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INVESTORS’ AWARENESS ABOUT INVESTMENT IN STOCK MARKET

By

Dr. K. BANUMATHY

Assistant Professor, Department of Management Studies

IFET College of Engineering

(Affiliated to Anna University-Chennai)

Gangarampalayam

Villupuram - 605 108

Tamil Nadu, India

Mobile Number: 8903536359

E.Mail: banukarunanithy@gmail.com

and

Dr. R. AZHAGAIAH

Associate Professor, Department of Commerce

Kanchi Mamunivar Centre for Postgraduate Studies

(Autonomous “A” Grade Centre with Potential for Excellence by UGC)

(Government of Puducherry) Pondicherry University

Puducherry – 605 008, India

Mobile Number: 9952474095

E. Mail: drrazhagaia@yahoo.co.in

INVESTORS’ AWARENESS ABOUT INVESTMENT IN STOCK MARKET

Abstract

The present study aims at to study the awareness of investors on stock market investment. The data were collected from 290 stock market investors of Puducherry using structured questionnaire. The analysis is made using Mann-Whitney U test and Kruskal-Wallis H Test. The study proves that there is a significant difference between male and female investors on awareness of stock market investment; there is a significant difference among the age, educational and occupational groups with respect to awareness; there is also a significant difference among the investors of different age and occupational groups, in respect of awareness.

Keywords: Awareness, behavioural finance, BSE, investment decision, stock market.

JEL Classification: G11, G02 and G10.

Introduction

Creating awareness about the stock market (SM) investment among the people is necessary to create knowledge of investments in shares and other investment. Investors’ awareness includes not only the knowledge of various financial products available in the market but also facilitates decision making, particularly among the less educated as well as of those committed to long-term financial decision. Advertising and the agent network played a vital role positively in creating awareness, but not knowledge; hence a coordinated approach is needed to convert the awareness into knowledge.

Indian investors are good savers, but often lose hard-earned money due to lack of knowledge and understanding about the financial products and financial markets. Though the regulatory authorities in the country such as Securities and Exchange Board of India (SEBI) have been taking necessary steps to protect the investors’ interest, the investors are still worried about and sceptical of investing in SM and they try to keep themselves always away from the SM participation.

The best form of investor protection is investor awareness and the best way to achieve that is through financial literacy. Hence, the investor should be knowledgeable, cautious and they should know the changing conditions of market scenario well before making an investment in the SM.

Review of Literature

Investors’ awareness is the knowledge of investment and about the important investment updates of the market. Many researchers have done research in this area, for instance, Guiso and Japelli (2005) stated that awareness of the investors could be determined by their income, wealth, age and educational status. Jain and Thakur (2012),who analysed the relationship between age and investment related characteristics of investors found that there were no significant relationships between the age and the investors’ investment strategies, reasons to invest in capital market, fund management strategy, awareness and investors’ risk bearing capacity.

Kadariya Collins et al. (2012) studied the level of awareness among the investors and found the extent of relationship between investors’ awareness and the volume of equity investment in secondary market considering the data collected through structured questionnaire from 65 investors. The study found that the investors’ awareness level was found to be affected by the related work experience, understanding of investment environment, learning expectation and access to market information; there was a positive relationship between investors’ awareness and equity investment; the investors were aware and their level of awareness was high. Further, Basaiah and Priyajka (2012) examined the investors’ motives and awareness level on various investment avenues in the SM in Anantapur district in Andra Pradesh and pointed out that investors were aware about the investment in SM and mutual fund, however they were not aware about debenture, gold traded funds, and unit linked funds, futures and options and commodities.

Umamaheswari and Ashok Kumar (2013) examined the awareness level of salaried class investors towards the nature of investment using the data collected from 1000 individual investors in Coimbatore district through structured questionnaire. The study predicted that the socio-economic variables viz., age, gender, income, education and occupation influenced the awareness of investors about investment; however, the investors were not much aware of the concept and working of the investment.

Rakesh (2014) examined the attitude and perception of investors with respect to SM and found out that around 80% of the investors were aware about the investment in SM, but Murthy and Joshi (2012), who examined the Indian investors’ behavior stated that the investors were irrational with different investment options and were overconfident. The previous studies have brought out varied information on individual investors. Hence, the present study made an attempt to study the awareness of the investors about investment in SM.

Objectives of the Study

The main objective of the study is:

To study the awareness (A) of the investors about investment in stock market (SM).

Hypotheses Developed for the Study

The hypotheses developed to achieve the stated objective are:

H01: There is no significant difference between gender and awareness of investors about investment in stock market.

