Demographic Factors and Investment Pattern of Households in Haryana

 

Dr. Suresh K. Mittal

Associate Professor, Haryana School of Business, Guru Jambheswar University of Science and Technology, Hisar

 

ABSTRACT:

The present paper is an attempt to know the role of demographic factors in the investment pattern of households in Haryana. The study is based on 200 respondents in Haryana only. Chi square test has been employed to test the relationship between demographic factors and various investment related characteristics. The study found that child marriage, emergency need, wealth creation and tax concession are the major objectives of the savings of household investors and insurance, postal schemes are most preferred investment avenue by the household investor of Haryana. The study also observed that high rate of return; safety and liquidity are most effective factors affecting investment decisions of household investors of Haryana. The study concluded that the demographic factors have affect on selecting investment avenues, investment objectives, sources of information for investment decision of households in Haryana.

 

 

 

INTRODUCTION:

The investment avenues have undergone many folds after the policy of liberalisation, privatization and globalisation of Indian Economy in the year 1991.The reduction of transaction costs, the technological developments in the processing and dissemination of information, media developments etc. have contributed to the financial revolution in the world and India is no exception to it. A large portion of the domestic savings in India is contributed by the household sector represented by individuals. To attain their financial goals and fulfil family responsibility, Individual investors invest their surplus funds in different assets. The main investment avenues which are used by individuals are real estate, bank deposits, corporate deposits, bonds,

 

units of mutual funds, instruments under national savings schemes, pension plans, insurance policies, equity shares, debentures, bonds, public deposits etc. Each asset can be classified on the basis of its own return, involvement of risk, liquidity, safety and the individual investors differ from each other in context of the income, age, number of dependents, education level, sex etc. So, the individual investors incline to make a trade off between their needs and the features of the instrument available for investment.

 

REVIEW OF LITERATURE:

With the growing importance of the subject under study, some literature, covering different aspects of investor’s preferences have been produced by economists, researchers and practitioners. Mittal (1989) found that the behavioural inconsistency for enduring and situational types of involvement may be found to be contingent upon demographic factors such as sex, income, age and education. Paul A. Samuelson (1989) concludes older individuals rationally reduce their risk exposure because they need to ensure that their savings provide sufficient means to satisfy levels of minimum consumption. Warren et al. (1990) worked and predicted individual investment choices based upon lifestyle and demographic attributes. Riley and Chow (1992) found that risk aversion decreases with the increase in age, wealth, income and education. Hawley and Fujii (1993) discovered that risk tolerance is positively correlated with the education, income and debt and married couples and households headed by a single male were more risk tolerant than otherwise similar households headed by a single female. Peter Yoo (1994) found that individuals do not follow behaviour prescribed by economic theory and concluded that a satisfactory model of individual behaviour needs to focus on factors not linearly correlated with age. Sung and Hanna (1996) concluded that income and education were positively related to risk but risk tolerance decreased with age. NCAER Survey (2000) observed that correlation between the income levels and investments of the households in securities market related instruments. Turan and Bodla (2001) concluded that different income groups have no significant difference in the investment pattern. V. Rajarajan (2003) examined the relationship between various demographic characteristics and the risk exposure of individual investor and summarised that the percentage of risky assets to total financial investments decline as the investor moves up through various stages in life cycle. Samudra Aparna and Burghate M.A. (2012) concluded that it is not only the income of the household that has immediate effect on the investment preferences but also the age group influences the choice of investment avenues. Umamaheswari S and Kumar Ashok M (2013) concluded that age, marital status, place of residence, educational qualification affects investment pattern as well as awareness of investors. Medury Yajulu and Bhushan Puneet (2013) found and concluded that significant gender differences occur in investment preferences for health insurance, fixed deposit and market investments among employees.

 

RESEARCH OBJECTIVES:

The main objective of the study is to examine the demographic factors and investment pattern of households in Haryana.

 

RESEARCH DESIGN AND SCOPE:

The study under consideration is descriptive in nature. Household investors were considered as respondents and questionnaire was used in order to collect the data. The survey was administered personally on face-to-face basis with the respondents by using convenient random sampling. The scope of present study is limited to the state of Haryana.

