chapter vii perception of mutual fund...
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CHAPTER VII
PERCEPTION OF MUTUAL FUND INVESTORS
7.1. Introduction
A mutual fund collects the savings from small investors, invest
them in Government and other corporate securities and earn income through
interest and dividends, besides capital gains. It works on the principle of a ‘small
drop of water can make a mighty ocean’. Hence, a mutual fund is nothing but a
form of collective investment. It is a group of various investors coming together
who transfer their surplus funds to a professionally qualified organization to
manage it. To get the surplus funds from the investors, the fund adopts a simple
technique. Each fund is divided into a small fraction called ‘units’ of equal value.
Each investor is allocated units in the proportion to the size of his investment.
Thus, every investor, whether big or small, will have a stake in the fund and can
enjoy the wide portfolio of the investment held by the fund. Hence, mutual funds
enable millions of small and large investors to participate in and derive the
benefit of the capital market growth. It has emerged as a popular vehicle of
creation of wealth due to high return, lower cost and diversified risk.
187
The fund mobilization by mutual funds in India has been increased
since their inception in 1964. i.e., with the launch of US 64 flagship scheme of
UTI. Again it was in 1987 and 1989, when public sector banks and corporations
entered in the mutual funds market. Further keeping in tune with the objective of
new economic policy of 1991, mutual funds market was thrown open to private
sector in India. Since 1993, the investment trend shifted in favour of private
sector funds. The corpus of mutual funds crossed Rs.120000 crores marks in
India. In November 2002 with almost 60 per cent of the total investment going
into private sector mutual funds. Today as on March 31st 2010, the total AUM is
614545.98 crores1. The fact that the money so invested comes out of the hard
earnings of investors apparently bring home the direct need of studying what the
investors feel about mutual funds. In this chapter an attempt has been made to
study the perceptions of investors towards mutual funds. It includes the analysis
of knowledge of investors, awareness and reasons for withdrawal of mutual fund
units.
7.2. Knowledge about Mutual Funds
It represents the investors’ knowledge on mutual funds. Investors
who invest their money into mutual fund must have some knowledge about their
investment. Blank investment always gives negative results. The investor with
high knowledge may have its own influence to select the type of mutual funds
and also the time of buying and selling of mutual funds in the market. So a
mutual fund investor should have the basic knowledge about mutual funds like
the nature of mutual fund, how it works, how the money is turned into returns ,
1. www.amfiindia.com
188
what are the parties involved in this operations, how the value is calculated etc.
Then only the investor can successfully involve in the field and make necessary
changes to earn good returns. In this study the investor’s knowledge level is
analysed by the use of t-statistics.
TABLE 7.1
KNOWLEDGE ABOUT MUTUAL FUNDS AMONG THE INVESTORS
S.
No.
Knowledge on
Mean Score among
Investors
T-Statistics
Small Large
1 Type of funds 2.3465 3.6544 -3.8186*
2 Fund’s investment
Objective
2.1172 3.7086 -4.1782*
3 Portfolio of the fund 2.2085 3.4147 -3.5644*
4 Portfolio manager 2.0042 3.1182 -3.0961*
5 Net Asset Value 2.2017 3.2496 -2.8541*
6 Lock in Period 2.3396 3.6541 -2.9691*
*significant at five percent level.
Source: Primary data.
The table 7.1 indicates the mean score of the knowledge of
investors among the two group of investors and the respective ‘t’ statistics. The
small investors have good knowledge about type of funds and lock in period
since their respective mean scores are2.3465 and 2.3396. Among large investors,
they have good knowledge on fund’s investment objective and type of funds
since their respective mean scores are 3.7086 and 3.6544. Regarding the
knowledge of mutual fund investors, the significant difference among the small
and large investors have been identified in type of funds, fund’s investment
189
objective, portfolio of the fund, portfolio manager, net asset value and lock in
period since the respective ‘t’ statistics are significant at five percent level.
