Behaviour of Investors Under Risk in Profit and Loss Situations in Pune City
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Transcript of Behaviour of Investors Under Risk in Profit and Loss Situations in Pune City
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BEHAVIOUR OF INVESTORS UNDER RISK IN PROFIT ANDLOSS SITUATIONS IN PUNE CITY
By: Rutuja Pandit (25)Nilesh Pardeshi (26)Ravi Teja (27)
Rupali Patil (28)Rutuja Patil (29)Sagar Pawar (30)Swapnil Pawar (31)Amruta Raje (32)Priyanka Bhosale (33)
MBA I A
SINHGAD INSTITUTE OF MANAGEMENT,VADGAON, PUNE-41
MARCH 2012
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I INTRODUCTION
History
Expected value was one of the first theories of decision making under risk. The
expected value of an outcome is equal to its payoff times its probability. This model failed
in predicting outcomes in many instances because it was obvious that the value that a
particular payoff held for someone was not always directly related to its precise monetary
worth.
Daniel Bernoulli was the first to see this contradiction and propose modification to the
expected value notion. In fact, Bernoulli was the first to introduce the concept of systematic
bias in decision making based on a psychophysical model. Specifically, Bernoulli used a
coin toss game known as the St. Petersburg paradox to demonstrate the limitations of
expected value as a normative decision rule. Bernoullis analysis of the dynamics of the St.
Petersburg paradox led him to appreciate that the subjective value, or utility, that a payoff
has for an individual is not always directly related to the absolute amount of that payoff, or
expected value. Rather, the value a person attaches to an outcome can be influenced by
such factors as the likelihood of winning, or probability, among other things. In this way,
Bernoulli showed that people would not always bet solely on the basis of the expected
value of a game.
Out of his analysis, Bernoulli proposed a utility function to explain peoples
choice behaviour. Bernoulli assumed that people tried to maximize their utility, and not
their expected value. Bernoullis function proposed that utility was not merely a linear
function of wealth, but rather a subjective, concave, evaluation of outcome. The concave
shape of the function introduced the notion of decreasing marginal utility, whereby changes
farther away from the starting point have less impact than those which are closer to it. For
example, Bernoullis utility function argues that $1 is a lot compared with nothing; people
will therefore be reluctant to part with this dollar. However, $101 is not significantly
different to most people than $100. Thus, people are more willing to part with their
hundred- dollar than with their only one.
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Because Bernoullis concave utility function assumed that increments in utility
decreased with increasing wealth, the expected utility model implicitly assumed risk
aversion. Specifically, Bernoulli argued that a person would prefer a sure outcome over a
gamble with an equal expected value. In other words, people would prefer $100 for sure
over a gamble that paid $200 or nothing on the toss of a fair coin.
Bernoullis model was the beginning of utility theory. As such, it combined a
mixture of descriptive and normative elements. The description seemed sensible, and the
normative implications merely represented the idea that caution constituted the better part
of prudence. To the extent that Bernoulli assumed that people are typically risk averse, he
explained this behaviour in terms of peoples attitudes toward the value of the payoff,
rather than in terms of the phenomenon of risk-taking behaviour itself. Peoples attitudes
toward risk were posited as a by-product of their attitude toward value.
Two centuries later, von Neumann and Morgenstern revolutionized Bernoullis
expected utility theory by advancing the notion of revealed preferences.In developing an
axiomatic theory of utility, von Neumann and Morgenstern turned Bernoullis suppositions
upside down and used preferences to derive utility. In Bernoullis model, utility was used
to denote preference, because people were assumed to prefer the option that presented the
highest utility. In the von Neumann and Morgenstern model, utility describes preferences;
knowing the utility of an option informs an observer of a players preferences. Von
Neumann and Morgensterns axioms do not determine an individuals preference ordering,
but they do impose certain constraints on the possible relationships between the
individuals preferences. In von Neumann and Morgensterns theory, as long as the
relationship between an individuals preferences satisfies certain axioms such as
consistency and coherence, it became possible to construct an individual utility function for
that person; such a function could then be used to demonstrate a persons pursuit of his
maximum subjective utility.
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This shift in utility theory toward revealed preferences allowed room now for
different people to have different preference orderings. In von Neumann and Morgensterns
model of subjective expected utility, there is no clear distinction between normative and
descriptive aspects. As mentioned, Bernoulli combined these elements, because risk
aversion was assumed to offer prudent counsel. In von Neumann and Morgensterns model,
it was assumed that axiomatic subjective expected utility is not only the way rational
people should behave, but do behave.