H02: There is no significant difference between age and awareness of investors about investment in stock market.

H03: There is no significant difference between educational level and awareness of investors about investment in stock market.

H04: There is no significant among various occupation categories in respect of awareness of investors about investment in stock market .

Research Methodology

To study the investors’ awareness about investment in SM, a structured questionnaire was prepared and was administered on the investors of SM in Puducherry. The questionnaire was distributed through personal contacts, the executives of the participating broking agencies and through E-mails. The questionnaires were distributed to the clients of various stock broking agencies in Puducherry and 290 responses were ultimately received.

Research Methods used for Analysis

The study used two major non-parametric tests viz., Mann-Whitney U test and Kruskal-Wallis H test.

Mann-Whitney U Test

The U test is used to study whether there is a significant difference between gender and the awareness of investors about investment in SM. The formula for Mann–Whitney U Test:

Where,
U= Mann-Whitney U test

n1 = Sample size for sample 1

n2= Sample size for sample2
Ri = Rank of the sample size

Kruskal -Wallis H Test

Kruskal-Wallis H Test is used for comparing more than two samples that are independent, or not related. The test is used to study whether awareness of investors vary with age, education and occupation. The H Test formula is:

Where,

R = Sum of rank of each group

N = Total number of observations

n = Number of observations in each group

k = Number of groups

Results and Discussion

Table 1 shows the demographic characteristics of the sample respondents. The selected variables viz., gender, age, education andoccupation are associated with various dimensions of awareness about investment in SM. The results about awareness are presented fromtables 2 to 5. For testing H01 Mann-Whitney U Test is employed while for testing H02 - H04 Kruskal-Wallis H Test is used.

Demographic Characteristics of Sample Investors

The important variables used in this context are viz., gender, age, marital status, education, occupation, income and savings of the respondents. The study shows that 77.2% of the respondents are male and 22.8% are female, which fact shows that the SM investment is widely preferred by men than that of women. On analysing the distribution of age it is found that 33.8% fall in the age category of ‘up to 30 years’, 35.9% of the respondents come under the age group of ‘31-40’, 10% of them are in the age group of ‘41-50 years’ and only 20% of the sample respondents fall ‘above 50 years’ of age.

The analysis over marital status of the sample respondents indicates that 75% of them are married and nearly 25% of them are single. Education determines the individual’s mental status and the level of confidence, however it is found that majority of the sample investors (40%) seemed postgraduate degree as the highest education, whereas 13% of them are educated up to school level, 34% of them are graduates, and only 13% of them possessed other educational qualifications.

Table 1: Profile of the Sample Investors

Demographic Characteristics

Frequency

Percentage

Gender

Male

224

77.2

Female

66

22.8

Total

290

100.0

Age

Up to 30

98

33.8

31-40

104

35.9

41-50

30

10.3

Above 50

58

20.0

Total

290

100.0

Marital Status

Married

218

75.2

Single

72

24.8

Total

290

100.0

Education

Up to School

38

13.1

Graduate

99

34.1

Post Graduate

115

39.7

Others

38

13.1

Total

290

100.0

Occupation

Business

77

26.6

Professional

41

14.1

Govt. Employee

25

8.6

Pvt. Employee

94

32.4

Home Maker

18

6.2

Retired

28

9.7

Others

7

2.4

Total

290

100.0

Monthly Income

Up to 25000

156

53.8

25001- 50,000

94

32.4

50001- 75,000

16

5.5

Above 75,000

24

8.3

Total

290

100.0

Monthly Saving

Up to 10,000

225

77.6

10,001- 20,000

43

14.8

20,001- 30,000

13

4.5

30,001- 40,000

6

2.1

40,001- 50,000

3

1.0

Total

290

100.0











































Source: Computed results based on survey data.

The occupation of the investors is also an important variable in SM investment because it directly affects the investors’ income, expenses, savings etc. The information pertaining to occupational categories reveals that most of the respondents (32.4%) are employed in private sectors, nearly 27% of them are doing business, only 14% of them are professionals like Doctors, Chartered Accountants etc. 8.6% of the respondents are government employees, 6% of them are housewives, nearly 10% of them are retired and only 2.4% of them belonged to other categories of occupation.