7.3. Awareness of Investors
It represents the awareness level of mutual fund investors. Indian
investors are not much aware of mutual funds. As per the survey of CAMS in
major cities, the survey results shows that, the awareness is weak, considering
especially the percentage of households that invest today, there is less than 50 per
cent awareness of funds2. Awareness is the highest in the metros where nearly
half of all savers know about mutual funds3. Most of the mutual fund companies
along with the Association of Mutual Funds in India (AMFI) have started
investor awareness programme. UTI mutual fund this year launched one of the
largest investor education initiatives under the name ‘Swatantra’ for creating
awareness about the concepts of financial planning and benefits of investing in
mutual funds in over 300 cities in the country. This study analyses the awareness
level of investors with the help of ‘t’ test.
2. Vetrivel R., (2007), ‘Awareness on Mutual Fund Investments Weak’, The Hindu-Business
Line, Aug14, http://www.thehindubusinessline.com/2007/08/14/stories/2007081452481500.
htm. 3. Vijaya Rathore, (2008), ‘Low Awareness of Mutual Funds Snags AMCs’ Bid to Expand
Base’, Livemint - The Wall Street Journal. http://www.livemint.com/ 2008/08/04231928/
Low-awareness-of-mutual-funds.html
190
TABLE 7.2
LEVEL OF AWARENESS ON THE TERMS IN MUTUAL FUND
MARKET
S.
No. Terms
Mean Score among
Investors T-Statistics
Small Large
1 New Fund Offer(NFO) 1.8996 3.8144 -4.2082*
2 Systematic Investment Plan
(SIP)
2.9891 4.0869 -3.4541*
3 Systematic Withdrawal Plan
(SWP)
2.0445 3.2081 -2.6881*
4 Asset Management Company 1.7868 3.0844 -2.3844*
5 AMFI 2.2089 3.4509 -2.6039*
6 Exchange Traded Fund 1.7033 2.9969 -2.3317*
7 Key Documents 2.0541 3.4162 -2.6417*
8 Systematic Transfer Plan
(STP)
2.1149 3.1773 -3.5082*
9 SEBI 2.0884 3.3845 -2.9086*
10 ELSS 2.2669 3.4086 -3.0841*
Overall 2.1157 3.4028 -3.2962*
*significant at five percent level.
Source: Primary data.
The small investors are much aware of Systematic Investment
Plan (SIP), ELSS and AMFI since its means scores are 2.9891, 2.2669 and
2.2089 respectively. Among large investors, they are having good awareness
about Systematic Investment Plan (SIP), NFO and AMFI since its mean score of
4.0869, 3.8144 and 3.4509 respectively. Regarding the level of awareness, the
191
significance difference among the small and large investors have been identified
in the case of New fund offer (NFO), Systematic Investment Plan (SIP),
Systematic Withdrawal Plan (SWP), Asset Management Company, AMFI,
Exchange Traded Fund, Key Documents, Systematic Transfer Plan (STP), SEBI,
and ELSS since their respective ‘t’ statistics are significant at five per cent level.
7.4. Perception on Mutual Funds
It means the investors perception about mutual funds different
aspects. The perception may differ from investor to investor. Seventeen variables
are selected from different areas to analyse the perception of investors. Investors
are asked to rate the above said funds at five point scale according to their
perception. These statements were framed considering the developments in
mutual fund industry over time. The means score of each statement have been
computed to exhibit the opinion of mutual funds among the two types of
investors. The results are summarized in Table.7.3.
192
TABLE 7.3
PERCEPTION ON MUTUAL FUNDS
S.
No.
