17vol2no2

IRACST- International Journal of Research in Management & Technology (IJRMT), ISSN: 2249-9563
Vol. 2 No.2, April 2012

A Study on the Individual Investor Behavior
with Special Referance to Geojit BNP Paribas
Financial Service Ltd, Coimbatore.
Gnani Dharmaja .V,
Mechanical Engineering
Psg College of Technology, Coimbatore, India

Ganesh .J,
Electrical and Electronics Engineering,
PSG College of Technology, Coimbatore, India

Dr. Santhi .V
Department Of Humanities
Psg College of Technology
Coimbatore, India

ABSTRACT
Research in behavioral finance is relatively new. Within Most financial theory is based on the idea that everyone
behavioral finance it is assumed that information takes careful account of all available information before
structure and the characteristics of market participants making investment decisions. But there is much evidence
systematically influence individuals’ investment decisions that is not the case. Behavioral finance, a study of the
as well as market outcomes. According to behavioral markets that draws on psychology, is throwing more light
finance, investor market behavior derives from on why people buy or sell the stocks they do - and even
psychological principles of decision making to explain why they do not buy stocks at all. This research on
why people buy or sell stocks. The research we have investor behavior helps to explain the various 'market
done was on the topic “Factors Influencing the anomalies' that challenge standard theory. It is emerging
Individual Investor Behavior”. The study aims at from the academic world and beginning to be used in
identifying the most and the least influencing factors of money management.
the individual investor behavior. The project is based on
descriptive research design. The data was collected with OBJECTIVES OF THE STUDY
the help of a questionnaire. The questionnaire included
thirty items that belong to five categories: self- Primary Objective
image/firm-image co-incidence, accounting information, To study the various factors influencing the
neutral information, advocate recommendations and investment behavior of individual investors.
personal financial needs. The sample size considered for Secondary Objective
the study was 200 wherein all the samples were investors To study the impact of the self-image/firm image co-
of GEOJIT BNP PARIBAS FINANCIAL SERVICE LTD, incidence on the investor behavior.
COIMBATORE. The tools used for the analysis include To identify the influence of the accounting
Chi-Square Test. The analysis was divided into 2 phases information on the investor behavior.
which are Personal Factors and Behavioral Factors. The To find out the effect of the factors related to neutral
study revealed that accounting information is the most information on the investor behavior.
influencing group of the individual investor behavior and To analyze the impact of the advocate
neutral information is the least influencing group of the recommendation on the investor behavior.
individual investor behavior. It was found that there are To interpret the effect of the factors related to
also some behavioral factors like the investor’s financial personal financial needs on the investor behavior.
tolerance, emotional risk tolerance and financial literacy To study the investment pattern of the investors based
which influence the investor’s behavior. Based on the on their risk taking abilities.
analysis Suggestions for improvement are provided. To study the investment time horizon of the investors
INTRODUCTION based on their personal profile.
Factors influencing investor behavior:
SCOPE OF THE STUDY
Research in behavioral finance has important applications.
A better understanding of behavioral processes and
outcomes is important for financial planners because an
understanding of how investors generally respond to