Table 2: Dimensions of Investors’ Awareness about Investment in Stock Market

Dimensions of Awareness

Description

A1

I am somewhat knowledgeable about SM

A2

I usually follow the SM through financial news on TV and newspapers every week

A3

I clearly understand the role of brokerage firms in listing on the BSE annually

A4

Stock exchange carries out awareness campaigns for investors

A5

I always have trust when trading on the BSE

A6

When seeking financial advice, I deal with licensed brokers, intermediaries or financial services companies

A7

I usually visit the BSE website

A8

I usually buy shares based on future expectation rather than past performance

A9

Raising funds from the SM is much easier and cheaper than the other sources like banks

A10

The return on investment in SM is higher than those of other investments


With regard to income, it is found that 53.8% of the investors have monthly income up to 25000, whereas 32.4% of them have income ranging from 25,001 to 50,000, 5% of them have income range between 50,001 and 75,000 and only 8% of the sample respondents earns income above 75,000. It is evident from the table 1, that majority of the investors save up to 10,000 per month. Only 4% of them save between 20,001and 30,000 and only very few of them save more than 30,000.

Dimensions of Investors’ Awareness

Various dimensions of investors’ awareness about investment in SM are shown in table 2.Mann-Whitney U Test is performed to study the gender difference on various dimensions of awareness and the result of the analysis is shown in table 3.It is inferred from table 2 that the dimension A1 (U=6105, p= 0.013) and A2 (U= 5374, p= 0.000) of awareness between male and female is statistically significant respectively.

Table 3: Results of Mann-Whitney U Test on Gender and Various Dimensions of Awareness about Investment in Stock Market

Dimensions of Awareness

Gender

N

Mean Rank

Mann-Whitney U Test

P value

A1

Male

224

151.25

6105.00

0.013**

Female

66

126.00

A2

Male

224

154.51

5374.00

0.000*

Female

66

114.92

A3

Male

224

147.41

6964.00

0.427

Female

66

139.02

A4

Male

224

144.17

7094.00

0.599

Female

66

150.02

A5

Male

224

146.40

7190.00

0.722

Female

66

142.45

A6

Male

224

149.58

6479.00

0.109

Female

66

131.67

A7

Male

224

143.16

6868.00

0.362

Female

66

153.43

A8

Male

224

149.56

6482.00

0.106

Female

66

131.71

A9

Male

224

148.81

6650.00

0.193

Female

66

134.26

A10

Male

224

146.44

7180.00

0.707

Female

66

142.30





























Source: Computed results based on survey data.

*Significant at 1% level, **Significant at 5% level.

The p value for the dimensions viz., A1 and A2 is less than 5% level of significance, hence it can be inferred that there is a significant difference between male and female investors in the awarenessdimensionsA1 and A2. Whereas, for the other dimensions viz., A3 to A10 the p value is more than 0.05, indicating that there is no statistically significant difference between male and female investors in respect of awareness about SM in respect of awareness dimensions from A3 to A10. The Mann-Whitney U test shows insignificant relationship between male and female investors on the dimensions of awareness from A3 to A10. Hence, H01“there is no significant difference between gender and awareness of investors about investment in SM is rejected for awareness dimensions A1 and A2.

Table 4 shows the results of Kruskal-Wallis H test, which tested the difference between the age and the investors’ awareness about investment in SM. It reveals that the investors of different age groups vary significantly with regard to awarenessdimensionsA1, A2, A5, A8 and A10. From the table, it is seen that the investors belonging to ‘31-40 years’ of age have strongly agreed to the statement that they buy shares based on future expectation rather than the past performance(A8) and return on SM investment is higher than that of the other investment avenues(A10). The investors of ‘above 50 years’ of age have trusts on BSE than the investors (A5) of other age categories.

Overall, the investors have knowledge on SM, following SM activities regularly through news and television (A2), have trust while trading (A5), trade based on future expectation (A8) and agreed that the return on SM investment is higher than that of any other avenues of investments (A10), hence H02 “there is no significant difference between age and awareness of investors about investment in SM” is rejected at 1% in respect of awareness dimensions A1, A8 and A10and at 5% level in respect of A2 and A5.