Variables Related to Mutual
Funds
Mean Score among
Investors
T-Statistics
Small Large
1 Mutual Funds are useful for
small investors
3.8667 3.6241 0.5446
2 Mutual Funds give higher
return than other investments
3.6643 3.0846 2.1569*
3 Mutual Funds are healthy for
Indian financial environment
3.8049 3.1107 2.4397*
4 Private sector mutual funds
are not good
2.6673 2.5239 0.1843
5 ELSS schemes are good for
tax saving
3.0441 3.8969 -2.8974*
6 Mutual funds with large
corpus perform better
3.1408 3.9337 -2.7646*
7 Mutual funds having
diversified portfolio gives
better returns
3.0639 3.9082 -3.1745*
8 Close ended mutual funds are
not good
2.6508 2.9791 -1.0336
9 Mutual Funds with high NAV
is good for investment
3.1446 2.0344 3.2765*
10 Public sector mutual funds are
safe
3.6887 2.6739 3.1144*
11 Mutual Fund investment is an
asset for future
3.4073 3.8944 -1.1908
12 Mutual fund investments are
the substitutes for share
investment
2.9484 3.6677 -2.0596*
13 New Fund offers are good
than existing fund
3.0339 3.5886 -2.1144*
14 Growth option is good for
long term
3.1144 3.8089 -2.6674*
15 Dividend payout option is
good in tax saving schemes
3.3084 3.9508 -2.2342*
16 Bearish market is good for
investment
3.1468 3.8244 -2.5896*
17 Bulky investment is not
advisable in bullish market
3.0229 3.7083 -2.7345*
*Significant at five percent level.
Source: Primary data.
193
Among small investors, majority of them accept the perception,
mutual funds are useful for small investors, and mutual funds are healthy for
Indian financial environment and public sector mutual funds are safe since their
respective mean score of 3.8667, 3.8049 and 3.6887. The large investors
favoured opinion are mutual funds with large corpus perform better, mutual funds
with high NAV is good for investment and Mutual Fund investment is an asset
for future since their respective mean score of 3.9508, 3.9337 and 3.9082.
Regarding the opinion, the significant difference among the two group of
investors have been identified in the case of Mutual Funds give higher return than
other investments, Mutual Funds are healthy for Indian financial environment,
ELSS schemes are good for tax saving, Mutual funds with large corpus perform
better, Mutual funds having diversified portfolio gives better returns, Mutual
Funds with high NAV is good for investment, Public sector mutual funds are
safe, Mutual fund investments are the substitutes for share investment, New Fund
offers are good than existing fund, Growth option is good for long term, Dividend
payout option is good in tax saving schemes, Bearish market is good for
investment and Bulky investment is not advisable in bullish market since the
respective ‘t’ statistics are significant at five percent level.
7.4.1. Factor Analysis
To study the investors perception about important aspects in
mutual fund, factor analysis is used. The score of the investors’ opinion about
mutual fund have been included for the factor analysis. The rotated component
matrix for the various investment options is given in Table 7.4.
194
TABLE 7.4
ROTATED COMPONENT MATRIX FOR INVESTORS OPINION
ABOUT MUTUAL FUND
S.
No. Variables
Factor Loading
F1 F2 F3 F4
1 Mutual Funds with high NAV
is good for investment 0.9207
2 Mutual Funds are useful for
small investors 0.8554
3 Mutual Funds are healthy for
Indian financial environment 0.7916
4 Bearish market is good for
investment 0.7208
5 New Fund offers are good than
existing fund 0.6396
6 Mutual fund investments are the
substitutes for share investment 0.5445
7 Mutual Funds give higher
return than other investments
0.8108
8 Mutual funds having diversified
portfolio gives better returns 0.7092
9 Mutual funds with large corpus
perform better 0.6117
10 Growth option is good for long
term
0.7168
11 Mutual Fund investment is an
asset for future 0.7024
12 Public sector mutual funds are
safe 0.6533
13 Dividend payout option is good
in tax saving schemes
0.8125
14 ELSS schemes are good for tax
saving 0.5224
Eigen Value 3.9654 3.0826 2.4587 1.5073
Percent of variation explained 27.45 18.82 16.09 10.66
KMO measure of sampling adequacy: .8144 Bartlett’s Test of Sphericity :
Chi-square=99.04 Significance Value : .000
Extraction Method: Principal component analysis
Rotation method: Varimax with Kaiser normalization
195
The above table indicates the rotated factor loading for the
fourteen variables. It is clear from the table that all the 14 variables have been
extracted into 4 factors.
The number of variables in each factor, eigen value and the
percent of variation explained by the factor is presented in Table 7.5.
TABLE 7.5
IMPORTANT ASPECTS IN MUTUAL FUNDS
S.
No.
