The Study on Influence of Psychological and Socio Cultural Factor on the Share Market Operations. Reference to Batticaloa District, Eastern Province, Sri Lanka.

Revathy 

Stock market is an important part of the economy of a country. The stock market plays a pivotal role in the growth of the industry and commerce of the country that eventually affects the economy of the country to a great extent. That is the reason why, the government, industry and even the central banks of the country keep a close watch on the happenings of the stock market. The stock market is important from both the industry’s point of view as well as the investor’s point of view.

This study focuses the influence of psychological and socio cultural factors to implement on stock market in Batticaloa District in the Eastern part of Sri Lanka. This study was conducted with two research objectives: to find out the degree of psychological characteristics of potential investors regarding the stock exchange and to evaluate the level of support of socio culture environment to implement in share market.Self motivation, perception and attitude is the dimension of identifying the psychological characteristics. Social culture factors are including language skill, brokers support and culture support to mature the socio culture supportive.The study was conducted among the potential investors reside in the various part of the Batticaloa District. The data were collected from the 100 sample of people. The proportionate stratified random sampling method was used to select the sampling units and the structured questionnaire was used to collect the data. The data were analyzed using Univariate Analysis and Bivariate analysis techniques. The unit of analysis was individual person.

Finding of the study revealed that respondents (potential investors) were moderate level supportive to implement the stock exchange as indicated by the degree (measured as mean value) of their psychological characteristics (Self motivation 3.5), perception (3.4), and attitude (3.4). Socio cultural environment (3.17) was moderate level influence. In overall this study was find out moderate level supportive to implement the stock exchange in Batticaloa.

Keywords: Investment, Psychology, Stock Exchange, Investor, and Socio Culture Environment

 

 

  1. INTRODUCTION

An island nation situated at the Southern tip of India, Sri Lanka is often referred to as the Pearl of the Indian Ocean. With the end of a bitter three decade long civil conflict, the country is taking advantage of new found peace and stability and growing economic prosperity to make its mark as a global logistics center.

Increased political stability is laying the way for strong growth on investment as the Government formulates long term robust development plans to drive economy wide sustainable growth.

Our nation is developing nation and agricultural one for hundred years due to our capability of resources, gain knowledge and technology requirements even we greater than some nations. If we want to become leading one we should change our habits of investment.

Eastern province is a one of the nine provinces in Sri Lanka. The Batticaloa is a one of the district in Eastern Province. Our society based on knowledge income and saving has an essential role and making the most valuable effects by using financial system at an economic entity level.

The fundamental factors such as economy, industry and company analysis play a key role in investment decision process. In earlier there are few ways to invest their money for more money such as purchasing land and gold, invest in education and business ,life insurance, bank deposit share market etc.. But now there are twenty sectors for investment in stock exchange. Each and every sector is important to develop the nation.

The word Investment refers to the deployment of surplus funds either in the financial assets or in the physical assets with the expectation of getting an optimum return in future. R.Jayaraman, Dr.G.Vasanthi, M.S.Ramaratnam, (JBM&SSR Volume 3 ,2014).

These are under the stock exchange there are twenty sector to invest the money which is functioning under the capital market. First we understand the capital market. The Financial Market, which is the market for credit and capital, can be divided into the Money Market and the Capital Market. The Money Market is the market for short-term interest- bearing assets with maturities of less than one year, such as Treasury bills, commercial paper, and certificates of deposits. The major task of the Money Market is to facilitate the liquidity management in the economy. The main issuers in the Money Market are the Government, banks and private companies, while the main investors are banks, insurance companies and pension and provident funds. The Capital Market is the market for trading in assets for maturities of greater than one year, such as Treasury bonds, private debt securities (bonds and debentures) and equities (shares). The main purpose of the Capital Market is to facilitate the raising of long-term funds. The main issuers in the Capital Market are the Government, banks and private companies, while the main investors are pension and provident funds and insurance companies.

 The Financial Market can be also be classified according to instruments, such as the debt market and the equity market. The debt market is also known as the Fixed Income Securities Market and its segments are the Government Securities Market (Treasury bills and bonds) and the Private Debt Securities Market (commercial paper, private bonds and debentures). Another distinction can also be drawn between primary and secondary markets. The Primary Market is the market for new issues of shares and debt securities, while the Secondary Market is the market in which existing securities are traded. (http://www.cse.lk/static/introduction

Investment, first of all we will learn here that what Investment is? Is Investment just a money or capital? Is Investment just a part of your salary or Income? We will answer all these questions in a single line that Investment is that part of your money whose nominal value increases along with the inflation or time to increase its real value. We will learn some benefits of investing which you must know before investing in stock market.

