Factors Influencing Investment Decisions in Indian Stock Market based on Representativeness

Abstract

The paper is based on the investor’s behavior. The behavior is on Heuristic
Representativeness of the individual investors. This approach is about ruling and decision
making. (Amos Tversky and Daniel Kahneman 1970) Heuristics are easy and are straight
forward in nature, they are the thump rule to be followed which helps in making judgment and
decision very effectively. This approach tells us about the nature of an individual’s
instinctive decision making abilities. We can even observe the spontaneous reaction of the
people during stock prediction or market speculation. Based on this theory we have tried
to built a model or approach as to how an investor behaviors at various stock market
situation. Out of three main elements of Heuristic approach (Tversky and Kahneman) ie.
Representativeness, Availability and Anchoring, this paper is only emphasized on
representativeness element. Based on this particular element, different factors are drawn like
Past experience, their ability of taking risk or bearing risk, precautions taken after loss
investments, their market speculation, and prediction ability. In the paper we have consider
107 respondents spread across Hubli Districts, Karnataka State of India. These respondents
are working both in government and Private sector. They are majority salaried people.
These Respondents have a work experience of 10-15 years in greater number. The
education qualification of these respondents was bachelors. To measure the effect of
different factors with that of social characteristics of respondent mainly two tools were
used that is T Test and One way ANOVA. The effect on these factor were computed by
comparing the relation between Gender (Independent )and Investment factor (Dependent)
in which all factor had a significant effect by gender as p-value representing all T values is
less than 0.05 (p< .05). Likewise comparing the relation between Age (Independent )and
Investment factor (Dependent ) in which all factor had a significant effect by age as pvalue representing all F values is less than 0.05 (p< .05). Except one factor that the
investor is careful after loss investment were p>0.05 (0.366>0.05 ) which is not significant.
The other comparison was between education and investment factor, were all factor were
significant. The factor which was not effecting was market predictability by investor were p
value of respective F value was greater the 0.05 (0.561>.05) hence this factor was not
significant. Likewise comparing the relation between Work Experience (Independent) and
Investment factor (Dependent) in which all factor had a significant effect by work
experience as p-value representing all F values is less than 0.05 (p< .05). Except two
factor that is expert predictors and careful after loss investment were p>0.05 (0.193>0.05
and 0.197>.05) which is not significant. Occupation (Independent) of the investor was
considered as another element of comparison with investor’s decision (Dependent). All the factor were significant effecting the decision were 0.05 (p< .05). But majorly these couldn’t
be considered as the p>0.05. Investment with equal chance loss and gain , expert predictors
analysis and being careful after loss investment were 0.731>0.05 and 0.466> .05 and
0.2.01>0.05. Likewise comparing the relation between income level (Independent) and
Investment factor (Dependent ) in which all factor had a significant effect by income level
as p-value representing all F values is less than 0.05 (p< .05). Except one factor that is
market prediction were p>0.05 (0.815>0.05) which is not significant