People seek to maximize their subjective expected utility; one person may not share
the same utility curve as another, but each follows the same normative axioms in striving
toward their individually defined maximum subjective expected utility.
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Background
Prospect Theory
Given by Daniel Kahneman And Amos Tversky
Prospect Theory is a theory that describes decisions between alternatives that
involve risk where the probabilities are known. The model is descriptive: it tries to model
real-life choices, rather than optimal decisions.
The theory was developed by Daniel Kahneman and Amos Tversky in 1979 as a
psychologically realistic alternative to expected utility theory. It allows one to describe
how people make choices in situations where they have to decide between alternatives that
involve risk (e.g., in financial decisions). Starting from empirical evidence, the theory
describes how individuals evaluate potential losses and gains.
Tversky and Kahneman have demonstrated in numerous highly controlled experiments
that most people systematically violate all of the basic axioms of subjective expected utility
theory in their actual decision-making behavior at least some of the time.These findings run
contrary to the normative implications inherent within classical subjective expected utility
theories. In response to their findings, Tversky and Kahneman provided an alternative,
empirically supported, theory of choice, one that accurately describes how people actually
go about making their decisions. This model is called prospect theory. In short, prospect
theory predicts that individuals tend to be risk averse in a domain of gains, or when things
are going well, and relatively risk seeking in a domain of losses, as when a leader is in the
midst of a crisis.
Tversky and Kahneman applied psychophysical principles to investigate judgment and
decision making. Just as people are not aware of the processing the brain engages in to
translate vision into sight, they are not aware of the kinds of computations the brain makesin editing and evaluating choice. People make decisions according to how their brains
process and understand information and not solely on the basis of the inherent utility that a
certain option possesses for a decision maker.
http://en.wikipedia.org/wiki/Daniel_Kahnemanhttp://en.wikipedia.org/wiki/Amos_Tverskyhttp://en.wikipedia.org/wiki/Expected_utility_hypothesishttp://en.wikipedia.org/wiki/Empiricalhttp://en.wikipedia.org/wiki/Gain_(finance)http://en.wikipedia.org/wiki/Daniel_Kahnemanhttp://en.wikipedia.org/wiki/Amos_Tverskyhttp://en.wikipedia.org/wiki/Expected_utility_hypothesishttp://en.wikipedia.org/wiki/Empiricalhttp://en.wikipedia.org/wiki/Gain_(finance) -
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Disposition Effect
Given by Shefrin and Statman
Aversion to loss realization this behavioural pattern can be placed into a widertheoretical framework concerning a general disposition to sell winners too early and hold
losers to long. They examined the decisions to realize gains and loses in a market setting.
Specifically with focus on financial markets to determine whether investors exhibit
reluctance to realize loses.
Statement of the problem
Behaviour of investors under risk in profit and loss situation in Pune city
Theoretical Framework
Uncertainty Certainty
Profit Avoid Risk Generally select
Loss Take Risk Generally avoid
As seen in the above payoff matrix we can see that the assumption on the basis of the
theory given by Kahneman and Tversky in profit situation under uncertainty is that people
avoid risk and go for profit output having certainty.
Similarly in loss situation in uncertainty people generally take risk and generally avoid loss
with certainty.
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PROSPECT THEORY:
Prospect Theory given by Kahneman and Tversky.
The prospect theory implies that decision makers tend to risk aversion when choosing
between gains and risk seeking when choosing between losses.
i.e. decision makers avoid risk in probable profit situations and seek risk in probable loss
situation.
DISPOSITION EFFECT:
Disposition effect states that The tendency of investors to hold losing investments
too long and sell winning investments too soon
This is given Stefrin and Statman. Further this theory is utilized by other people.
The disposition effect was used by Terrance Odean to prove this effect, he used secondary
data collection method for performing analysis.
Linking the prospect theory with Disposition effect
Prospect theory: Avoid risk in profit situation.
Disposition effect: sell winning investment to avoid risk of falling prices.
Prospect theory: Seek risk in loss situation.
Disposition effect: hold on to losing investment in the hope that prices may rise subject to
the risk that the prices may fall even more.