The part of money which you park in some avenues like Bank Deposits, Real Estate, Jewellery or Stock Market to get some return on that capital in future is also known as Investing or Investment.

There are many Instruments of Stock Market called Securities like Shares, Bonds, Debentures etc. and this stock market have its own benefits in his own way for every person who invest in stock market. We will discuss here the advantages and the benefits of investing in Stock Market which you must know before Investing in stock market.

Easy Liquidity: It is the very first benefits of investing, In stock market shares and securities are traded in very high volume which make it a volatile market so there is very easy liquidity in stock market, like if you want to turn your investment in stock market into cash then you can do that very easily. Flexibility: Investing in stock market is very flexible like the market has ups and downs in prices at every trade session, price of stock market moves with the rapidity and flexibility of this market.

Regulatory Framework: Stock Market works under some regulatory framework to protect and safeguard all its investors. For example: In Sri Lanka the Securities and Exchange Commission (SEC) works as a Regulatory Framework Body to safeguard all investors. Maximum Returns: According to the long term perspective it is found that Investing in Stock Market gives maximum returns. For example:

Business Taste: Well, According to me it is the best benefits of investing in stock market you can ever have, here from Business Taste I mean that when a person trades or invest in stock market everything is here works like a business a modern style business. Sole Proprietorship: If you invest in stock market then you are starting your own business where your investment is your capital, like the more your trade is in profit the more your business grows and you are the only person to run this business that is why investing in stock market is your sole proprietorship business.

While in the midst of important transformation to an industrialized economy, its traditional stronghold in the service industry is growing with simultaneous speed. The change in the mindset of the investor’s leads to change in the trend of investment ways. The investor’s sentiment may either be optimistic or pessimistic. The people sentiment and socio culture sentiment are complimentary to each other. Any change in social change lead to a substantial change in the investor’s behavior similarly any change in the investors’ sentiment leads to a substantial change for social culture environment.

At presently telecommunication, bank and industry and food & beverage sectors are very popular one in the capital market and several advantages on investing shares even in the Batticaloa district still there is so many traditional ways are following by the people on investment. Here share investment way is infancy investment way. It should be encourage due to globalization and survive in future change.

Therefore, I have intended to study the influence of social and psychological factors on implement in share Market in Batticaloa District.

  1. PROBLEM STATEMENT

The Sri Lankan share market continues to shine as one of the best performing ones. According to Bloomberg news service in 2009.CSE is one of the most modern stock exchange in South Asia a fully automated trading platform and market capitalization of over US$ 23 billion, it has been one of the best performing stock market in the world, with average daily turnover US$ 18 million. http://kenangasl.com/why-sri-lanka/colombo-stock-exchange-cse/

Batticaloa is one of the districts in Sri Lanka, Still now Stock Exchange did not located in Eastern Province. There are huge amount of lands, higher education institutes, big amount of population who are knowledgeable and so many financial institutions.

If the stock exchange will be establish in Batticaloa district, that gives great investment opportunity to public and it will lead to economic development.

Therefore this present study aims to find out the influence of psychological and socio culture environment to establish the stock market in Batticaloa district.

  1. RESEARCH QUESTIONS
  2. What is the degree of psychological characteristic of potential investors in stock exchange?
  3. To what extent the socio culture environment is favorable to implement in the stock exchange?

4.OBJECTIVES OF THE STUDY

  1. To find out the degree of psychological characteristic to implement in Stock Exchange.
  2. To evaluate the level of favorable of Socio Culture environment to implement in stock exchange.
  3. SCOPE OF THE STUDY

This research is possible to study level influence of psychological and Socio culture factors to implement the share market, based on gender, education, ethnic group, designation, monthly income level, and investors’ behavior of particular people who are living in Batticalo district.

Therefore the researchers have scope of this study to the Batticaloa district and also selected 100 people which use in proportionate stratified random sample size in Divisional Secretariat Divisions in Batticaloa district to carry out this research study.