243


market movements should help investment advisors devise Data were collected through both primary
appropriate asset allocation strategies for their clients. and secondary data sources. Primary data was
For companies, identifying the most collected through questionnaires.
influencing factors on their investors’ behavior would
Questionnaire Design
affect their future policies and strategies would affect their
Proper care has been taken to ensure
future financial plans.
that the information needed match the objectives, which
For government, identifying the most influencing factors
in turn match the data collected through the
on investors’ behavior would affect the required
questionnaire. The basic cardinal rules of Questionnaire
legislations and the additional procedures needed in order
design like using simple and clear words, the logical and
to satisfy investors’ desires and also to give more support
sequential arrangement of questions has been taken care
to market efficiency.
of.
The research can help guide portfolio allocation
Secondary Data
decisions, both by helping us to understand the kinds of
Secondary data consist of
errors that investors tend to make in managing their
information that already exists somewhere, have been
portfolios, and also by allowing us to understand better
collected. Secondary data is collected from company
how to locate profit opportunities for investment
websites, other websites, company fact sheets, magazines
managers. Beyond this, understanding the psychological
and brochures.
foundation of human behavior in financial markets
facilitates the formulation of macroeconomic policy and
Statistical Tools
The statistical tools used for this
the devising of new financial institutions.
analysis are:
RESEARCH DESIGN Mean Score Values
Mean score values has been calculated for
The research design that is adopted in this study is the different scales used to find the perception and
descriptive design. Descriptive research is used to obtain satisfaction level of investors.
information concerning the current status of the Mean score value Analysis is calculated
phenomena to describe, "What exists" with respect to
variables or conditions in a situation. The focus of this
by
study was on revealing the various factors influencing the
individual investor behavior. No. of Respondents
Thus it involves Statement of the problem, x Score value (1)
Identification of information needed to solve the Total No. of Respondents
problem, Selection or development of instruments for Chi – Square Test
gathering the information, Identification of target Chi – Square test is a non-parametric test
population and determination of sampling procedure, of statistical significance for bi-variant tabular
Design of procedure for information collection,
analysis. A non-parametric test, like chi square, is a
Collection of information, Analysis of information and
Generalizations and/or predictions.
rough estimate of confidence.
SAMPLING DESIGN Chi-square is used most frequently to test
the statistical significance of results reported in bi-
Population variant tables and interpreting bi-variant tables is
The population for this study is investors of integral to interpreting the results of a chi-square
Geojit bnp paribas financial services limited in test.
Coimbatore city.
Null Hypothesis ( H0 )
The hypothesis, or assumption, about a
Sampling Technique population parameter we wish to test, usually an
The sampling technique used is non
probability convenience sampling. The sample frame for
assumption of the status quo.
this study is the company’s database of Coimbatore city Alternative Hypothesis (H1)
(finite universe) The conclusion we accept when the data
Survey Method fail to support the null hypothesis.
Research design includes selecting
appropriate data collection method. It can be Statistical Test
obtained by primary data or secondary data. The
Chi-Square test:-
primary data is the Questionnaire collected through (2)
Direct Personal Interview.
Sample Size Degrees of freedom = (R-1) (C-1)
The sample size for this study is 200
investors of Geojit bnp paribas financial services Where, O = Observed Frequency
limited of Coimbatore city out of entire population E = Expected Frequency
2048 which consists of 10% of the population. R = Number of rows
Sample Unit C = Number of columns
The individual investors of Geojit bnp paribas To find E
financial services limited were the target respondent Expected Frequency = (Row Total ×
groups from which the data were collected. Column Total) / Grand Total (3)
Sources of Data

244


Level of Significance
A value indicating the percentage of
sample values that is outside certain limits,
assuming the null hypothesis is correct, that is, the
probability of rejecting the null hypothesis is
correct, that is, the probability of rejecting the null TABLE 2
hypothesis when it is true.
Educational Qualification Standard of Investors
ANALYSIS AND INTERPRETATION S.NO NO OF
The factors are analyzed under the following broad QUALIFICATION RESPONDENTS PERCENTAGE
phases: 1 School level 32 16
2 Under Graduate 84 42
PHASE I : Personal Factors
3 Post Graduate 64 32
PHASE II: Behavioral Factors 4 Others 20 10
Total 200 100
PHASE I
Personal Factors
Source: Primary Data
This phase includes the personal details of The table2 shows that out of the 200 respondents,
the investors. The factors considered are gender, nearly 16% of the investors have school level
qualification, work status, income and life stage. education whereas 42% are under graduates, 32%
are postgraduates and 10% of them have completed
PHASE II other level of education like diploma and charted
Behavioral Factors accountancy.

In this particular phase the responses for CHART 2
the various behavioral factors of the investors that QUALIFICATION STANDARD OF THE
have been considered in the questionnaire have INVESTORS
been analysed. The investors’ financial resources,
emotional risk tolerance, financial literacy level
and various other factors have been analyzed in this
phase.