We could analyze this on the response of the sample group i.e. the investors and then we
could segregate it based on the age ( 3 groups: below 30, 30-50 and above 50)
Again segregate on the basis of gender and carry out analysis to check if the responses
vary with marital status.
Significance of the study
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Behavioural Economics is a newer branch of Economics and it is gaining importance.
Behavioural Finance is following in the footsteps of Behavioural Economics. It has
extreme importance in todays world. The psychology of every person determines his
decisions in economic and financial transactions. Analysis of behaviour helps in
understanding the general pattern of the population. This analysis helps in every walk of
life. Understanding human tendency is of great importance and equally challenging.
II LITERATURE REVIEW
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Victor Ricciardi and Helen K. Simon
Business, Education and Technology Journal
Fall 2000
While conventional academic finance emphasizes theories such as modern portfolio theory
and the efficient market
Hypothesis, the emerging field of behavioural finance investigates the psychological and
sociological issues that impact
The decision-making process of individuals, groups, and organizations. This paper will
discuss some general principles
Of behavioural finance including the following: overconfidence, financial cognitive
dissonance, the theory of
Regret and prospect theory. In conclusion, the paper will provide strategies to assist
individuals to resolve these mental
Mistakes and errors by recommending some important investment strategies for those
who invest in stocks and
Behavioural Finance
Robert Bloomfield
Cornell University
The New Palgrave Dictionary of Economics
October, 2006
Behavioural finance began as an attempt to understand why financial markets react
inefficiently to public information. One stream of behavioural finance examines how
psychological forces induce traders and managers to make suboptimal decisions, and how
these decisions affect market behaviour. Another stream examines how economic forces
might keep rational traders from exploiting apparent opportunities for profit. Behavioural
finance remains controversial, but will become more widely accepted if it can predict
deviations from traditional financial models without relying on too many ad hoc
assumptions.
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Mounting evidence suggests that a variety of trading strategies generate returns that
are larger than permitted by the reigning theory of efficient financial markets. Defenders of
efficient markets theory argue that the anomalies represent methodological errors, and in
many cases they appear to have been correct; in cases where the anomalies appear robust,
the debates turn to two other questions. First, why would investors make systematic trading
errors that could result in mispricing? Second, why wouldnt smarter traders exploit those
errors, thereby driving prices to appropriate levels? Many answers to the first question have
relied heavily on the branch of psychology called behavioural decision theory, which has
led to the entire body of research being dubbed behavioural finance, even though there is
rarely much behavioural content in the literatures identifying pricing anomalies and
explaining why price errors are not eliminated by smarter traders.
The next section of this article discusses the empirical evidence that market prices deviate
from levels that would reflect perfectly rational traders acting in competitive markets (the
anomalies literature). I then discuss literatures that document how behavioural forces can
explain these anomalies, and that examine why irrational traders might influence prices in
competitive markets. I conclude by suggesting some promising future directions in
behavioural finance.
The Influence of Investor Psychology on Disposition Effect
Pi-Chuan Sun, Shu Chun Hsiao
Associate Professor, Department of Business Management, Tatung
University,
Market hypothesis (EMH). Previous studies (e.g., Bernartzi and Thaler, 1995) related to
behavioral model suggest that certain market anomalies are consistent with the presence of
irrational trades by investors. Kahn man and Tversky (1979) proposed the prospect theory
as an alternative to expected utility in describing investor behavior.
Based on previous works (Lichtenstein, Fischhoff and Phillips, 1982; Shefrin and Statman,
1985) this research examined the influences of overconfidence, mental accounting, regret
aversion and self-control on the disposition effect of selling winners too early and holding
losers too long. The results of empirical data analysis of 290 investors In 1980s, many
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empirical researches findings (i.e., Shiller(1984), Thaler (1985) et al. ) did not support
efficient indicate that all four psychological factors have significant influences on the
disposition effect. The findings show that overconfidence, mental accounting and self-
control positively influence the disposition effect, and self-control negatively influences the
disposition effect. As predicted, self control can reduce irrational behavior of investor.
Market efficiency, long term returns, And behavioural finance
Eugene F. Fama
June 1997
Market efficiency survives the challenge from the literature on long term return anomalies
consistent with the market efficiency hypothesis that the anomalies are change results
apparent over reactions to information is about as a common as under reaction and post
event reversal. Most important consistent with the market efficiency prediction that
apparent anomalies can be due to methodology most long term returns anomalies tend to
disappear with reasonable changes in technology.
