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A RESEARCH REPORT
ON
A STUDY ON INVESTORS DECISION TO CONTINUEINVESTING IN STOCK MARKETS
Submitted in partial fulfillment for the award of the degree
Master of Business Administration
Chhattisgarh Swami Vivekananda Technical University, Bhilai
Submitted by:
Damini AgrawalVinod Kumar SahuSimran Jeet SinghMBA-Semester II(Session 2011-13)
Approved By, Guided By,Dr. Sumita Dave Ms. Meenakshee Sharma
Head of the Department Assistant Professor
SHRI SHANKARACHARYA GROUP OFINSTITUTIONS
Faculty of Management StudiesApproved by AICTE
(Managed by Shri Gangajali Education Society, Bhilai)
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JUNWANI, BHILAI 490020 (C.G.) INDIA
DECLARATION
We the undersigned solemnly declare that the report of the research work entitled A
Study on investors decision of continue investing in Stock Market is based on our own
work carried out during the course of our study under the supervision of Prof. Meenakshi
Sharma, Faculty of MBA Department.
We assert that the statement made and conclusions drawn are an outcome of our research
work. We further declare that to the best of our knowledge and belief the report does not
contain any part of any work which has been submitted for the award of MBA degree or
any other degree/diploma/certificate in this University or any other University of India or
abroad.
Damini Agrawal
Vinod Sahu
Simran Jeet Singh
MBA II semester
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CERTIFICATE
This is to certify that Ms. Damini Agrawal, Mr. Simranjeet Kaur, Mr. Vinod sahu, a
student of MBA II semester at Faculty of Management studies shri ShankaracharyaGroup
of Institute, Junwani, Bhilai have conducted the project titled A Study on Decision of
continue investing in Stock Market. They have conducted their project under my
guidance and supervision.
(Prof. Meenakshee Sharma)
Assistant Professor
FMS SSGI
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ACKNOWLEDG EMENT
The project has been made possible through the direct and indirect co-operation of
various persons, for whom we wish to express our appreciation and gratitude, but a
complete acknowledgement would be encyclopedic.
First and foremost we express our profound gratitude to our project guide Prof.
Meenakshee Sharma for assigning us an interesting and challenging project. It is only
because of her invaluable guidance and encouragement; we have dared to venture this
task. If at all we have succeeded, we owe it to her and we are left with a deep sense of
gratitude for her. Under whos able guidances had the privilege to work and who guide
us at every stage.
We express our deep sense of gratitude towards Prof. Meenakshee Sharma, Lecturer of
MBA Department, consistence guidance and morale encouragement helped us to
complete the project successfully.
At last we offer my thanks to all those people and other whose efforts and contribution
had made this possible.
Damini Agrawal
Vinod Kumar Sahu
Simran Jeet Singh
MBA II semester
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INDEX
Contents PageNumber
DeclarationCertificateAcknowledgement
Chapter 1Introduction to the studyAbout the studyLiterature review
Chapter 2ObjectivesResearch planSampling planData collectionDescriptive statistics
Chapter 3Data tabulation, analysis and resultsType of analysis used and why
Results of the analysis
Chapter 4Findings of the study
Chapter 5Recommendations
Chapter 6ConclusionsReferences
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Chapter 1
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Introduction of the study
a) INTRODUCTION OF THE STUDY
This study is based on investors decision to continue investing in Stock market. We have
studied investors behavior. We have used descriptive research types, and used
questionnaire techniques. We have selected convenience sampling design.
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This study examines the percentage of factors which influence the investors decision
which they took into consideration while continue investing in stock market.
Through this study we collected data from different people who actually invested in stock
market and found the influencing percentage of all the factors.
BEHAVIOUR OF THE STOCK MARKET
From experience we know that investors may 'temporarily' move financial prices away
from their long term aggregate price 'trends'. (Positive or up trends are referred to as bull
markets; negative or down trends are referred to as bear markets.) Over-reactions may
occurso that excessive optimism (euphoria) may drive prices unduly high or excessive
pessimism may drive prices unduly low. Economists continue to debate whether financial
markets are 'generally' efficient.
The event demonstrated that share prices can fall dramatically even though, to this day, it
is impossible to fix a generally agreed upon definite cause: a thorough search failed to
detect any 'reasonable' development that might have accounted for the crash. (But note
that such events are predicted to occur strictly by chance, although very rarely.) It seems
also to be the case more generally that many price movements (beyond that which are
predicted to occur 'randomly') are not occasioned by new information; a study of the fifty
largest one-day share price movements in the United States in the post-war period seems
to confirm this.
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STOCK MARKET
A stock market which is also known as equity market is a public body in which a free
network of economic transactions occurs. It is not a physical facility or secret body. It is
the place for the trading of stock or shares of company and its derivatives at an agreeable
price. These shares and derivatives are securities that are listed on a stock exchange.