PHASE I: PERSONAL FACTORS

GENDER DISTRIBUTION OF THE
INVESTORS

TABLE I
WORK STATUS OF THE INVESTORS
S.N GENDER NO OF INVESTORS PERCENTAGE TABLE 3
O WORK NO OF
1 S.NO STATUS RESPONDENTS PERCENTAGE
Male 180 90
2 1 Own Business 76 38
Female 20 10 2 Pvt company
employee 28 14
Total 200 100 3 Govt Servant 16 8
4 Student 10 5
5 Retired 56 28
Source: Primary Data 6 Others 14 7
The table1 indicates that out of the total Total 200 100
respondents, 90% were male and 10 % were
female. Majority of the investors are male. Source: Primary Data
The table 3 shows that out of the 200
CHART 1 respondents, nearly 38% of the investors are doing
their own business whereas 14% are private
GENDER DISTRIBUTION OF THE INVESTORS
company employees, 8% are government servants,
5% are students, 28% are retired persons and 7% of
the investors where included in others category
which comprises house wives and full time
investors.

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CHART 3
WORK STATUS OF THE INVESTORS

INVESTMENT TIME HORIZON OF THE
INVESTORS
TABLE 5

S.NO INVESTMENT TIME Source: Primary Data
HORIZON NO OF PERCENTAGE From the table5 it is found that 22.5% of the
RESPONDENTS
1 Less than 1/2 year 45 22.5 investors are very short term investors with the
2 Between ½ to 1 years 54 27
3 Between 1 to 2 years 39 19.5
investment time horizon less than 1 year, 27%
4 Between 2 to 3 years 40 20 of the investors are investing for the time
5 More than 3 years 22 11 period between 1 to 2 years, 19.5% of the
Total 200 100
respondents invest between 2 to 5 years, 20%
of them invest between 5 to 10 years and only
11% of them are investing for more than 10
years.

CHART 5
INVESTMENT TIME HORIZON OF THE
LIFE STAGE OF THE INVESTORS INVESTORS
TABLE 4
NO OF
S.NO STAGES OF LIFE RESPONDENTS PERCENTAGE

1 Below 25yrs 20 10
2 Early adulthood(25-
34yrs) 44 22
3 Middle adulthood(35-
49yrs) 60 30
4 Empty Nesters
(50+yrs) 76 38
Total 200 100

From the table4 it is found that 10% of the
investors are single, 20% are under early
adulthood, another 20% of the respondents are INCOME OF THE INVESTORS
under middle adulthood and 22% are empty nesters
in 50+ years and 28% are retired persons. It shows TABLE 6
that the majority of the respondents are retired S.NO NO OF
persons. INCOME RESPONDENTS PERCENTAGE

1 < Rs.10000 80 40
CHART 4 2 Rs.10000 – Rs.20000 80 40
LIFE STAGE OF THE INVESTORS 3 >Rs.20000 40 20
Total 200 100

246


TABLE 8
EMOTIONAL RISK NO OF
Source: Primary Data S.NO TOLERANCE RESPONDENTS PERCENTAGE
From the table6 it is understood that 40% of 1 Very conservative
36 18
investor’s have income < Rs 10000 per month, 2 Moderately conservative
78 39
40% of investor’s have a income between Rs.10000 3 Moderate
48 24
– Rs.20000 per month, 20% have a income of 4 Moderately Aggressive
38 19
above 20000 per month. 5 Very aggressive
0 0
CHART 6
Total 200 100
INCOME OF THE INVESTORS Source: Primary Data
18% of investor’s are very
conservative in their investments, 39% of the
respondents are moderately conservative, 24%
of the respondents are moderate risk takers,
19% are moderately aggressive and no
respondents are very aggressive towards their
investments.