Table 4: Results of Kruskal-Wallis H Test on Age and Various Dimensions of Awareness about Investment in Stock Market

Dimensions of Awareness

Age Group

Mean Rank

χ2 value

Dimensions of Awareness

Age Group

Mean Rank

χ2 value

A1

Up to 30 years

166.33

17.556

(0.001*)

A6

Up to 30 years

133.51

5.197

(0.158)

31-40 years

145.85

31-40 years

155.43

41-50 years

122.27

41-50 years

133.45

Above 50 years

121.70

Above 50 years

154.19

A2

Up to 30 years

135.22

9.291

(0.026**)

A7

Up to 30 years

151.44

4.589

(0.205)

31-40 years

158.66

31-40 years

147.63

41-50 years

162.28

41-50 years

156.47

Above 50 years

130.58

Above 50 years

125.97

A3

Up to 30 years

142.62

3.224

(0.358)

A8

Up to 30 years

126.55

14.976

(0.002*)

31-40 years

154.86

31-40 years

165.59

41-50 years

145.82

41-50 years

161.23

Above 50 years

133.42

Above 50 years

133.36

A4

Up to 30 years

153.02

2.578

(0.461)

A9

Up to 30 years

149.78

2.081

(0.556)

31-40 years

146.01

31-40 years

150.12

41-50 years

127.60

41-50 years

134.30

Above 50 years

141.14

Above 50 years

135.78

A5

Up to 30 years

129.58

8.421

(0.038**)

A10

Up to 30 years

140.11

21.449

(0.000*)

31-40 years

155.42

31-40 years

169.44

41-50 years

133.45

41-50 years

147.60

Above 50 years

160.84

Above 50 years

110.59

Source: Computed results based on survey data.

*Significant at 1% level, **Significant at 5% level.

The result of Kruskal-Wallis test (vide table 4) reveals significant difference among investors belonging to different age groups for the dimensions of awareness A1, A2, A5, A8 and A10. It is observed from table 4, the p value for A1, A8 and A10 is less than 0.01 indicating highly significant difference among various age categories of respondents. Hence, H02 “there is no significant difference between age and awareness of investors about investment in SM” is rejected. Therefore, it can be concluded that there exists a significant difference among the various age categories of investors with regard to their awareness towards SM investment except for dimensions A3, A4, A6, A7 and A9.

The result of Kruskal-Wallis test is tabulated in table 5 for each educational category, the respective mean rank for each dimension of awareness and test statistics. From the table it is evident that the investors vary significantly with regard to the awareness dimensions A6 and A10. Since the p value for these two dimensions A6 2 = 8.86, p = 0.03) andA102 = 7.99, p = 0.04) is significant, the Kruskal-Wallis test shows that the respondents of four educational groups do not perform equally well and henceH03 “there is no significant difference between educational level and awareness of investors about investment in SM” is rejected at 5%level and it can be concluded that there exists a significant difference between educational level and the dimensions of awareness about SM investment.

Whereas, the elements of awareness viz., A1-A5, A7-A8 and A9 do not differ significantly with the educational level since the p values are greater than 5% level of significance and so the H03“there is no significant difference between educational level and awareness of investors about investment in SM” is accepted. The H03 tested by Kruskal -Wallis test showed that the investors of four different educational categories have the same effect on A6 and A10, i.e. the investors seek financial advice from licensed brokers and they visit the BSE website usually. Therefore, H03 “there is no significant difference between educational level and awareness of investors about investment in SM” is rejected.

Table 5: Results of Kruskal - Wallis H Test on Educational Level and Various Dimensions of Awareness about Investment in Stock Market

Dimensions of Awareness

Education

Mean Rank

χ2 value

Dimensions of Awareness

Education

Mean Rank

χ2 value

A1

Up to School

148.68

6.582

(0.086)

A6

Up to School

154.08

8.865

(0.031**)

Graduate

135.39

Graduate

147.06

Post Graduate

157.62

Post Graduate

152.95

Others

131.97

Others

110.32

A2

Up to School

131.25

3.636

(0.304)

A7

Up to School

126.70

4.042

(0.257)

Graduate

142.42

Graduate

140.58

Post Graduate

147.40

Post Graduate

151.99

Others

162.04

Others

157.49

A3

Up to School

137.34

1.904

(0.593)

A8

Up to School

157.32

2.745

(0.433)

Graduate

152.30

Graduate

151.88

Post Graduate

145.62

Post Graduate

138.87

Others

135.57

Others

137.11

A4

Up to School

144.57

1.281

(0.734)

A9

Up to School

149.37

4.445

(0.217)

Graduate

144.17

Graduate

140.40

Post Graduate

142.52

Post Graduate

155.09

Others

158.93

Others

125.89

A5

Up to School

151.70

2.868

(0.412)

A10

Up to School

115.46

7.992

(0.046**)

Graduate

149.36

Graduate

144.78

Post Graduate

146.69

Post Graduate

156.93

Others

125.64

Others

142.80

Source: Computed results based on survey data.

*Significant at 1% level, **Significant at 5% level.

