Determinants of

portfolio choice of
individual investor
Presented by:
Varun jindal (211161)
Durgendra singh (211172)
TNVM ravindra mohan (211146)

Introduction
The traditional bulwark of the equity
market place-the individual investor
has been an object of scrutiny only in
a very aggressive terms. The
individual investor has been a
significant
contributor
to
the
allocation and liquidity function of
capital market. Accordingly, it is imp
to understand his concerns. In this
direction we tried to find what are the
factors that influence his choice of
portfolio.

Methodology
Data was obtained by a questionnaire survey of a
representation cross section
of 200 individuals.
Representative cross section for sampling proposes was
taken only those household which are capable of
financial investment.
Variables employed:
Age
Income
Risk tolerance
Expected return

Data collection and

preparation
Age :

Age of investing No. of respondents

50-60
40-50
30-40
20-30
<20

35
46
52
59
8
200

%
17.5
23
26
29.5
4
100

Data collection and

preparation cont
Income :

Monthly income class No. of respondents

15,000-25,000
25,001-30,000
30,001-40,000
40,000-50,000
50,000-60,000

52
46
38
26
38
200

%
26
23
19
13
19
100

Data collection and

preparation cont
Risk tolerance :

Risk tolerance

No. of respondents

more willingness
less willingness
risk factor hs no influence
can't say

10
69
72
49
200

5
34.5
36
24.5
100

Data collection and

preparation cont
Expected return:

Expected return No. of respondents

0-15%
15% - 30%
30% -50%
above 50%

52
45
57
46
200

%
26
22.5
28.5
23
100

Data collection and

preparation cont
Age / Income :
Age/income level
15,000-25,000
25,001-30,000
30,001-40,000
40,000-50,000
50,000-60,000

25-35
10
14
9
4
6
43

35-45
16
15
11
12
11
65

45-55
16
12
11
6
18
63

>55
10
5
7
4
3
29

total
52
46
38
26
38
200

Data collection and

preparation cont
Return / Income:
RETURN/INCOME LEVEL
15,000-25,000
25,001-30,000
30,001-40,000
40,000-50,000
50,000-60,000

0-15%
20
15
7
2
8
52

15%-30% 30%-50%
15
10
13
14
12
15
3
10
2
8
45
57

>50%
7
4
4
11
20
46

52
46
38
26
38
200

Determinant of portfolio
choice
To identify the factors
influencing the
portfolio of individual
in investors a
multiple regression
was developed. The
expected return was
taken as a
dependent variable
and rest all the
variables was taken
as independent
variables.

Regression table data

X1
Age in years(5)
25
25
25
25
25
25
35
35
35
35
35
35
45
45
45
45
45
45

X2
Income in '000(10,000)
25
25
25
45
45
45
30
30
30
50
50
50
35
35
35
55
55
55

X3
risk
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3

Y1
Expected return(%)
10
15
20
15
25
35
11
15
20
12
17
20
10
13
17
9
13
16

Regression analysis
Regression
Statistics
Multiple R

0.944086032

R Square

0.891298436

Adjusted R Square 0.85053535

Standard Error

2.885849095

Observations

12

ANOVA
df

SS

MS

Significance F

Regression

3 546.2916667182.0972222 21.8653325 0.000328298

Residual

Total

66.625

11 612.9166667

8.328125

Regression analysis cont

Coefficients

Standard Error

t Stat

Intercept

2.013888889

5.137282735

0.392014416 0.705283891

X Variable 1

-0.322222222

0.111076383

-2.900906675 0.019864069

X Variable 2

0.408333333

0.083307288

4.901531968 0.001191462

X Variable 3

5.875

1.020301732

5.758100583 0.000425033

Lower 95%

Upper 95%

Intercept

-9.832706332

13.86048411

-9.832706332 13.86048411

X Variable 1

-0.578364822

-0.066079623

-0.578364822 -0.06607962

X Variable 2

0.216226384

0.600440283

0.216226384 0.600440283

X Variable 3

3.522179988

8.227820012

3.522179988 8.227820012

Lower 95.0%

P-value

Upper 95.0%

Regression residual
Observation

Predicted Y

Residuals

10.04166667

-0.041666667

15.91666667

-0.916666667

21.79166667

-1.791666667

18.20833333

-3.208333333

24.08333333

0.916666667

29.95833333

5.041666667

5.208333333

3.791666667

11.08333333

0.916666667

16.95833333

-1.958333333

10

13.375

-1.375

11

19.25

0.75

12

25.125

-2.125

Results
Dependent variable = Expected return
Multiple R = 0.944086032
Adjusted R2 = 0.85053535
Standard error = 2.885849095
F = 21.8653325 significant at 0.000328298
T STAT:
X1 = -2.900906675
X2 = 4.901531968
X3 = 5.758100583

References
L.fisher and J.Lorie Rates of returns on investments in common
sock. Journal of business,41, July 1968, Pp 291-316.
V.Rangarajan, Chennai investor is conservative, business line,
FEB23, 1997 p20.
V.Rangarajan, investment size based segmentation of individual
investor, management researcher, 3-3&4, jan-june, pp21-28.
Peter S.Yoo, age dependent portfolio selection, St. Louis : Federal
reserve bank of St. Louis, 1994.
L.C. Gupta, Indian share owner A survey , NEW Delhi, society for
capital market research and development, 1991.