FINANCIAL TOLERANCE LEVEL OF
CHART 8
THE INVESTORS EMOTIONAL TOLERANCE LEVEL OF THE
TABLE 7 INVESTORS
FINANCIAL NO OF
S.NO TOLERANCE RESPONDENTS PERCENTAGE
1 Pessimist 36 18
2 Neutral 120 60
3 Optimist 44 22
Total 200 100

18% of investor’s are pessimist in
their attitude towards their financial resource,
60% are neutral and 22% are optimist in their RANKING OF THE RISKS OR EVENTS
attitude. THAT THE INVESTOR FEAR OR REGRET
THE MOST
CHART 7
TABLE 9
FINANCIAL TOLERANCE LEVEL OF
THE INVESTORS S.NO RISKS OR EVENTS MSV RANK
1 A loss of principal over a period of 1 year
or less 2.56 IV
2 A rate of inflation that exceeds the rate of
return over the long term
2.64 V
3 Portfolio performance that is insufficient
to meet the goals 3.64 I
4 Portfolio performance that is consistently
less than industry benchmarks 3.36 II
5 A missed investment opportunity that
could have yielded higher returns over the
long term 2.8 III

EMOTIONAL TOLERANCE LEVEL OF The risks or events that the investor fear or regret
THE INVESTORS the most is for the Portfolio performance that is
insufficient to meet their goals. The other risks or

247


events includes portfolio performance that is NEUTRAL INFORMATION MSV RANK
consistently less than industry benchmarks, a Recent price movement in a
missed investment opportunity that could have 3.98 1
firm’s stock
yielded higher returns over the long term, a loss of Current economic indicators 3.7 2
principal over a period of 1 year or less, a rate Fluctuation/developments in the
of inflation that exceeds the rate of return over 3.68 3
stock index
the long term. Statements from government
CHART 9 3.36 4
officials
RANKING OF THE RISKS OR EVENTS Information obtained from the
THAT THE INVESTOR FEAR OR REGRET 3.34 5
internet
THE MOST
Coverage in the press 3.14 6
A missed investment opportunity that could
have yielded higher returns over the long term 2.8 Government holdings 3.12 7
Portfolio performance that is consistently less
OVERALL MSV = 3.474
than industry benchmarks 3.36
Risks or Events

Portfolio performance that is insufficient to
meet the goals 3.64 Source: Primary Data
The most influencing factors under neutral
A rate of inflation that exceeds the rate of
return over the long term
2.64
information is the recent price movement in a
A loss of principal over a period of 1 year or
firm’s stock (MSV 3.98) whereas the least
2.56
less
influencing factors include Coverage in the press
(MSV 3.14) and Government holdings (MSV 3.12)
in the company.
0 1 2 3 4
MSV

FINANCIAL LITERACY LEVEL OF THE CHART 11
INVESTORS ANALYSIS OF FACTORS UNDER NEUTRAL
TABLE 10 INFORMATION
FINANCIAL NO OF
S.NO LITERACY LEVEL RESPONDENTS PERCENTAGE
1 Low 19 9.5
2 Medium 122 61
3 High 59 29.5
Total 200 100
9.5% of investor’s are low in their financial
literacy score, 61% of the respondents are under
medium literacy level and 29.5% of the respondents
are having high financial literacy score.

CHART 10
FINANCIAL LITERACY LEVEL OF THE
INVESTORS

ANALYSIS OF FACTORS UNDER
ADVOCATE RECOMMENDATION
TABLE 12
ADVOCATE RECOMMENDATION MSV RANK
Friend or coworker recommendations 3 1
Opinions of the firm’s majority stockholders 2.96 2
Broker recommendation 2.92 3
Family member opinions 2.88 4

OVERALL MSV = 2.94
ANALYSIS OF FACTORS UNDER NEUTRAL
INFORMATION The most influencing factor under
TABLE 11 advocate recommendation is the Friend or