Important
Aspects
Number of
Variables
in
Discriminant
Coefficient
Eigen
Value
Percent
of
Variation
Explained
Cumulative
Percent of
Variation
Explained
1 Investment 6 0.7908 3.9654 27.45 27.45
2 Return 3 0.8214 3.0826 18.82 46.27
3 Future 3 0.7911 2.4587 16.09 62.36
4 Tax savings 2 0.8334 1.5073 10.66 73.02
*Significant at zero percent level.
The important factors regarding the perception of investors about
mutual funds are investment, return, future and tax savings since their eigen
values are 3.9654, 3.0826 and 2.4587 respectively.
Opinion about investment consists of 6 variables with percent of
variation explained of 27.45 per cent. Return consists of 3 variables with the
percent of variation explained of 18.82 percent. Opinion regarding future to the
extent of 16.09 percent. The next factors is opinion about tax savings since its
respective eigen values are 1.5073 and the percent of variation explained by the
two factor is 10.66 percent.
196
7.5. Level of Perception among Small and Large Investors
Investors opinion about mutual fund is again analyzed with the
help of ‘t’ test. Both small and large investors level of opinion is examined.
Opinion regarding important aspects in mutual fund is confined to investment,
return, and future and tax savings. The result of ‘t’ test is exhibited in table 7.6.
TABLE 7.6
LEVEL OF OPINION ON IMPORTANT ASPECTS IN MUTUAL FUNDS
S.No.
Important Aspects in Mutual
Funds
Mean Score among
Investors
T-
Statistics Small Large
1 Investment 3.3242 3.3083 0.3096
2 Return 3.2896 3.6422 -2.6644*
3 Future 3.1763 3.9239 -3.8865*
4 Tax savings 3.4035 3.4591 -0.4151
*Significant at five percent level.
Source: Primary data.
Majority of the small investors are favorable to the perception
about tax savings and investments since its means scores are 3.4035 and 3.3242
respectively. Among large investors, these factors are future and return since its
mean score of 3.9239, and 3.6422 respectively. Regarding the level of opinion
about important aspects of mutual fund, the significance difference among the
small and large investors have been identified in the case of ‘return’ and ‘future’
since their respective‘t’ statistics are significant at five per cent level.
7.5.1. Discriminant Factors among Small and Large Investors
Small investors and large investors opinion about mutual funds are
197
different. In order to identify the important discriminant factors among the two
groups of investors, the two group discriminant analyses have been executed.
Initially, the mean difference in all factors, its ‘t’ statistics and Wilks Lambda
have been computed to identify the significance and discriminant power of the
factors. The results are summarized in Table 7.7.
TABLE 7.7
MEAN DIFFERENCE AND DISCRIMINANT POWER OF IMPORTANT
ASPECTS OF MUTUAL FUND AMONG SMALL AND LARGE
INVESTORS
S.
No.
Important
Aspects in
Mutual Funds
Mean Score
among Investors Mean
Difference
T-
Statistics
Wilks
Lambda Small Large
1 Investment 3.3242 3.3083 0.0159 0.3096 0.2388
2 Return 3.2896 3.6422 -0.3526 -2.6644* 0.1486
3 Future 3.1763 3.9239 -0.7476 -3.8865* 0.1082
4 Tax savings 3.4035 3.4591 -0.0556 -0.4151 0.3446
*Significant at five percent level.
Source: Primary data.
The higher mean difference among the two group of investors
have been noticed in the case of future and return since their respective mean
differences are - 0.7476, and -0.3526. The lesser wilks lambda is noticed in the
case of future and return since their respective Wilks Lambda co-efficients are
0.1082 and 0.1486. The significant mean difference is noticed in the case of
factors namely return and future.
198
The relative contribution of discriminant factors in total
discriminant score is computed by the product of discriminant co-efficient and
the respective mean difference of the factor. The results are given in Table 7.8.
TABLE 7.8
RELATIVE CONTRIBUTION OF DISCRIMINANT ASPECTS IN
TOTAL DISCRIMINANT SCORE
S. No. Discriminant
Aspects
Discriminant
Coefficient
Mean
Difference Product
Relative
contribution
in TDS
1 Return -0.1736 -0.3526 0.0612 27.62
2 Future -0.2145 -0.7476 0.1604 72.38
Total 0.2216 100.00
Percent of cases correctly classified: 79.07.