It was estimated that the worlds stock market size was at around $36.6 trillion at the
beginning of October 2008. The entire market of world derivative has been estimated at
around $791 trillion face or nominal value which is eleven-fold of the total world
economy. Since the value of derivative market is presented in terms of notional values, it
cannot be straightly compared to a fixed income security or a stock, which
conventionally refers t an actual value. Furthermore, the large majority of derivatives
cancels each other out which means that a derivative bet on an event that occurs is
counteracted by a comparable derivative bet on an event that does not occur. Many of the
securities that are relatively not liquid like that are valued as marked to model, instead of
valued as an actual market price.
a) LITERATURE REVIEW
INVESTMENT BEHAVIOUR
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Psychological factors can actually explain why different investors behave in different
ways which affect their investment decisions. Investors might actually overreact towards
some information that they gained and under react towards others. One of the most
common investor behaviors is overconfidence in their judgment towards the market. This
actually happens when they actually underestimate the risk of the investment. The major
mistake of all is when they are overconfidence towards the market; they tend to trade too
much which will lead them to high transaction costs. The transaction costs might even
exceed the returns that they gained.
The second behavior is the investor tends to have biased self- attribution which means
that they will take all the credit for the returns that they received and they will blame
others for their losses that they encountered. This kind of investors will usually support
the information that favor their beliefs and they will underestimate or not considering the
information that are against them. They usually see the failure to get the returns as the
result of the factors that are beyond their control.
The third behavior is known as loss aversion. This behavior often happens to the
investors that dislikes the losses much more than the gains. For example, when a person
loss $200, the loss that he experience will have a bigger impact on him compare with
when he is gaining $200. The investor will usually hang on to the losing stock hoping the
price of the stock will bounce back. They will sell the gaining stock rather than the losing
stock.
The fourth behavior will be representativeness. The investor will usually make strong
conclusions from a very small sample. This means that they actually ignore or
underestimate the effects of random chance. One of the examples is when a stock broker
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helps the investors to gain from the market for consecutive three months, the investor
will assume that the stock broker will maintain his performance and continue to help him
to earn the returns. But actually the investor overlooks a few matters in this case. Firstly,
the investment period is only three months which is a very short time period. Secondly,
the results of the stock broker might just be driven by random chance. The investor
should analyze the investment results for a longer time period before making the
judgment that they choose the right stock broker and they are investing at the right
investment.
Another behavior that most investor might have is the belief perseverance. This actually
means that the investor will just simply ignore the information that is against their
existing belief. They will even avoiding themselves from finding any new information
because they afraid that the new information is against their initial opinion. Once the
investor has decided that they make the right choice, they will believe it even though
there is evidence proving that their choice is wrong.
Basically, these are the few of the investor behaviors that explain their actions when
dealing with the investment. Some investors might posses one of the behaviors but some
of them might posses few of these behaviors at one time. Understand these behaviors will
help the investors to react in the market efficiently.
Behavioral finance attempts to understand and explain how human emotions influence
investors in their decision-making process. You'll be surprised at what they have found.
The facts
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In 2001 Dalbar, a financial-services research firm, released a study entitled "Quantitative
Analysis of Investor Behavior", which concluded that average investors fail to achieve
market-index returns. It found that in the 17-year period to December 2000, the S&P 500
returned an average of 16.29% per year, while the typical equity investor achieved only
5.32% for the same period - a startling 9% difference! It also found that during the same
period, the average fixed-income investor earned only a 6.08% return per year, while the
long-term Government Bond Index reaped 11.83%.
Regret theory
Fear of regret, or simply regret, theory deals with the emotional reaction people
experience after realizing they've made an error in judgment. Faced with the prospect of
selling a stock, investors become emotionally affected by the price at which they
purchased the stock. So, they avoid selling it as a way to avoid the regret of having made
a bad investment, as well as the embarrassment of reporting a loss.
What investors should really ask them when contemplating selling a stock is, "What are
the consequences of repeating the same purchase if this security were already liquidated
and would I invest in it again?" If the answer is "no", it's time to sell; otherwise, the result
is regret of buying a losing stock and the regret of not selling when it became clear that a
poor investment decision was made - and a vicious cycle ensues where avoiding regret
leads to more regret.
Mental accounting
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Say, for example, you aim to catch a show at the local theater, and tickets are $20 each.
When you get there you realize you've lost a $20 bill. Do you buy a $20 ticket for the
show anyway? Behavior finance has found that roughly 88% of people in this situation
would do so. Now, let's say you paid for the $20 ticket in advance. When you arrive at
the door, you realize your ticket is at home. Would you pay $20 to purchase another?
Only 40% of respondents would buy another. Notice, however, that in both scenarios
you're out $40: different scenarios, same amount of money, different mental
compartments.