 

DATABASE AND SAMPLING:            

Primary data has been collected from the household of Haryana for studying their investment pattern. A sample of 220 respondents has been considered using convenient random sampling for the collection of primary data. Out of this, 20 incomplete or otherwise unusable questionnaires were discarded from the sample and the data on remaining 200 respondents are used for further analysis. A questionnaire for primary data collection was prepared and administered personally. The survey was limited to Haryana only.

 

Statistical Tools

To achieve the purpose of present study, the collected primary data is analysed on various fronts. To begin with, tabulation of collected primary data is made and frequency distribution tables are being prepared. Chi square test has been employed to test the relationship between demographic factors and various investment related characteristics.

 

A profile of Respondents

A plenty of factors influence the Individual’s investment decision namely risk and return of the investment and other demographic factors like income level, stages in life cycle, age, education level, sex, marital status, occupation, residential status, family size, joint family or nuclear family, peer group, lifestyles, financial literacy and personality characteristics etc. The study under consideration is based on 200 respondents which belong to different areas of Haryana. Table 1 shows the profile of respondents.

 

Table 1 Demographic Characteristics and Frequency Distribution

Variables	Attributes	Frequency	Percentage
Sex	Male Female Total	155 45 200	77.5 22.5 100
Age (years)	21-30 31-40 41-50 Above 50 Total	16 27 122 35 200	8.0 13.5 61.0 17.5 100
Marital Status	Married Unmarried Total	191 9 200	95.5 4.5 100
Education Level	Under matric Matric Graduate Post Graduate Doctorate Total	23 20 30 54 73 200	11.5 10.0 15.0 27.0 36.5 100
Residential Area	Rural Semi- urban Urban total	32 27 141 200	16.0 13.5 70.5 100
Annual family saving	Less than 25000 250001-50000 500001-100000 Above 100000 Total	17 4 18 161 200	8.5 2.0 9.0 80.5 100
Investment decision	Self Life partner Total	165 35 200	82.5 17.5 100
Occupation	Agriculture Agriculture-worker Indus.-worker Professional Business total	17 7 9 147 20 200	8.5 305 4.5 73.5 10.0 100
Family Income per year	Less than 50000 500001-100000 100001-300000 300001-500000 500001-700000 Above 700000 Total	2 15 14 44 18 107 200	1.0 7.5 7.0 22.0 9.0 53.5 100
Annually expected return	Less than 8% 8%-12% 12%-16% Above 16% Total	13 82 84 21 200	6.5 41.0 42.0 10.5 100
Risk profile	Conservative Moderate conservative Moderate Aggressive Highly aggressive Total	25 51 93 30 1 200	12.5 25.5 46.5 15.0     .5 100

 

Table 1 show that 77.5 percent of the respondents are males and the 22.5 percent are female respondents. Thus, the sample is dominated by male respondents. Table reveals the highest percentage (61.00) of the respondents belong to the age-group of 41-50 yrs; only 8.00 per cent fall in the category of lowest age group i.e. 21-30 yrs. The representation of senior respondents (i.e. above 50 years age) in the sample is 17.5%. Marital status of investors is another important factor in investment decisions. The Table indicates that study covers only 4.5 per cent unmarried respondents and 95.5 per cent married respondents. The Table also depicts that most of the respondents are highly educated, 78.5 percent of respondents are graduates or having higher qualification. The study covers only11.5 per cent under metric respondents. So, the study largely covers the educated respondents. The table also shows that most of the respondents belong to urban area.

 

Table shows that the highest proportion (73.50%) of the respondents is job class. The lowest 4.5 per cent of the respondents are industrial workers. The agriculturist constitute only (8.5%) of respondents and agriculture workers only (3.05%).  Hence, the sample is dominated by job class. It is clear from the table that very less number of respondents (1.00%) has income less than Rs. 50,000 per year. Around 7.5 per cent respondents are in the category of Rs. 50,001-1, 00,000 and 22.00 per cent investors belong to the income class of Rs. 3, 00,000‑5,00,000. The majority (53.50%) respondents fall in the highest income group. Thus, the study is representative of moderate to high income class investors having vast scope for planning their portfolio. The table also shows that very less number of respondents (2.00%) has saving between Rs.25001 to Rs.50000, 9.00 per cent respondents are in the category of Rs. 50,001-1, 00,000 saving per year. The majority (80.50%) respondents fall in the saving level more than Rs. 100000 per year. Thus, the study is focused on the high level savings investors.