The higher discriminant co-efficient is identified in the case
‘future’ since their respective discriminant co-efficient are -0.1736. It infers that
the above factors are major in the discriminant function compared to other
factors. The higher relative contribution to the total discriminant score is
identified in the case of future since their respective relative contribution is 72.38
per cent respectively. The estimated discriminant function correctly classifies the
cases to the extent of 79.09 per cent. The analysis reveals that the important
discriminant factor among the small and large investors are future.
7.6. Switching / Withdrawal Behaviour among the Investors
The investors may switch from one mutual fund to another in
same family funds or withdraw or redeem the units. It depends on their mindset,
current market condition, performance of the fund, service of mutual funds,
mismanagement etc. The switching/ withdrawal behaviour among the investors
199
are usually seen in the market since the investors are frequently sell their mutual
funds and invest in other funds. Peles (1997) established that there is evidence of
investor psychology affecting fund/scheme selection and switching4. The reasons
for switching/withdrawal are drawn from various reviews (Singh and Chander,
20045; Agarwal, 1992
6, Subash and Mukesh, 1992
7; Bal and Mishra, 1990
8; and
Baruna and Srinivasan, 19829). In the present study the included reasons for
switching are fourteen. The investors are asked to rate these fourteen reasons at
five point scale. The assigned marks on these scales range from 5 to 1
respectively. The means scores of the reasons among the small and large
investors have been computed to exhibit the importance of the reasons.
Regarding perception on the reasons, the significant difference among the two
group of investors have been analysed with the help of ‘t’ test. The results are
given in table 7.9.
4. Goetzman, W.N., and Peles, N., (1997), ‘Cognitive Dissonance and Mutual Fund Investors’,
The Journal of Financial Research, Vol.20(2), pp.145-158.
5. Singh Jaspal and Chander Subash, (2004), ‘An Empirical Analysis of Perceptions of
Investors towards Mutual Funds’, Finance India, Vol.XVIII (4), December, pp.1673-1692.
6. Agarwal, G.D., (1992), ‘Mutual Funds and Investors Interest’, Chartered Secretary,
Vol.22(1), January 23, pp.24-25.
7. Chandar Subash and Mahajan Mukesh, (1992),’Perception of Investors towards Mutual
Funds: An Empirical Investigation’, Indian Journal of Commerce, June, pp.117-119.
8. Bal, R.K., Mishra, B.B., (1990), ‘Role of Mutual Funds in Developing Indian Capital
Market’, Indian Journal of Commerce, Vol.43(165), pp.112-117.
9. Baruna, S.K., and Srinivasan, G., (1982), ‘Experiment on Individual Investment Decision
Making Process’, Working Paper No.423 (April-June), Indian Institute of Management,
Ahmedabad.
200
TABLE 7.9
REASONS FOR SWITCHING /WITHDRAWAL OF MUTUAL FUNDS
S. No. Reasons
Mean Score among
Investors T-Statistics
Small Large
1. Performance 3.8843 3.1145 2.9446*
2. Involvement of Companies 3.0441 3.9208 -3.1774*
3. Portfolio 3.1142 3.7569 -2.3969*
4. Return 3.8586 3.5776 1.0465
5. Fund managers efficiency 3.3341 3.9617 -2.0419*
6. NAV 3.7765 3.2143 2.1173*
7. Dividend Payment ratio 3.1442 3.6675 -2.0291*
8. Future scope of the fund 3.2084 3.9443 -2.8864*
9. Capital appreciation 3.1139 3.8969 -2.6971*
10. Consistency in
performance 3.1085 3.7734 -2.5084*
11. Adequate unit holders
information 3.2642 3.8086 -2.6676*
12. As per the advice of
Friends/Broker 3.6673 3.0667 2.1144*
13. Performance of Peer
groups 3.0239 3.8084 -2.9968*
14. Lack of investors Redressal
mechanism 3.1773 3.9965 -3.1408*
*Significant at five percent level.
Source: Primary data.