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Chapter 2
Research methodology
a) OBJECTIVES OF THE STUDY
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To understand the factors influencing the investors to take decision of continue
investing in stock market.
To examine how investors understand and take decision to invest in stock market.
b) RESEARCH PLAN
RESEARCH PLAN
Research Design DescriptiveResearch Method
UsedSurvey
Research
InstrumentQuestionnaire
Data Collection Secondary Source
Sampling Design Convenience
Sample Size 157Sample Location Durg and Bhilai
Sample UnitInvestors of stock
market
RESEARCH PLAN
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A research design is a basis of framework, which provides guidelines for the rest of
research process. It is the map of blueprint according to which, the research is to be
conducted. The research design specifies the method of study. Research design is
prepared after formulating the research problem.
Descriptive research, also known as statistical research, describes data and characteristics
about the population or phenomenon being studied. Descriptive research answers the
questions who, what, where, when and how...The description is used for frequencies,
averages and other statistical calculations. Often the best approach, prior to writing
descriptive research, is to conduct a survey investigation. Qualitative research often has
the aim of description and researchers may follow-up with examinations of why the
observations exist and what the implications of the findings are.
In this research I have conducted Descriptive research to study the Investors
decision while investing in stock market. Descriptive includes survey and fact finding
analysis of different kinds.
POPULATION
All the investors investing in stock market will constitute the population of the
study.
SAMPLE
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It is neither feasible nor desirable for the researcher to go through the population there
Sample Method was used and the researcher has taken 157 samples, while adopting
Convenience Sampling.
QUESTIONNAIRE
For the purpose of research the researcher has used this particular researcher instrument-
Questionnaire. Keeping in mind the objective of the study questionnaire was prepared.
Questionnaire is comprised of two parts, the first part contains the questions related to the
topic of the research and second part contains the profile of respondent.
QUESTIONNAIRE DESIGN
In questionnaire, we have used Likerts measurement scale to identify the significant
factors influencing the decision of investor which he take into consideration while
investing in stock market. Here 1 to 7 scales are used to be marked their satisfaction
level, where 1 & 2 stands for strongly disagree, 3, 4 & 5 neutral, and 6, 7 stands for
strongly agree.
DATA COLLECTION
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Data are the raw materials in which research works. The task of data collection begins
after research problem has been defined and research design chalked out. The data has
been collected by the researcher with the help of questionnaire while visiting the
respective investor.
Data collection is classified into two part, primary data and secondary data.
Primary data
Secondary data
The data referred to those which gathered for some other purpose and are already
available in the firms initial records and commercial, trade or government, publication.
On the other hand primary data dont exist in record and publication. The researcher has
to gather primary data fresh for the specific study, undertaken by him.
In this project primary data were collected by survey methods i.e. Questionnaire.
SAMPLING PLAN
The first step in sampling plan is to decide the population. Once the population is
decided the research must concern him to fine:
What sampling unit should be?
What should be the sampling size?
What sampling procedure should be used?
What sampling method should be utilized in this project?
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Chapter 3
Data Tabulation, Analysis and Results
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Data Analysis
Data collected during the research with the help of questionnaire is further analyzed
and interpreted in the following lines in the same sequential can be understood more
clearly with the help of interpretation then followed.
The analysis techniques used have been on SPSS and the test was performed to
ascertain the factor influencing the decision of investor while investing in stock
market.
We in our study used pie-chart to know the percentage of factors influencing the
decision of investor.
D1: I intend to continue investing in Stock Market rather than discontinue its
use.
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
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INTERPRETATION: 31% respondent says that they are somewhat agree with I intend
to continue investing in Stock Market rather than discontinue its use. , 23% are neutral,
16%are agree, 12%are strongly agree, 7% are disagree, 6% are strongly disagree and
only 5% are somewhat diagree.
D2: My intentions are to continue investing in Stock Market than investing
anywhere else.
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION: 24% of respondent are neutral about My intentions are to
continue investing in Stock Market than investing anywhere else, 23% are
somewhat agree, 21%are agree, 13% are strongly agree, 10% are somewhat disagree,
7% are disagree and 2% are strongly disagree.
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D3: If I could, I would like to discontinue investing in Stock Market.
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION: 20% respondents are disagreeing with If I could, I would
like to discontinue investing in Stock Market. And only 2% are agreeing.
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S1: How do you feel about your overall experience of investing in Stock Market?
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION: 29% ,Majority of respondents are somewhat agree
with How do you feel about your overall experience of investing in Stock Market?
and the least 2% are disagree.
U1: Investment in Stock Market improves my overall returns.
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Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION: 31% majority of people says that they are somewhat agree with
Investment in Stock Market improves my overall returns., and only 2% are disagree.
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U2: Investment in Stock Market increases the liquidity of my investment.
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION: 24%are saying that they are neutral about Investment in
Stock Market increases the liquidity of my investment. And only 3% are
disagreeing.