 

The table shows that 46.50% respondents are moderate in risk profile and 42.00% of the respondents expect 12% to 16% annual return. The table also shows that majority of the respondents (82.50%) take decision at their own level. After going through the profile of respondents, it may be concluded that the sample is representative in terms of various age groups, income groups, occupational groups, males and females and married and unmarried investors.

 

Demographics and Investment Decision

Analysis and Findings

This section of the study is concerned with the demographic factors and investment pattern of households in Haryana. Generally the risk and return are the two important factors which affect the investment decision but to analyze the effect of investors’ demographics on their investment preferences is also very important. The table given below shows the impact of individual demographics of investors on their investment decision.

 

 

Table 2 Demographic Characteristic and Investment Avenues (Pearson chi square value)

Variables	Age	Education level	Occupation	Residential Area	Annual Family Income
Bank deposit	17.207 (.142)	35.986 (.003)*	27.477 (.007)*	15.496 (.050)*	24.968 (.070)
Insurance	31.496 (.002)*	71.259 (.000)*	83.241 (.000)*	51.580 (.000)*	52.800 (.000)*
Provident fund	33.731 (.000)*	6.021 (.049)*	--	.468 (.791)	.926 (.819)
Postal scheme	6.953 (.034)*	55.065 (.000)*	22.301 (.034)*	12.573 (.050)*	34.174 (.003)*
Mutual fund	8.119 (.230)	6.967 (.031)*	--	--	2.933 (.231)
Equity stock	5.918 (.432)	23.111 (.001)*	6.928 (.074)	20.000 (.000)*	20.000 (.000)*
Real estate	20.077 (.066)	83.015 (.000)*	71.883 (.000)*	55.493 (.000)*	31.781 (.011)*
Gold	16.886 (.326)	56.131 (.000)*	57.454 (.000)*	34.038 (.000)*	46.660 (.001)*

 

 

Table 2 depicts the significant association between insurance (χ2=31.496,p=0.002), provident fund (χ2=33.731, p=0.000) and postal scheme (χ2=6.953, p=0.034) with the age of household investors of Haryana. The result of chi-square revealed that there are significant relationship between bank deposit (χ2=35.986,p=0.003),insurance (χ2=71.259,p=0.000), provident fund (χ2=6.021,p=0.049),postal scheme (χ2=55.065,p=0.000), mutual fund (χ2=6.967,p=0.031), equity stock (χ2=23.111,p=0.001),real estate (χ2=83.015,p=0.000) and gold (χ2=56.131,p=0.000) with the education level of the household investors of Haryana. The results of chi-square shows that there is significant relationship between bank deposit (χ2=27.477, p=0.007), insurance (χ2=83.241,p=.000), postal scheme (χ2=22.301,p=0.034),real estate (χ2=71.883,p=0.000) and gold (χ2=57.454,p=0.000) with occupation of household investors of the Haryana. The result described that there are significant relationship between bank deposit (χ2=15.496,p=0.050), insurance (χ2=51.580,p=0.000), postal scheme (χ2=12.573, p=0.050), equity stock (χ2=20.000, p=0.000), real estate (χ2=55.493,p=0.000) and gold (χ2=34.038,p=0.000) with the residential area of household investors of Haryana. The insurance (χ2=52.800, p=0.000), postal scheme (χ2=34.174, p=0.003),  equity stock (χ2=20.000,p=0.000), real estate (χ2=31.781,p=0.011) and gold are significantly related with annual family income of the household investor of the Haryana. It can be concluded that the different investment avenues are significantly associated with the demographic factors   i.e. Age, Education level, Occupation, Residential area and Annual family income. The results also provide the interesting finding that insurance and postal scheme are most preferred investment avenue by the household investor of Haryana.

