Date of Award

24-5-2024

Document Type

Thesis

School

School of Management

Programme

Ph.D.-Doctoral of Philosophy

First Advisor

Dr.C.Vijayabanu

Keywords

Personality Traits, Behavioral Bias, Gen Y or Millennials, Investment Decisions

Abstract

Investments are indeed vital to the economic development of a country. Individual savings and investment patterns play an important role in any economy since they are major components of financial markets. The investment pattern and type of investment products preferred by investors decide the future of the economy. As the Investment decision-making became crucial for individual investors since it can result in significant gains or losses and also has effect on the economy. As a result, each individual investor needs to be so cautious of how they make decisions and what influences them. The people were categorised by the generations as each of it has their own characteristics. The persons in each generation were defined in terms of different determinants. These discrepancies may be due to various factors like technological advancements, major events that took place, political differentiation, social differentiation, and economic differentiation (Baker, 2015).

Gen Y has fascinated researchers across the globe among several generational cohorts, which quite predictably makes them the most researched generation so far (Beaton, 2016). Subsequently, India’s IT industry has continued to have more employees, bringing the total to 5.4 million (5.7% year-over-year increase), solidifying its status as the ”Digital Talent Nation” for the entire world. In the past two decades, India has become a major global center for IT. Thus, the current study examines the investment decisions of Gen Y IT employees and the factors that influence their investment decisions. The investor’s decision-making may be influenced by various factors, including psychological and economic factors. Many significant factors involved in decisionmaking on the investment include personality, self-esteem, decision-making skills to

manage the funds, and the role of friends and family decisions (Sadiq & Khan, 2019). Since much of the basic theories of behavioural finance are concerned with personal, psychological and individual vulnerability against behavioural biases, risk attitude and time preference plays an essential role in investment decision-making. The study has taken psychological factors, behavioral biases and risk propensity to understand its impact on the investment decisions of Gen Y IT employees in TamilNadu. Under psychological factors the study has taken big five personality traits namely extroversion, openness, conscientiousness, agreeableness and neuroticism in addition to the other factor self-efficacy.

Subsequently under the behavioral bias three biases were taken for the study namely herd behaviour bias, overconfidence bias, and dispositional effect bias. And another factor that is used in the current study is risk propensity. The socio-economic factors used in the study are namely age, gender, marital status, location, income, savings and investment details. All these factors were taken to study its impact and relationship with the investment decision of Gen Y IT employees.

The data for the study is collected from the IT employees who are working in IT companies located in Chennai, Coimbatore, Madurai and Trichy of Tamilnadu as they are considered as the population of the study using a multistage stratified sampling method. From the total 800 questionnaires distributed across the four selected cities of Tamil Nadu, 671 have been collected with a response rate of 83.8%O˙ ut of these, 94 questionnaires were removed due to improper and partially filled responses. Finally, 577 questionnaire responses were taken for the study.

The study identifies that there exists a significant positive relationship between age, marital status, designation, annual income, annual gross savings and investment experience with the investment decisions of Gen Y IT employees. The correlation coefficient found to be higher for annual income, age and the investment decision, followed by marital status, annual gross savings and investment experience. The psychological factors namely, big five personality trait - extraversion trait has higher correlation with the investment decision followed by the openness to experience, agreeableness traits towards the investment decision of Gen Y IT employees. The psychological factor - self-efficacy also has a higher correlation with the investment decisions, which have a significant influence on the investment decisions of Gen Y IT Employees.

The R-squared value of 0.545 from the model states that a moderate accuracy (54.5%) in investment decisions is owing to herd behaviour bias. Compared to herd behavior bias, the model shows slightly higher prediction accuracy (60.3%) for overconfidence bias, with an R-squared of 0.603. The dispositional effect is a major (70.9%) influence on investing decisions, as seen by its stronger effect (R-squared = 0.709). Likewise, the R-squared value of 0.714 states that a high accuracy (71.4%) in investment decisions is owing to risk propensity.

Furthermore, the model shows a slightly higher prediction accuracy (74.5%) for behavioural bias, with an R-squared of 0.745. Based on the factors included in the model, it is inferred that the total model gets a R-squared value of 0.768, showing good predictive accuracy in describing investment decisions. Thus, the structural model shows strong predictive accuracy overall, accounting for (76.8%) of the influence in investment decisions. From the study, it is confirmed that there exists an influence of psychological factors, behavioural bias and risk propensity towards the investment decision of Gen Y IT employees in Tamil Nadu.

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