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U3: Investment in Stock Market makes my investment flexible.
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION: 37% respondent the majority says that they are somewhat
agree with the Investment in Stock Market makes my investment flexible. , 20%
are neutral ,15 % are agree and the least 3% are strongly disagree.
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U4: Investment in Stock Market increases my effectiveness in managing my
personal finances.
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION: There is a tie in Investment in Stock Market increases my
effectiveness in managing my personal finances.24% are somewhat agree and
neutral and the least 2% are strongly disagree.
U5: Overall, investment in Stock Market is useful for managing my finances.
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Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION: 29% are neutral about Overall, investment in Stock Market
is useful for managing my finances. 25% are somewhat agree, 18% are strongly
agree and least 4% respondents are strongly disagree and somewhat disagree.
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R1: My experience with investing in Stock Market was better than what I expected
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION: 29% respondents are neutral about My experience with
investing in Stock Market was better than what I expected and the least 4 % respondents
are strongly disagreeing.
R2: The returns provided by Stock Market were better than what I expected.
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Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION:
Majority of people says that they are somewhat agree with The returns provided by
Stock Market were better than what I expected 29% are in the state of somewhat agree
and 23% are saying that they are neutral.
R3: Overall, most of my expectations from investing in Stock Market were fulfilled.
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Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION:
In overall experience of investing is fulfilled 38% respondents are saying that they are
neutral about the statement and 4% are strongly disagree.
E1: I am able to get optimum return while investing in Stock Market.
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Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION:
4% are strongly disagree, 4% are somewhat disagree, 13% are disagree, 25% are
neutral, 27% are agree, 15% are somewhat agree and 12% are strongly agree.
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E2: Investing in Stock Market is fulfilling my overall expectation.
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION:
4% are strongly disagree, 6% are somewhat agree, 13% are disagree, 32% are
neutral, 14% are agree, 22% are somewhat agree and 9% are strongly agree.
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E3: Investment in Stock Market is given overall flexibility (Switching facility) andliquidity.
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
INTERPRETATION:
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7% are strongly disagree, 8% are somewhat disagree, 8% are disagree, 24% are
neutral, 25% are agree, 14% are somewhat agree, 14% are strongly agree.
V1: I can reduce the level of risk while investing in Stock Market
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
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Interpretation:
6% are strongly disagree, 6% are somewhat disagree, 14% are disagree, 26% are
neutral, 24% are agree, 13% are somewhat agree, 11% are strongly disagree.
V2: I get higher return while investing in stock market.
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
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INTERPRETATION:
19% are strongly disagree, 5% are some what disagree, 16% are disagree, 26% are
neutral, 6% are agree, 16% are some what agree and 12% are strongly agree.
V3: Before making investment decision in stock market I am taking suggestion from
my financial advisor.
Strongly
disagree
Disagree Somewh
at
disagree
neutral Somewh
at agree
Agree Strongly
agree
1 2 3 4 5 6 7
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INTERPRETATION:
17% are strongly disagree, 2% are somewhat disagree, 6% are disagree, 18% are
neutral, 17% are agree, 27% are some what agree, 4% are strongle disagree.
V4:Before making investment decision in stock market I am taking suggestion from
my friends and family members.
Strongly
disagree
Disagree Somewh
at
neutral Somewh
at agree
Agree Strongly
agree
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disagree1 2 3 4 5 6 7
INTERPRETATION:
21% people strongly disagree, 3% people say that somewhat disagree, 9% are
disagree, 22% are neutral, 21% are agree, 19% are somewhat agree, 7% are strongly
agree.
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CHAPTER 4
FINDINGS OF THE STUDY
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It is found that investors are not ready to continue investing in stock market.
Investors consider level of risk while investing.
They are not satisfied with the return.
Their experience is somewhat neutral investing in stock market.
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Chapter 5
Suggestion
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To provide knowledge to the investors about the market.
They should choose optimum position for investing.
Their risk and return should be equal.
They have to consider both risk market and riskless market.
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Chapter 6
Conclusion
CONCLUSION
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We would like to conclude as most of the investors like to discontinue investing in
stock market because of risk factors. It is because they are not getting the same
proportion of return as risk. Some people not investing because of lack of knowledge.
People of some criteria didnt know about stock market, by providing efficient and
proper knowledge risk can be reducing and investor may increase to make them able
to invest. Investors not trust the brokers and they not prefer to ask them or to take
from advice.
REFERENCES
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http://www.tradingeconomics.com/india/stock-market
http://www.meta4forexbroker.com/2011/10/what-is-stock-market/
www.sharekhan-firststep.com/
http://www.articles-finance.info/understanding-investor-behavior-in-stock-
market/
http://www.investopedia.com/articles/05/032905.asp#axzz1r0TCARSr