Behavioral Finance
Jay R. Ritter
Cordell Professor of Finance
University of Florida
(September 2003)
This article provides a brief introduction to behavioral finance. Behavioral finance
encompasses research that drops the traditional assumptions of expected utility
maximization with rational investors in efficient markets. The two building blocks of
behavioral finance are cognitive psychology (how people think) and the limits to arbitrage
(when markets will be inefficient).
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The growth of behavioral finance research has been fueled by the inability of the traditional
framework to explain many empirical patterns, including stock market bubbles in Japan,
Taiwan, and the U.S.
Are Investors reluctant to realize their losses?
Terrance Odean
Oct 1998
I test the disposition effect, the tendency of investors to hold losing investment too long
and sale winning investments too soon, by analyzing trading records for ten thousand
accounts at larger discount brokerage house. These investors demonstrate a strong
preference for realizing winners rather than losers. Their behavior doesnt appear to be
motivated by a desire to rebalance port folios, or to avoid higher trading cost of low price
stocks nor it is justified by subsequent port folio performance. For tangable investments, it
is sub optional and leads to lower after tax returns.
A SURVEY OF BEHAVIORAL FINANCE
Nicholas Barberis
Richard Thaler
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
September 2002
Behavioural finance argues that some financial phenomena can plausibly be understood
using
models in which some agents are not fully rational. The field has two building blocks:
limits to
arbitrage, which argues that it can be difficult for rational traders to undo the dislocations
caused by less rational traders; and psychology, which catalogues the kinds of deviations
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from full rationality we might expect to see. We discuss these two topics, and then present
a number of behavioural finance applications: to the aggregate stock market, to the cross-
section of average returns, to individual trading behaviour, and to corporate finance. We
close by assessing progress in the field and speculating about its future course.
A SURVEY OF B.F. NICHOLAS BARBERIS &RICHARD THALES
B.F. argues that some financial phenomena can plausibly be understood using models in
which some agents are not fully rational. The field has two building blocks limits to
arbitrage, which argues that it can be different for rational , traders and psychological
which catalogues the kinds of deviations. From full rationality we might expect to see. We
discuss these two topics and then present a number of behavioural finance applications to
the aggregate stock market to the cross section of average returns to individual trading
behaviour and to corporate finance . we close by assessing progress in the field and
speculating about its further course.
III RESEARCH METHODOLOGY
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HYPOTHESES
Hypothesis 1
. Ho= The investors do not behave in accordance with the Prospect Theory
Hypothesis 2
Ho= The investors do display the disposition effect.
Hypothesis 3
Ho= The behavior under risk is independent on gender, age and marital status.
Objectives:
1) To analyze whether the investors averse risk in profit situation and take risk in loss
situation.
2) To analyze whether the investors sell their wining investments too early and hold on to
their losing investments too long.
3) To analyze whether the behavior is dependent on gender or age.
Type of Research
The type of research used is Descriptive research since the survey was carried out.
The main characteristic of this research is that, the researcher has no control over the
variables, he can only report and analyse the responses. The research is also a quantitative
research.
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Research Method
The type of research method used for the analysis is Field Research, the method
used is questionnaire and the techniques include analysis of the choices provided by the
subjects in order to check their consistency with the hypothesis mentioned above.
Subjects were given the questionnaires with 9 questions. All the questions had their
options as either 1 or 2. Subjects were told to choose their answers and mark them on the
questionnaire itself. Questionnaire is the easiest and efficient form of collecting the primary
data from the subjects that directly reveals their choice. It makes the analysis more
efficient.
Sample Size
Two hundred investors were chosen as samples. Categorized into male and female
falling into three different age groups.
Sampling Technique
Sampling technique used is purposive sampling.
Analysis
We use the chi square to analyze if risk taking behavior is dependent or independent of
gender, age and marital status.
We have used binomial distribution for the questions based on shares leading to the
disposition effect.
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IV RESEARCH DESIGN
We divided the samples on the basis of gender, their marital status and age.
Question wise design
Q1) Two options for winning were given the first was uncertainty of winning higher
amount and the second was certainty of winning lesser amount
80% probability of winning Rs.40,000 and 100% certainty of Rs.30,000.
Q2) Two options were given, these two options were coded in terms of loss but were
actually winning situations. Uncertainty of winning nothing and certainty of winning a
certain amount.