Table 6 shows the results of Kruskal –Wallis test, which reveals the difference among various occupational categories in respect of awareness of the SM investment. When awareness about SM investment is analysed considering the investors’ occupational category, it is found that the investors have strongly agreed with all the dimensions of awareness except for A2, A5 and A6, indicating the existence of significant difference among the different occupation categories in respect of awareness about SM. The χ2values for awareness dimensions A2,A5 and A6 are insignificant. Whereas, it is significant at 1% level for dimensions A1,A3-A4 and A7-A10 so it is inferred that there is a significant difference among different occupational categorise in respect of awareness of the investors about SM investment. Hence, H04 “there is no significant difference among various occupation categories in respect of awareness of investors about investment in SM” is rejected.

Table 6: Results of Kruskal-Wallis H Test on Occupation and Various Dimensions of Awareness about Investment in Stock Market

Dimensions of Awareness

Mean

Standard Deviation

χ2 Value

P Value

A1

3.99

0.751

27.768

0.000**

A2

3.96

0.726

9.770

0.135

A3

3.74

0.748

14.579

0.024**

A4

3.30

1.127

15.871

0.014**

A5

3.50

0.964

8.992

0.174

A6

3.61

1.093

10.662

0.099

A7

3.43

1.054

35.251

0.000*

A8

3.72

0.915

23.437

0.001*

A9

3.50

1.079

32.315

0.000*

A10

3.52

1.040

23.348

0.001*

Source: Computed results based on survey data.

*Significant at 1% level, **Significant at 5% level.

Concluding Remarks

The objective of the study is to analyse the awareness of the investors towards investment in SM. Hypotheses were framed and tested using the data (290 respondents), which are collected with the help of structured questionnaire. Using Mann-Whitney U test and Kruskal-Wallis H test the study shows that male and female investors differ in their awareness about investment in SM; there exists a significant difference between age group of investors and the awareness about the investment in SM; majority of the investors of different educational background are equal with regard to awareness and only very few investors differ in the awareness towards SM investment. Besides, the study also reveals that there is a significant difference between occupation and awareness of investors about investment in SM. The study supports the earlier studies of Kadariya Collins et al. (2012), Rehman and Kalkundrikar (2011) and Umamaheswari and Ashok Kumar (2013) where the demographic variables like gender, age, marital status, education and income influence the investment behaviour of individuals and their decision making.

Limitations of the Study

The present study aims to identify the awareness of investors about investment in SM. The following are some of the limitations of the study:

* The respondents contacted belong to Puducherry only.

* The primary data has been collected through a structured questionnaire from a sample of 290 investors in Puducherry region who had invested their hard earned money in SM, which may not reflect the opinion of the entire population of the SM investors in the country as a whole.

Scope for Further Study

The study found that the demographic variables viz., age, gender, education and occupation have been influencing the awareness of investors towards investment in SM significantly. Further research can be conducted by extending the scope of the study to cover other related variables and concentrating on the investors in other regions also. The present study concentrated the investors’ who had invested their money only in SM therefore, further studies can also be made on identifying the awareness level of investors about other investment avenues besides SM investment.

References

Basaiah, P. & Priyajka, K. T. Y. (2012). A study on motives and awareness level of stock market investors- A case study with reference to Anatapur district in A. P. International Journal of Research in Commerce & Management, 3(3), 22-30.

Guiso, L. & Japelli, T. (2005).Awareness and stock market participation. Review of Finance, 9(4), 537-67.

Jain, D. & Thakur, P. (2012).Behavior of investors in the Indian capital market - An empirical analysis with respect to Udaipur, Rajasthan. IJRMS’s International Journal of Management Science, 1(2), 72-84.

Kadariya, S. Prasad, P. S. Joshi, B. &Prasad, R. N. (2012).Investor awareness and investment on equity in Nepalese capital market. Banking Journal, 2(1), 1-15.

Murthy, P. G. K. & Joshi,D. (2012).A study on retail investors’ behaviour.International Journal of Contemporary Business Studies, 3(6), 28-37.

Rehman, A. R. H., & Kalkundrikar. A. B. (2011). Impact on demographic factors on retail investors’ investment decisions - An exploratory study. Indian Journal of Finance, 5(9), 35-44.

Rakesh, H. M. (2014). A study on individual investors behavior in stock market of India.International Journal in Management and Social Science, 2(2), 165-74.

Umamaheswari, S. &Ashok Kumar,M. (2013).A study on investment pattern and awareness of salaried class investors in Coimbatore district. PARIPEX-Indian Journal of Research,2(9), 31-4.

 
 

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