 

 

  1. LITERATURE REVIEW

Psychological Characteristic

Investors are normally assumed to make their financial decisions rationally according to classical economic theories but some novice investors make unsuitable investment decisions based on irrational exuberance (Ricciardi, 2008).

The investor sentiment is primarily based on investor’s psychology. Individual expectation, Individual optimism, individual ability and individual confidence are the four major psychological components of investor sentiments. On other words the investors sentiments are run by individual expectation, individual optimism, individual ability and individual confidence (R.Jayaraman,Dr.G.Vasanthi.M.S.Ramaratnam, JBM&SSR 2014)

Psychological factors operating within individual partly determine people’s general behavior and thus influence their behavior as consumer. Primary psychological influence their behavior as consumer are perception, motives, learning, attitudes and personality and self concept. Even though these psychological factors operate internally, they are also very much affected by social factors outside the individual. (Pride M Ferrell .O. C, 2006)

Emotional development of children and is part of developmental psychology, the study of changes in behavior that occur through the life span. Cognitive psychology deals with how the human mind receives and interprets impressions and ideas. Social psychological looks at how the actions of others influence the behavior of an individual.

(http:/www.medterms.com/script/main/art.asp/articlekey)

The persons buying choices are also influenced by four major psychological factors motivation, perception, learning, and beliefs and attitudes. (Philip Kottel, 2005)

Consumer attitudes are composite of a consumer’s beliefs about feelings ,about behavioral intentions towards some “object “ – within the context of marketing , usually a brand, product category, or retail store. These components are viewed together since they are highly interdependent and together represent forces that influence how the consumers will react to the object.

 Consumer attitude are considered by many marketers to be accurate predictors of consumer behavior, making the study of attitude formation and change an important topic. Attitudes are learned tendencies to perceive and act in a consistent way toward a given objective or idea, such as a product, services, brand, company, store or spoke person. This definition emphasizes the impact on attitude of several of other concepts.

The attitude is a person’s enduring favorable or unfavorable evaluation, emotional feeling, and action tendencies toward some object or idea. People have attitudes towards almost everything: religion, politics, clothing, music and foods. Attitudes put people into a frame of mind: liking and disliking an objects, moving towards or away from it (Phillip Kottler

Socio Culture Environment

According to Kottler views culture factors exert the broadest and deepest influences on consumer behavior. Culture, subculture and social class, reference group, family and social roles and particularly important in buying behavior.

  1. METHODOLOGIES

Sample of the Study

 

The total population for the study was in Batticaloa district people. There are 100 people were  selected who are resident of Divisional Secretariat division in Batticaloa District (100%) as sample by using stratified random sampling method.

Data Collection Method

In considering objectives it was a cross – sectional one in the time horizon because data were collected in a one single time from the respondents but the unit of analysis was the people of the selected area in the Batticaloa district.

The questionnaire is a structure technique for data collection. The primary data were collected through questionnaires and interviews from the respondents. The questionnaire developed based on three parts, namely research information, personal information and investor’s behavior. In this research questionnaire is closed ended. In general closed questions are considered as more efficient and reliable than open ended questions. In the research one of the ordinal measures called “Likert’s five points rating scale” is used to require respondents to order their answers.

  1. Methods of Data Analysis

Data Presentation and Analysis

The data were analyzed by using univariate analysis and bivariate analysis techniques. In this case, the unit of analysis was individual person of selected area in Batticaloa district.

Method of Data Evaluation

Each variable is given a scale from 1-5 to show the extent of agreement, based on responses, univariate measures were calculated for each of variables. The mean value is lying in the range of 1-5. The range is explore the particular result of this study the range between 1 and 0.25 is express the low level influence for this study. The range between 2.5 and 3.5 is assumed moderate level influence on this study. The range above 3.5 to 5 is considered high level influence on this study. This decision rule is used to measure the level of influence. It shown in the table.

  1. Implication and conclusion

Psychological characteristic of people on Share Market operations in Batticaloa district.

Psychological Characteristic variable with three dimension including self motivation, perception and attitude are evaluated the influence of Psychological Characteristic of people on the share market operations in Batticaloa. We test through univariate analysis and bivariate analysis techniques. This outcome express the mean value is 3.4733 and standard deviation is 0.4524. It is shown in the table 3

If we want to invest in share market we should wish on the activities. That desire depends on our mind likewise involvement on share market operations also leads by our mind. The society should be support to run the business.