Given Rs.40,000 select either of the options 80% -Rs.40,000 and 100% -Rs.30,000.
Q3) In this question also in the first option profit probabilities are fragmented with only 1%
uncertainty and the second option is certainty of winning.
33% Rs.25,000
66% Rs.24,000
1% Rs.0
100% Rs.24,000
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Q4) Two winning situations are given with different probabilities. One with higher gain
and higher risk and second with lesser gain and lower risk.
1/6 th probability of winning 5000 and 1/2 probability of winning 2500
Q5) Two losing situations are given with different probabilities. One with higher loss and
lower risk and second with lesser loss and greater risk.
1/6 th probability of losing 5000 and 1/2 probability of losing 2500
Q6) Two probabilities in loss situation given involving human lives
1/3 rd possibility that 400 people will die and 100 people will die with certainty.
The following questions are related to the investment in shares, these questions are to be
answered in terms of yes on no
Q7) If the shares have been bought and the prices increase by 20% then whether the
subjects will sell the shares
Q8) If the shares have been bought and the prices fall by 20% then whether the subjects
will sell the shares.
Q9) If the shares further fall by 12.5% then whether the subjects will sell the shares or hold
onto the shares.
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ANALYSIS
Hypothesis 1
Ho= The investors do not behave in accordance with the Prospect Theory
Q1) Choose between the two options
o 80% probability of winning Rs 40,000
o 100% probability of winning Rs 30,000
Winning Probability
Frequency Percent Valid Percent
Cumulative
Percent
Valid 80% probability of 40,000 66 39.3 39.3 39.3
100% probability of 30,000 102 60.7 60.7 100.0
Total 168 100.0 100.0
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As we can see 61% of the subjects would select 100% probability of winning rather than go
for an option which involves risk.
Q2) In addition to whatever you own you have been given Rs 40,000
Choose between the following two options
o -Rs 40,000, 20%
o -Rs 10,000, 100%
Losing probability
Frequency Percent Valid Percent
Cumulative
Percent
Valid -40,000 80% 104 61.9 61.9 61.9
-10,000 100% 64 38.1 38.1 100.0
Total 168 100.0 100.0
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If the given data is given in terms of loss people have a psychological inclination to take
risk.62% people take risk even though the options given are in terms of loss but the
situation is actually profit situation.
Q3) Choose between the two gamble options
o 33% chances of winning Rs 25,000
66 % chances of winning Rs 24,000
1% chances of winning Rs 0
o 100% chances of winning Rs 24,000
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Gamble selection
Frequency Percent Valid Percent
Cumulative
Percent
Valid 33% 25000,66%24000,1%0 82 48.8 48.8 48.8
100% 24000 86 51.2 51.2 100.0
Total 168 100.0 100.0
In this given case the options given were winning probability with only 1% risk involved of
not winning anything but even then we cannot see a significant inclination of subjects
towards risk taking. There are 86 subjects out of 168 who would still go for certainty when
it comes to a winning situation.. 51.1% still go for certainty
The following two games of dice show varying degrees of risk involved in the winning and
losing situations.
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Q4) There are two games of dice, following possibilities are there in the games when the
dice is thrown. Which game would you play?
o 1/6 probability of winning 5000.
o 1/2 probability of winning 2500.
Dice winning
Frequency Percent Valid Percent
Cumulative
Percent
Valid 1/6 5000 51 30.4 30.4 30.4
1/2 2500 117 69.6 69.6 100.0
Total 168 100.0 100.0
In the winning situation people take lesser risk even though the winning amount is that
of the option with higher risk involvement.
70% of the people take less risk when it comes to gains
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Q5) There are two games of dice, which one would you play?
o 1/6 probability of losing 5000
o 1/2 probability of losing 2500
Dice losing
Frequency Percent Valid Percent
Cumulative
Percent
Valid 1/6 5000 93 55.4 55.4 55.4
1/2 2500 75 44.6 44.6 100.0
Total 168 100.0 100.0
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In the losing situation subjects are not following a distinct pattern towards risk take, the
risk appetite in this situation differs by a small margin. We can thus conclude that when
both options involve risk taking the subjects behave in a random manner.
Thus we can conclude that people tend to avoid risk in gains and take risks in losses.
This is in accordance with the prospect theory.
Thus hypothesis1,
Ho= The investors do not behave in accordance with the Prospect Theory, is not proved
Hence we can conclude that the investors tend to take risk in loss situation and risk averse
in profit situation.