248


coworker recommendations (MSV 3) whereas ANALYSIS OF FACTORS UNDER SELF-
broker recommendation (MSV 2.92) and IMAGE/FIRM-IMAGE COINCIDENCE
family member opinions (MSV 2.88) are the
least influencing factors.
CHART 12
ADVOCATE RECOMMENDATION

ANALYSIS OF FACTORS WITHIN THE
ACCOUNTING INFORMATION
GROUPS
TABLE 14
ANALYSIS OF FACTORS UNDER SELF-
IMAGE/FIRM-IMAGE COINCIDENCE ACCOUNTING INFORMATION MSV RANK
TABLE 13
SELF-IMAGE/FIRM- Condition of financial statements 4.1 1
MSV RANK
IMAGE COINCIDENCE Dividends paid 4.08 2
Organized financial markets 3.98 1
Perceived ethics of firm 3.98 2 Past performance of the firm’s stock 4.06 3
Reputation of the firm 3.84 3
Expected Dividends 3.98 4
Feelings for a firm’s
3.7 4
products and services Expected corporate earnings 3.88 5
Gut feeling on the economy 3.68 5
Firm status in industry 3.58 6 Stock Marketability 3.65 6
Reputation of the firm’s Affordable share price 3.62 7
3.32 7
shareholders
“Get rich quick” 3.08 8 Source: Primary Data
Increase of the firm’s
involvement in solving 2.92 9 OVERALL MSV = 3.912
community problems
Religious reasons 2.26 10 Condition of financial statements (MSV
Source: Primary Data 4.1) is being considered as the most influencing
OVERALL MSV = 3.43 attribute under the factor accounting information
whereas Stock Marketability (MSV 3.65) and
Organized financial markets (MSV 3.98) Affordable share price (MSV 3.62) are the least
is being considered as the most influencing factors influencing factors.
on the investor behavior under the factor self- Source: Primary Data
image/firm-image coincidence whereas Increase of
the firm’s involvement in solving community OVERALL MSV = 3.912
problems (MSV 2.92)and Religious reasons (MSV
2.26) are the least influencing factors. Condition of financial statements (MSV
4.1) is being considered as the most influencing
CHART 13 attribute under the factor accounting information

249


whereas Stock Marketability (MSV 3.65) and
Affordable share price (MSV 3.62) are the least
influencing factors.
CHART 14
ACCOUNTING INFORMATION

Calculated value = 13.186
Table value = 16.919

Therefore by using the chi-square for the above
given table, it is found that the calculated value is
less than the tabulated value. So, Ho is accepted.
1.Chi- square calculation for education and
relation between employee and management.
FINDINGS

Majority of the investors (39%) are moderately
conservative and 18% of investor’s are very
conservative in their investment, and no respondents are
very aggressive towards their investments.
Majority of the investors (27%) are short term
investors with the investment time horizon between 1 to
2 years.
There is no significant relationship between
Emotional Risk Tolerance and Gender of the investor.
There is a significant relationship between
Emotional Risk Tolerance and Work Status of the
investor.
Source: Primary Data There is a significant relationship between
Emotional Risk Tolerance and Life stage of the investor.
Ho : there is no relationship between the job There is no significant relationship between
satisfaction and age. Emotional Risk Tolerance and Income of the investors.
H1 : there is a relationship between the job There is no significant relationship between
satisfaction and age. Emotional Risk Tolerance and Financial resource
tolerance of the investors.
There is no significant relationship between
( Oi – Ei ) Financial Literacy Level and Emotional risk tolerance
Chi-square ∑ = of the investors.
Ei There is no significant relationship between
Level of significant = 5% Investment Time Horizon and Gender of the investor.
Degree of freedom = (r-1) (c-1) = 9 There is a significant relationship between
Investment Time Horizon and Qualification of the
investor.
There is a significant relationship between