The first objective is obtained through the psychological characteristic variable. It is moderate level supportive on this study.

Extent of Social Cultural Environment Supportive to Invest on Share Market Operations.

Socio Culture variable with three dimensions are knowledge on share market, stock brokers support and cultural support. Those dimensions help to identify the influence of socio culture environment. We test through univariate analysis and bivariate analysis techniques. This outcome express the mean value is 3.1733 and standard deviation is 0.23915.

The second objective is obtained through the socio culture factors. It is moderate level supportive on this study.

Overall Result

 

Eventually when we observe the influence factors for an establishment of the stock exchange in Batticaloa district. Table 4   clearly discloses that influence factors are moderate level to establish the stock exchange in Batticaloa district.

  1. CONCLUTION AND RECOMMENTATION

To examine two variable of research we have used six dimensions. All research variables have been measured due to the nature of measurement and research objectives have been investigated with using of mean and standard deviation that summarized in Tables.

It is commonly believed that the investment decision of the investors is driven by the sentiment of investors. Investor’s psychological characteristic and socio culture trends were carefully indentified with the help of existing review of literature. The study has revealed that image factor has appeared as the most influence factor in determining investors decision making. Similarly individual optimism has become the key factor in influencing the sentiment of the investors.

In Batticaloa district there are many educational institutes those are higher education as university, college of education, teacher’s training college, international school and vocational training center even it is distant from share investment, there are low level of awareness and lack of stock brokers firm and information center on this type of investment. In any type of education should change the people and their society. These institutions can be change through subject of finance and investment. We can revolve the people’s investment pattern through provide psychological training as skill, attitude and knowledge development. This step change social culture environment due to most of them are more believe on educated people so if we change the educational society’s investment pattern other type of society also change into share market. Those are possible; the stock exchange will be established in Batticaloa district because visible services are more invited by the people. Based on this type of investment way some are known well some are unknown therefore, we assume this is a childhood investment way  in Batticaoloa, We state without building we cannot run the business perfectly based on our research.

Finally this study convey people are mostly involved all type of investment even experientially traditional investment is well known by the people than share investment because inadequate resources and deepest knowledge on this field. Psychological and socio cultural motivational factors are motivated the people to invest in share market so implementation is necessary one in Batticaloa district.

Reference 

  1. Alexander William, Gordon. J, Sharpe. F, Feffery v,bailey, Fundamental of investment ,3rd ed
  2. Barnewall,M.M(1987) Psychological characteristic of individual investors.
  3. Bhole L.M, (2004) Financial institution and market, 4th ed, publish by Tata Mcgrow –hill, New   Delhi,    5, 17.2-19.12
  4. Central Bank of Sri Lanka, (2008), Recent Economic Development -Highlight of 2008 and Prospect for 2009, Central Bank Publication
  5. Cornett and Saundress, (1998), Fundamentals of Financial Institutions Management, Irwin McGraw-Hill, New Delhi, pp26-29
  6. Daily news , Thursday November 5 2009
  7. Gary .Armstrong, Plip Kotler , Principal of marketing 5th ed
  8. E,(Oct 2000) Sri Lankas Securities market ,1st ed
  9. Kiran D. and Rao U.S. (2004), “Identifying Investor Group Segments Based on Demographic and Psychographic Characteristics”, MBA Project Report, Sri Sathya Sai Institute of Higher Learning
  10. Naresh,k.malhotra,satyabhusan Dash Marketing Research an Applied Orientation, ,5th edition,
  11. M, Ferrell, marketing 10th ed 2000, all Indian publisher & distributors Regd
  12. Peter S.Rose, (1986), Money and Capital Market, Printice Hall, London, pp 330-423
  13. Valarie A,Zeithul mary J Bitner , Ajoy Pandit Dwayne D gremler 2008 Service Markiting.
  14. Jayaraman, Dr.G.Vasanthi, M.S.Ramaratnam, A Study on influence of psychological factors on Investment Behaviour in Equity Investment,Journal of Business Mangement &Social Science Research(JBM&SSR Volume 3 ,2014)
  15. S, saravavel.P, (2005/2006) marketing research and consumer behavior

 

Advertisements

Your views and comments are most welcome

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s