 

Association between Demographic Factors and Investment objectives: There are different investment objectives namely wealth maximization, tax concession, emergency need, child education, child marriage, retirement and convenience. The table given below shows the relationship between demographic characteristics and investment objectives.

 

 

 

 

Table 3 Demographic Characteristics and Investment Objectives

Variables	Age	Education level	Occupation	Residential Area	Annual Family Income
Wealth Creation	15.730 (.204)	64.604 (.000)*	56.310 (.000)*	56.889 (.000)*	21.121 (.049)*
Tax Concession	34.670 (.000)*	16.450 (.012)*	57.710 (.000)*	4.135 (.658)	28.455 (.000)*
Emergency Need	10.299 (.327)	46.702 (.000)*	31.921 (.001)*	22.034 .001*	55.707 (.000)*
Child Education	15.960 (.068)	32.328 (.001)*	9.557 (.655)	8.334 (.215)	50.442 (.000)*
Child Marriage	27.877 (.001)*	46.464 (.000)*	33.792 (.001)*	32.630 (.000)*	37.778 (.001)*
Retirement	4.278 (.118)	8.167 (.086)	1.556 (.459)	1.556 (.459)	8.167 (.86)
Convenience	19.413 (.022)*	22.555 .032*	11.024 (.527)	15.836 (.015)*	55.707 (.006)*

 

 

Table 3 shows that there is significant association between tax concession (χ2=34.670, p=0.000), child marriage (χ2=27.877, p=0.001),and convenience (χ2=19.413, p=0.022) with age of the household investor of the Haryana. The result confirm that there is significant relationship between wealth creation (χ2=64.604, p=0.000),tax concession (χ2=16.450, p=0.012), emergency need (χ2=46.702,p=0.000),child education (χ2=32.328,p=0.001), child marriage (χ2=46.464,p=0.000) and convenience (χ2=22.555, p=0.32) with the education level of household investors of Haryana. The table also shows that the wealth creation (χ2= 56.310, p=0.000), tax concession (χ2=57.710, p=0.000) and child marriage (χ2=33.630,p=0.001) are strongly associated with occupation of household investors of Haryana. The result also shows a significant relationship among wealth creation (χ2=56.889, p=0.000), emergency need(χ2=22.034,p=0.001),child marriage    (χ2=32.630,p=0.000) and convenience (χ2=0.015, p=0.015) with the household investor of Haryana.  The wealth creation(χ2=21.121,p=0.049),tax concession (χ2=28.455,p=0.000),emergency need (χ2=55.707, p=0.000),child education (χ2=50.442,p=0.000), child marriage (χ2=37.778, p=0.001) and convenience (χ2=55.707, p=0.006) are significantly related with annual family income of the household investors of Haryana. The result concluded that child marriage, emergency need, wealth creation and tax concession are the major objective of the savings of household investor of the Haryana and are associated with demographics factors of household investors in Haryana.

 

Association between Demographic Factors and factors affecting Investment Decisions:  There are many factors which affect investment decisions. The table given below shows the relationship between demographic characteristics and factors affecting investment decisions.

 

Table 4 Demographic characteristics and factor affected investment decision

Variables	Age	Education level	Occupation	Residential Area	Annual Family Income
High Rate of return	18.945 (.090)	81.858 (.000)*	56.621 (.000)*	38.838 (.000)*	38.808 (.000)*
Tax benefit	22.054 (.001)*	14.950 (.005)*	71.913 (.000)*	5.632 (.228)	8.087 .088
Safety	15.762 (.072)	96.289 (.000)*	86.710 .000*	42.368 .000*	1.224 (.000)*
Liquidity	14.686 (.100)	81.755 (.000)*	69.256 (.000)*	46.034 (.000)*	84.304 (.000)*
Regular return	6.949 (.642)	15.577 (.211)	11.856 (.457)	11.443 (.076)	24.386 (.018)*
Convenience	5.732 (.766)	26.020 (.011)*	29.555 (.003)*	16.443 (.012)*	33.926 .001*

 