The important reasons for switching/withdrawal among the small
and large investors are performance, return and NAV since their respective mean
score of 3.8843, 3.8586 and 3.7765 whereas in the large investors case these
reasons are lack of investor redressal mechanism, fund managers efficiency and
future scope of fund since their respective mean score are 3.9965, 3.9617 and
201
3.9443. Regarding the perception on the reasons for switching/withdrawal the
significant difference among the two group of investors have been identified in
the case of performance, involvement of companies, portfolio, fund managers
efficiency, NAV, dividend payment ratio, future scope of the fund, capital
appreciation, consistency in performance, adequate unit holders information, as
per the advice of friends/broker, performance of peer groups and lack of investors
redressal mechanism since their respective ‘t’ statistics are significant at five per
cent level.
7.6.1. Reasons for Switching/Withdrawal
The important reasons for switching/withdrawal are analysed with
the help of factor analysis. The score on various reasons for switching have been
included for the study. The KMO measure of sampling adequacy and bartletts test
of sphericity have been conducted to test the validity of data for factor analysis.
Both these two test satisfy the conditions for validity of data since their KMO
measure is greater than 0.5 and the chi-square is significant at five percent level.
The factor analysis result in three important factors (reasons). The details of the
findings of factor analysis is summarized in Table 7.10.
202
TABLE 7.10
ROTATED COMPONENT MATRIX FOR IMPORTANT REASONS FOR
SWITCHING/WITHDRAWAL OF MUTUAL FUNDS
S. No. Variables Factor Loading
F1 F2 F3
1 Return 0.9144
2 NAV 0.8596
3 Consistency in Performance 0.8142
4 Performance 0.7814
5 Dividend Payout Ratio 0.7304
6 Performance of Peer Groups 0.6179
7 Involvement of companies
0.8504
8 Lack of Investors Redressal
Mechanism 0.8011
9 Fund Manger Efficiency 0.7192
10 Adequate unit holders information 0.6269
11 Capital Appreciation
0.8246
12
Portfolio 0.7085
13 Future Scope of the fund 0.5869
Eigen Value 3.5686 2.7132 2.0671
Percent of variation explained 31.69 25.43 18.87
KMO measure of sampling
adequacy: .7664
Bartlett’s Test of Sphericity :Chi-square= 89.94
Significance Value : .000
Extraction Method: Principal component analysis
Rotation method: Varimax with Kaiser normalization
The above table indicates the rotated factor loading for the 13 variable. It
is clear from the table that all the 13 variables have been extracted into 3 factors.
203
TABLE 7.11
IMPORTANT REASONS FOR SWITCHING
S.
No.
Important
Reasons
Number
of
Variables
Rehabilits
Coefficient
Eigen
Value
Percent
of
Variation
Explained
Cumulative
Percent of
Variation
Explained
1 Lack of
Performance 6 0.7968 3.5686 31.69 31.69
2
Lack of
redressal
mechasnism
4 0.8144 2.7132 25.43 57.12
3 Lack of
Appreciation 3 0.7341 2.0671 18.87 75.99
*Significant at zero percent level.
The most important factor is lack of performance since its eigen
value is 4.0811. The ‘lack of performance factor explain the variables considered
for identify mutual fund problems to the extent of 31.69 per cent. It is followed
by the factors namely ‘lack of redressal mechanism since its eigen value is
2.7132. The variance explained by the above factor is 25.43. The last factor
narrated by the factor analysis is ‘lack of appreciation since its eigen value is
2.0671. The variance explained by the factor is 18.87 per cent.
7.6.2. Switching/withdrawal Behaviour among Small and Large
Investors
The important reasons for switching/withdrawal are lack of
performance, lack of involvement and lack of appreciation. The score of the
factors regarding important reasons for switching/withdrawal are drawn from the
mean score of the variables regarding the important problems mutual funds.
Regarding the importance given on factors, the significant difference among the
small and large investors have been analysed with the help of ‘t’ test. The results
are given in Table 7.12.
204
TABLE 7.12
INVESTORS VIEW ON IMPORTANT REASONS FOR
SWITCHING/WITHDRAWAL
S. No. Reasons
Mean Score among
Investors T-Statistics
Small Large
1. Lack of Performance 3.4660 3.5259 -0.4467*
2. Lack of Involvement 3.2049 3.9219 -3.1778*
3. Lack of Appreciation 3.1455 3.8660 -3.2368*
*Significant at five percent level.