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Hypothesis 2
Ho= The investors display the disposition effect.
We have used the binomial distribution to test the responses to the questions on shares
Q7) If you have bought shares at Rs 100 and if the current rate is Rs 120.
Will you sell the shares, if there is a 50% probability that the rate will further increase?
o Yes
o No
Shares profit
Frequency Percent Valid Percent
Cumulative
Percent
Valid yes 93 55.4 55.4 55.4
no 75 44.6 44.6 100.0
Total 168 100.0 100.0
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As we can see from the above chart 55.35% people will sell the share after the value
appreciates by 20%
I) For shares involving gains, values for binomial distribution are
p.m.f =2.35x10 -2
actual p.m.f=6.15x10^-2
There is no significant difference between the p.m.f and actual p.m.f
Q8) If you have bought shares at Rs 100 and if the current rate is Rs 80.
Will you sell the share, if there is a 50% probability that the rate will fall and 50%
probability that rate will increase?
o Yes
o No
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Shares loss
Frequency Percent Valid Percent
Cumulative
Percent
Valid yes 62 36.9 36.9 36.9
no 106 63.1 63.1 100.0
Total 168 100.0 100.0
64 % people will not sell the shares, Subjects are reluctant to realize their losses.
II) For shares involving loss, values for binomial distribution are
p.m.f=6.3x10^-2
actual p.m.f=1.8x10^-4
There is some significant difference between the p.m.f and actual p.m.f values
So the subjects have not made random choices. They have more inclination towards not
realizing the loss
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Q9) If the shares further falls to 70 and there is a 50% probability that the rate might
increase and 50% probability that the rate will fall. Will you sell the shares?
o Yes
o No
Share further loss
Frequency Percent Valid Percent
Cumulative
Percent
Valid yes 95 56.5 56.5 56.5
no 73 43.5 43.5 100.0
Total 168 100.0 100.0
III) For shares whose value falls further falls the values are
p.m.f=3.64x10^-5
actual p.m.f=8.1x10^-2
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There is some significant difference between the p.m.f and actual p.m.f values
So the subjects have not made random choices. They have more inclination towards not
realizing the loss even when the prices of shares further falls by 12.5%
Thus hypothesis2,
Ho= The investors behave in accordance with the Disposition effect, is proved.
Thus, we can conclude investors tend to realize their profits too soon and are reluctant to
realize their losses.
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Hypothesis 3
Ho= The behavior under risk is independent of gender, age and marital status
Gender
o Female
o Male
Gender
Frequency Percent Valid Percent
Cumulative
Percent
Valid female 63 37.5 37.5 37.5
male 105 62.5 62.5 100.0
Total 168 100.0 100.0
Gender * Dice winning Crosstabulation
Count
Dice winning
Total1/6 5000 1/2 2500
Gender female 21 42 63
male 30 75 105
Total 51 117 168
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Age
o Below 30
o 30 50
o 50 and above
Age
Frequency Percent Valid Percent
Cumulative
Percent
Valid below 30 106 63.1 63.1 63.1
30-50 41 24.4 24.4 87.5
Above 50 21 12.5 12.5 100.0
Total 168 100.0 100.0
Age * Dice winning Crosstabulation
Count
Dice winning
Total1/6 5000 1/2 2500
Age below 30 32 74 106
30-50 11 30 41
Above 50 8 13 21
Total 51 117 168
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Marital Status
o Single
o Married
Marital status
Frequency Percent Valid Percent
Cumulative
Percent
Valid Single 93 55.4 55.4 55.4
Married 75 44.6 44.6 100.0
Total 168 100.0 100.0
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CHI SQUARE TEST
Chi square test was carried out for age and risk taking nature in profit situation, the result
obtained was as follows
The difference is considered to be not statistically significant.
Similarly chi square test was carried out for age criteria and marital status the difference in
these cases also was not statistically significant.
CORRELATION
Correlation test was carried out for loss situation to check if there is correlation between
age, marital status and risk taking in loss situation.
According to the table above there is slight negative correlation.
Thus, hypothesis 3
Ho= The behavior under risk is dependent on gender, age and marital status
is not proved
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CONCLUSION
We thus conclude that,
The investors averse risk in profit situation and take risk in loss situation.
The investors hold on to their losing investments too long.
The behavior is independent of gender, age and marital status .