Table 4 confirm the significant association between tax benefit (χ2=22.054,p=0.001) with the age of household investors of Haryana. The table also revealed that there are significant relationship between high rate of return (χ2=81.858,p=0.000),tax benefit (χ2=14.950,p=0.005), safety (χ2=96.289,p=0.000), liquidity (χ2=81.755, p=0.000), and convenience (χ2=26.020,p=0.011) with the education level of the household investors of Haryana. The results of chi-square shows that there is significant relationship between high rate of return (χ2=56.621,p=0.000), tax benefit (χ2=71913,p=.000), safety (χ2=86.710,p=0.000), liquidity (χ2=69.256, p=0.000) and convenience (χ2=29.555, p=0.003) with occupation of household investors of the Haryana. The result described that there are significant relationship between high rate of return (χ2=38.838,p=0.000), safety (χ2=42.368,p=0.000), liquidity (χ2=46.034, p=0.000) and convenience (χ2=16.443, p=0.012) with the residential area of household investors of Haryana. The high rate of return (χ2=38.808, p=0.000),safety (χ2=1.224,p=0.000), liquidity(χ2=84.304,p=0.000), regular return(χ2=31.781, p=0.011) and convenience(χ2=33.926,p=0.001) are significantly related with annual family income of the household investor of the Haryana. The results of the study concluded that high rate of return; safety and liquidity are most effective factors affecting investment decisions of household investors of Haryana.

 

Association between Demographic Factors and Sources of Information for Investment:  There are many sources of information for investment avenues. The table given below shows the relationship between demographic characteristics and sources of information for investment.

 

Table 5 Demographic Characteristic and Source of Information for Investment

Variables	Age	Education level	Occupation	Residential Area	Annual Family Income
Friends and Relatives	13.748 (.132)	45.896 (.000)*	36.324 (.000)*	26.696 (.000)*	39.559 (.001)*
News Paper	4.769 (.574)	38.635 .000*	21.255 .000*	6.945 (.139)	44.058 (.000)*
Financial Magazine	11.387 (.077)	7.467 (.113)	--	--	7.520 (.111)
Brokers/Agent	14.377 (.110)	83.261 (.000)*	65.061 (.000)*	48.745 (.000)*	56.899 (.000)*
Email and Internet	3.429 (.064)	.178 (.673)	3.429 (.064)	3.429 (.064)	3.429 (.064)

 

Table 5 don’t confirm the significant association between friends and relatives (χ2=13.748,p=0.132), newspaper (χ2=4.769,p=0.574), financial magazine (χ2=11.387, p=0.077), broker/agent (χ2=14.377, p=0.110) and email and internet (χ2=3.429,p=0.064) with the age of household investors of Haryana. The result of chi-square revealed that there are significant relationship between friends and relatives (χ2=45.896, p=0.000), newspaper (χ2=38.635, p=0.000) and broker/agent (χ2=83.261, p=0.000) with the education level of the household investors of Haryana. The results of chi-square shows that there is significant relationship between friends and relatives (χ2=36.324,p=0.000), newspaper (χ2=21.255, p=.000) and broker/agent (χ2=65.061, p=0.000) with occupation of household investors of the Haryana. The result described that there is significant relationship between friends and relatives (χ2=26.696, p=0.000) and broker/agent (χ2=48.745, p=0.000) with the residential area of household investors of Haryana. The friends and relatives (χ2=39.559, p=0.001), newspaper (χ2=44.058,p=0.000),  and broker/agent (χ2=56.899, p=0.000) are significantly related with annual family income of the household investor of the Haryana. The results confirmed that the age is not associated with the source of information for investment but education level, residential status and family income are closely associated with the sources of information used for investment decisions.

 

CONCLUSION:

The study analyses the role of demographic factors in the investment pattern of households in Haryana. The study is based on 200 respondents in Haryana and used chi-square test to examine the effect of demographic factors on investment decision. The study found that age, education level, occupation, residential area and annual family income affects the choice of investment avenues. The study also observed that child marriage, emergency need, wealth creation and tax concession are the major objectives of the savings of household investor of the Haryana and are affected by demographics factors of household investors in Haryana. The results confirmed that the age is not affecting the choice of selecting of source of information for investment but education level, residential status and family income are affecting the choice of the sources of information used for investment decisions.

 

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