Source: Primary data.
The important factors regarding the investors view on reason for
switching/withdrawal among small investor is lack of performance since their
respective mean score is 3.4660. Among large investors, the factor is lack of
involvement since their respective mean score is 3.9219. Regarding the
importance given on these factors, the significant difference among the two group
of investors have been identified in the case of lack of performance, lack of
involvement and lack of appreciation since their respective ‘t’ statistics are
significant at five percent level.
7.6.3. Discriminant Factors among Small and Large Investors
The reasons for switching/withdrawal of small investors and large
investors are different. In order to identify the important discriminant factors
among the two groups of investors, the two group discriminant analyses have
been executed. Initially, the mean difference in all factors, its ‘t’ statistics and
Wilks Lambda have been computed to identify the significance and discriminant
power of the factors. The results are summarized in Table 7.13.
205
TABLE 7.13
MEAN DIFFERENCE AND DISCRIMINANT POWER OF IMPORTANT
REASONS FOR SWITCHING
S.
No.
Important
Reasons
Mean Score
among
Investors Mean
Difference
T-
Statistics
Wilks
Lambda
Small Large
1 Lack of
Performance
3.4660 3.5259 -0.0599 -0.4667* 0.4861
2 Lack of
Involvement
3.2049 3.9219 -0.7170 -3.1778* 0.1634
3 Lack of
Appreciation
3.1455 3.8660 -0.7205 -3.2368* 0.1146
*Significant at five percent level.
Source: Primary data.
The higher mean difference among the two group of investors
have been noticed in the case of lack of appreciation and, lack of involvement
since their respective mean differences are - 0.7205 and -0.7170. The higher
discriminant power is identified in the case of lack involvement since their
respective Wilks Lambda co-efficient is 0.1634. The significant mean difference
is noticed in the case of factors namely lack of performance, lack of involvement
and lack of appreciation.
The relative contribution of discriminant factors in total
discriminant score is computed by the product of discriminant co-efficient and
the respective mean difference of the factor. The results are given in Table 7.14.
206
TABLE 7.14
RELATIVE CONTRIBUTION OF IMPORTANT REASONS IN TOTAL
DISCRIMINANT SCORE (TDS)
S.
No.
Important
Reasons
Discriminant
Coefficient
Mean
Difference Product
Relative
Contribution
in TDS
1 Lack of
Involvement -0.1031 -0.7170 0.0739 33.95
2 Lack of
Appreciation -0.1996 -0.7205 0.1438 66.05
Total 0.2177 100.00
Percent of cases correctly classified: 69.07.
The higher discriminant co-efficient is identified in the case lack
of appreciation since their respective discriminant co-efficient is -0.1996. It infers
that the above factors are major in the discriminant function compared to other
factors. The higher relative contribution to the total discriminant score is
identified in the case of lack of appreciation since their respective relative
contribution is 66.05 per cent. The estimated discriminant function correctly
classifies the cases to the extent of 69.07 per cent. The analysis reveals that the
important discriminant factors among the small and large investors is lack of
appreciation.
7.7. Conclusion
Mutual funds investment is one of the best avenue for investment.
The role of mutual fund investors are very important. The investors knowledge
level , awareness, opinion regarding mutual fund investment plays vital role in
the industry. In Kerala , most of the investors are educated and their knowledge
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and awareness level is good. The investors have good knowledge about the type
of funds, fund’s investment objective, portfolio of the fund, portfolio manager,
net asset value and lock in period. Investors are highly aware of the term, New
Fund Offer (NFO), Systematic Investment Plan (SIP), Systematic Withdrawal
Plan (SWP), Asset Management Company, AMFI, Exchange Traded Fund, Key
Documents, Systematic Transfer Plan (STP), SEBI, and ELSS. The important
factors extent the opinion of investors about mutual funds is investment, return,
future and tax savings. Regarding the reasons for switching/withdrawal the most
important factor is poor performance.