determinants of portfolio choice of individual investor
TRANSCRIPT
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Determinants of
portfolio choice of
individual investorPresented by:
Varun jindal (211161)
Durgendra singh (211172)TNVM ravindra mohan (211146)
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Introduction
The traditional bulwark of the equitymarket place-the individual investor
has been an object of scrutiny only in
a very aggressive terms. The
individual investor has been asignificant contributor to the
allocation and liquidity function of
capital market. Accordingly, it is imp
to understand his concerns. In this
direction we tried to find what are thefactors that influence his choice of
portfolio.
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Methodology
Data was obtained by a questionnaire survey of arepresentation cross section of 200 individuals.
Representative cross section for sampling proposes was
taken only those household which are capable of
financial investment.Variables employed:
Age
Income
Risk tolerance Expected return
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Data collection and
preparation
Age :
Age of investing No. of respondents %
50-60 35 17.540-50 46 23
30-40 52 26
20-30 59 29.5
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Data collection and
preparation cont
Income :
Monthly income class No. of respondents %15,000-25,000 52 26
25,001-30,000 46 23
30,001-40,000 38 19
40,000-50,000 26 13
50,000-60,000 38 19
200 100
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Data collection and
preparation cont
Risk tolerance :
Risk tolerance No. of respondents %
more willingness 10 5less willingness 69 34.5
risk factor hs no influence 72 36
can't say 49 24.5
200 100
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Data collection and
preparation cont
Expected return:
Expected return No. of respondents %0-15% 52 26
15% - 30% 45 22.5
30% -50% 57 28.5
above 50% 46 23
200 100
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Data collection and
preparation cont
Age / Income :
Age/income level
25-35 35-45 45-55 >55 total
15,000-25,000 10 16 16 10 5225,001-30,000 14 15 12 5 46
30,001-40,000 9 11 11 7 38
40,000-50,000 4 12 6 4 26
50,000-60,000 6 11 18 3 3843 65 63 29 200
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Data collection and
preparation cont
Return / Income:
RETURN/INCOME LEVEL
0-15% 15%-30% 30%-50% >50%
15,000-25,000 20 15 10 7 5225,001-30,000 15 13 14 4 46
30,001-40,000 7 12 15 4 38
40,000-50,000 2 3 10 11 26
50,000-60,000 8 2 8 20 3852 45 57 46 200
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Determinant of portfolio
choice
To identify the factorsinfluencing the
portfolio of individual
in investors a
multiple regressionwas developed. The
expected return was
taken as a
dependent variable
and rest all thevariables was taken
as independent
variables.
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Regression table data
X1 X2 X3 Y1
Age in years(5) Income in '000(10,000) risk Expected return(%)
25 25 1 10
25 25 2 15
25 25 3 20
25 45 1 15
25 45 2 25
25 45 3 35
35 30 1 11
35 30 2 15
35 30 3 20
35 50 1 12
35 50 2 1735 50 3 20
45 35 1 10
45 35 2 13
45 35 3 17
45 55 1 9
45 55 2 13
45 55 3 16
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Regression analysis
Regression
Statistics
Multiple R 0.944086032
R Square 0.891298436
Adjusted R Square 0.85053535
Standard Error 2.885849095
Observations 12
ANOVA
df SS MS F Significance F
Regression 3 546.2916667 182.0972222 21.8653325 0.000328298
Residual 8 66.625 8.328125
Total 11 612.9166667
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Regression analysis cont
Coefficients Standard Error t Stat P-value
Intercept 2.013888889 5.137282735 0.392014416 0.705283891
X Variable 1 -0.322222222 0.111076383 -2.900906675 0.019864069
X Variable 2 0.408333333 0.083307288 4.901531968 0.001191462
X Variable 3 5.875 1.020301732 5.758100583 0.000425033
Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -9.832706332 13.86048411 -9.832706332 13.86048411
X Variable 1 -0.578364822 -0.066079623 -0.578364822 -0.06607962
X Variable 2 0.216226384 0.600440283 0.216226384 0.600440283
X Variable 3 3.522179988 8.227820012 3.522179988 8.227820012
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Regression residual
Observation Predicted Y Residuals
1 10.04166667 -0.041666667
2 15.91666667 -0.916666667
3 21.79166667 -1.791666667
4 18.20833333 -3.208333333
5 24.08333333 0.916666667
6 29.95833333 5.041666667
7 5.208333333 3.791666667
8 11.08333333 0.916666667
9 16.95833333 -1.958333333
10 13.375 -1.375
11 19.25 0.75
12 25.125 -2.125
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Results
Dependent variable = Expected returnMultiple R = 0.944086032
Adjusted R2 = 0.85053535
Standard error = 2.885849095
F = 21.8653325 significant at 0.000328298
T STAT:
X1 = -2.900906675
X2 = 4.901531968
X3 = 5.758100583
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References
L.fisher and J.Lorie Rates of returns on investments in commonsock. Journal of business,41, July 1968, Pp 291-316.
V.Rangarajan, Chennai investor is conservative, business line,
FEB23, 1997 p20.
V.Rangarajan, investment size based segmentation of individual
investor, management researcher, 3-3&4, jan-june, pp21-28. Peter S.Yoo, age dependent portfolio selection, St. Louis : Federal
reserve bank of St. Louis, 1994.
L.C. Gupta, Indian share owner A survey , NEW Delhi, society for
capital market research and development, 1991.