision making. A sample of
168 respondents conveniently selected were administered a behavioural finance
questionnaire comprising nine closed ended questions. Chi-square has been
used as a statistical tool for data analysis. The authors have found female are
more conservative than their male counterparts in terms of risk aversion. In terms
of overconfidence, they could not reach to any conclusion with certainty because
research has shown mixed results.

Bashir et al (2013) has carried out a study on “Influence of Behavioural

Biases on Cognitive Abilities”. The study aimed to analyze the role of individual’s
level of cognitive abilities in making financial decisions and whether these
abilities are affected by their behavioural biases. Cognitive Reflection Test (CRT)
was used to investigate that whether behavioural biases that play major role in
financial decisions are related with cognitive abilities. The research found that
individuals who scored high on CRT are less likely to overconfidence,
conjunction fallacy and conservatism biases. The research also related CRT with
subjects such as time preferences and risk preferences and found that high

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score group are more patient and more risk seeker in domain of gain and less
risk seeker in domain of losses. However behavioural biases are lower for people
having higher cognitive abilities but they are still present in financial decisions.

Ramanujam et al (2012) carried out a study to compare the young and

experienced women investors related to their investment avenues with their
empirical analysis towards the success in investing in stock market. The study is
based on personal interview of women investors, using a structured
questionnaire. The study says that women should take some risk in the
investment, which gives them a more knowledge in making out the correct and
perfect judgment for their future investment. The women investors also need to
mobilize them with regards to the men investors in the stock market investment.

Dharmaja et al (2012) conducted a study on the topic “Factors Influencing

the Individual Investor Behaviour”. The study aims at identifying the most and the
least influencing factors of the individual investor behaviour. The sample size
considered for the study was 200 wherein all the samples were investors of
GEOJIT BNP PARIBAS Financial Service Ltd., Coimbatore. The tools used for
the analysis include Chi-square Test. The analysis was divided into 2 phases
which are personal factors and behavioural factors. The study revealed that
accounting information is the most influencing group of the individual investor
behaviour and neutral information is the least influencing group of the individual
investor behaviour. It was found that there are also some behavioural factors like
the investor’s financial tolerance, emotional risk tolerance and financial literacy
which influence the investor’s behaviour.

Singh (2012) has studied the “Investor Irrationality and Self-Defeating

Behaviour: Insights from Behavioural Finance”. The article explains that, the
efficient markets hypothesis has posited investment decision-makers as rational,
utility-maximizing individuals. Cognitive psychology, on the other hand, suggests
that human decision processes are susceptible to several illusions: those caused
by heuristic decision-making processes, as well as those arising from the

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Review of Literature

adoption of "mental frames". Unfortunately, these heuristics may lead to cognitive

illusions that include: representativeness, over-confidence, anchoring, gambler's
fallacy, loss aversion, regret aversion, and mental accounting, among others.
Behavioural finance proponents argue that heuristic-driven bias and framing
effects cause market prices to deviate from fundamental values. This paper
argues that understanding of the findings of this research benefits individual
investors the most as it seeks to create awareness of the various human biases
and the high costs they impose on their portfolios.

Thomas et.al (2012) has conducted a study on “BB&K Five-way Model

and Investment Behaviour of Individual Investors: Evidence from India”. The
intention of this study is to understand the relationship between model developed
by Thomas Bailard, David Biehl and Ronald Kaiser (BB&K) five-way model and
investment choices of individual investors. To find the relationship between
investor behaviour and investment choices, the study has used various
psychological theories. The study finally concludes that the personality of an
investor plays an important role and that influences the investment patterns and
selection of investment avenues. The study also found that preferences of
investments made by various investors were exactly matched with all the five
dimensions of the BB&K model. The Delphi technique was used to derive the
investment choices of investors as per BB&K model. The behaviour exhibited by
the investors in investment decision reflected all the five dimensions of BB&K
personalities namely Adventurer, Celebrity, Individualist, Guardian and Straight
Arrow.

Chitra et al (2011) conducted a study on “Does personality traits influence

the choice of Investment” analyses the psychological and personality
characteristics of investors while investing their money in the stock market. The
study analysed the influence of seven personality traits – emotional stability,
extraversion, risk, return, agreeability, conscientiousness and reasoning – on the
choice of investment pattern. The results of the study showed that these
personality traits of the investors have an impact on the individual while taking

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Review of Literature

decisions and also have a strong influence on determining the method of

investment. The study found that the influence of personality traits on the
investment decision is more compared to that of demographic variables.

Pasewark et al (2010) found that investors consider personal values in

addition to financial factors in the course of selecting investment avenues and
also personal values network with expected rates of return to decide the
investment choice. When return on investment with socially undesirable
characteristics exceed returns on socially responsible investments, the strength
of investor’s personal values becomes particularly important in determining their
investment choice.

Sahni (2010) has studied the “Behavioural Finance: Testing Applicability

on Indian Investors”. It was conducted with the objective to test the applicability
of behavioural finance theories on Indian investors and with the sub-objectives to
study the concept of behavioural finance and various theories associated with it
and to prove the loss averse nature of investors The sample size for the
consumer survey is 135 and they are drawn randomly. They finally concluded
that there is an investors’ perception about market trend that is influenced by the
past performance of a stock market on three consecutive days, which shows that
the anchoring theory is relevant in case of Indian investors. The Indian investors
are found to be loss averse, i.e., there is difference in investors’ behaviour in
case of losses and gain.

Srivastava (2007) has carried out a study on “An Analysis of Behaviour of

Investors in India”. The study attempts to measure the expectation and
confidence of retails investors in Indian stock markets. In this study they
concluded that the India investors do not believe in the stock market efficiency.
Majority of the investors shared their views that it was smart to individual stocks
and try to predict when they would rise. The researcher examined that investors
have acquaintance with respect to the past performance of the stocks over the
other universal investing instruments.

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Raj et al (1998) in his article “Financial Behaviour of an Investor” found

that the investment experience of the respondents is not uniform. Investment
decisions generally were taken by the respondents themselves. The alternative
sources contributing to investment decisions such as advice, information are
available through friends/ relatives; consultants and media were not so
significant. The factors which motivate investment decisions are safety, liquidity,
conveniences and price differences. For precautionary and contingency
purposes a tendency of preferring safe securities such as cash and bank
deposits was shown by the sample households.

2.6 Summary

It is observed from the earlier studies that, to understand the pattern of

individual investment behaviour, only few studies have been available in
Coimbatore District and also the earlier studies focused on the people those
closely related with investment itself. The current research study focused on the
behaviour of Professionals of Information Technology Sector, since IT
professionals are considered to be highly remunerative and in the present
scenario most of the people prefer to work in IT sector because of the attractive
salary packages and it encourages them to invest more for future. This research
gap motivated the researcher to study the “determinants of investment behaviour
of individual investors” of information technology sector in Coimbatore.

Determinants of Investment Behaviour of Individual Investors