250


Investment Time Horizon and Work Status of the clients.
investor. They can provide specific industry reports
There is a significant relationship between which gives comprehensive information on
Investment Time Horizon and Life stage of the investor. various industries.
There is no significant relationship between They should devise appropriate asset allocation
Investment Time Horizon and Income of the investors. strategies for successful portfolio management
There is a significant relationship between of their clients based on their life stage,
Investment Time Horizon and Financial resource financial and emotional risk tolerance and their
tolerance of the investors. financial literacy level.
There is no significant relationship between They have to provide customized advisory
Investment Time Horizon and Financial Literacy Level services to help investors make the right
of the investors. financial moves that are specifically suited to
their portfolio.
The other findings of the study include the following: The most influencing factors were belong to
The respondents belong to different socio-economic the accounting information group so the
background in terms of age, sex marital status,
market are required to give more attention to
occupation, literacy and annual income.
these factors in order to satisfy the desires of
Majority of the investors (90%) are male. their investors and also to attract more
Majority of the investors (42%) are under graduates.
investors to deal with their stocks.
Majority of the investors (38%) are doing their own
The listed companies should provide proper
business. accounting information to the public since it is
The respondents are under different stages of life and
the most influencing factor and they have to
the majority are under retired (28%) life stage.
maintain good financial position.
From the study it was revealed that 40% of the The companies have to declare expected
investors have income of <10000 per month and
dividends to their stakeholders since it is one
another 40% of the investors have the income of
among the most influencing attribute.
Rs.10000 – Rs.20000 per month. To increase their stock marketability, they
From the study it was found that majority of the
need to review the relationship between the
investors (60%) are neutral in their financial tolerance price and demand on their stocks frequently.
and 18% are pessimist in their attitude towards their If the stock price is too high, this might make it
financial resource and 22% are optimist in their
difficult to sell, and one of the policies that can
attitude. be adopted by companies to make it more
It was found that the risks or events that the investor marketable is a stock split.
fear or regret the most is for the Portfolio The companies have to build brand image and
performance that is insufficient to meet their goals should maintain their status in the industry to
followed by portfolio performance that is consistently
get good reputation from its stakeholders.
less than industry benchmarks, a missed investment They have to follow business ethics which is
opportunity that could have yielded higher returns also an important influencing factor.
over the long term.
CONCLUSION
Majority of the investors (61%) are having medium The study entitled “Factors Influencing
literacy score and 9.5% are low in their financial the Individual Investor Behavior” would help the
literacy score, and 29.5% of the respondents are
share brokerage firms to take care of the factors
having high financial literacy score. influencing their investors and can give proper
SUGGESTIONS asset allocation strategy to their investors. The
After analyzing the various factors listed companies can also look at the most
influencing the individual investor behaviour the influencing factors and can focus much on these
following suggestions are made for better factors to attract the investors to invest in them.
understanding of the investor behavior. The study was conducted for a
Since the brokers’ recommendation is one period of 50 days. The study aimed at identifying
among the least influencing factors, the the most and the least influencing factors of the
company should go for in-depth research to individual investors. Convenience sampling
find out the reasons for it. method was used in the study and a sample size of
They should get constant feedback from the 200 investors was taken for the study. The primary
investors and have to provide sound advisory data was collected through structured
facilities to make the brokers recommendation questionnaire. The questionnaire included thirty-
as the most influencing factor. four items that belong to five categories, namely
They should give analysis about the latest self-image/firm-image coincidence, accounting
stock market trends and have to take a close information, neutral information, advocate
look at the various investment options, and recommendation and personal financial needs. The
products available in the market to their research design that is adopted in this study is

251


descriptive design.
The data collected through questionnaire
has been analyzed using mean score value and chi-
square test. Pie charts and bar diagrams were used
in the study for better understanding.
Through this, the researcher helped the
company to know more about the factors
influencing their investors and also helped to focus
on those factors to provide better customer Service.
Majority of the respondents are influenced by the
accounting information of the companies and
advocate recommendation is the least influencing
group. Suggestions were also made for further
understanding of the investor behavior.

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7. Baker, H.K., and J.A. Haslem, “Toward the
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8. Benartzi, Shlomo and Richard H. Thaler
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