A STUDY ON INFLUENCE OF BEHAVIORAL FINANCE ON SOLO PARENT’S

INVESTMENT DECISIONS WITH SPECIAL REFERENCE TO INDIA

1
Dr. Mahima Singh, 2Prof. surabhi Rodi

1
Assistant Professor, Pratibha Institute of Business Management, Pune

2
Assistant Professor, Pratibha Institute of Business Management, Pune

ABSTRACT

The present paper is concerned with finding out the behavioral finance factors which play a great
role in molding the decisiveness in relation to investment by a solo parents in India. The decisions
taken by them has to be dependable as they are usually not in the position to look for another
possibility due to the fact that they are lone earning parent generally having single source of
income. The research takes into consideration the socio demographic features and also the
elements related to risk and return, peer choices of investment etc. The data of 80 respondents is
collected online through a Google form in which majority of them have preference towards gain
but not on the cost of losses so they prefer to invest in safe or risky avenues. The result of the
pearson correlation analysis between behavioural finance and investment decisions on solo
parents’ investment decisions a positive relationship.

Keywords: Behavioural Finance, Investment Decision, Solo Parents, Biasness, Socio-demography

INTRODUCTION

Financial decisions taken by an individuals are influenced by various factors such as income, age
but the psychology in the form of behavior plays a major role in ultimate final decision. The role
of behavior finance is of paramount importance as greediness and distress both are extreme but
ironically have a significant part in the selection of investment avenues. This behavior finance is
of much more significance to individuals who have to carry out all the monetary responsibilities
of their own as well of their children single handedly. So they have to care a lot about their
psychological sentiments in understanding and developing investment decision making process.

Along with the psychology, economics and sociology are also an integral part of behavior finance
as it is a multidisciplinary filed. It is a field which extend and shape the financial decisions of the
individuals as it perform the function of evaluating the need, wants and the elements which give
rise to inclinations towards doing investment. It also take in to consideration the basic intent which
makes the individual to invest in high risky avenues like stock without making a proper analysis
of it. It became considerably more essential in case of single parent as they have to carry out all
the future expenses and contingencies all alone. The present investment will set a path for the
future and keeping them in a systematic and proper manner will provide them with required
confidence and comfort.
The investment pattern of the solo parents depends on their risk appetite, expected return, safety,
liquidity, knowledge level, number of children etc. The study on the impact of behavioral finance
on investment decisions has been done in the past but specifically its influence on the single parents
with special reference to India is not covered much. So, to fill this gap, the present study focuses
on the single parent’s investment decisions which is largely influenced by behavioral finance.

REVIEW OF LITERATURE

Tavakoli (2011) was of the opinion that there are multiple elements which effect the decision
making process of the individuals. Along with the identification of the elements he also pinpointed
the elements like expert opinion, financial position of the company, goodwill of the company,
profit position, past dividends are major decision influencers. Shefrin and Statman, Ahamed
Ibrahim and Tuyon, (2017) in their research work emphasized on main pertinent constituents
which influence the behavior of individual investor in a growing market by using the behavioral
portfolio theory.

Lewellen (1977) in his study come to the conclusion that demographic factors like age, gender,
income level, educational qualification plays an important role in making investment decisions by
individuals. Fung and Durand (2014) are also of the same opinion that socio economic attributes
play a major role in investment decisions.

Rana and Vibha (2017) found in their study that marital status is a very governing factor in
investment preferences of the household. The unmarried individual is having a freedom to take the
decisions on their own whereas married couple have to talk with each other over regarding the
decisions to be taken for investment amount, avenues. Shaikh and Kalkundrikar (2011) carried on
a study which focused on marital status and investment preferences with the aim to find the
relationship between the two and it was concluded that there is a significant positive relationship
between them. They also confirmed in their study that both the genders react to the risk differently.
Males are more risk taker as compared to females.

Yang (2007) offered insight through his case study paper in between the gender and age in relation
to excessively confidence level, frequentness in trading. This study was done within the limit of
behavioral finance and came to the conclusion that socio demographic factors should be an integral
part of investor behavior study. He also observed the investment pattern of split up relation and
survived wife and confirmed that their total life gets change and it becomes an uphill task for them
to reanalyze all the investment to meet short as well as long needs.

Devereux (1994) found that the respondent of their study were of the opinion that during the
married time the savings are less as there is another partner to bear the risk and uncertainty so they
are in better comfort zone and if the chances are separation are there than the saving proportion
increases due to the fear factor. Mazzocco (2007) has also confirmed the above notation that
uncertainty in married life will enlarge the saving quota due to increased chances of risk and
uncertainty of the future.

Christiansen and Joensen (2011) in his paper divulge the changing pattern of financial decision
making process due to marriage and separation in married life. It has been revealed in the study
that married female used to invest higher proportionate of their income in risky avenues like stock
which goes on decreasing after separation from their husband as they have to carry out all the
financial responsibilities on their own which reduces their risk taking capacity. On the contrary
male investment ratio in the risky portfolios increases after the separation as their responsibilities
reduces which left them with more money and higher risk appetite. The study also take into
consideration the comparative analysis between two set of financial investors. One being the
married and other single due to unmarried or divorce and studied that investment pattern and how
the behavioral characteristics regulate their investment pattern, avenues.

Singh and Shah (2021) carried on a study on finding the consciousness about the financial literacy
among women with special reference to Maharashtra. In the study it was discovered that working
women have more knowledge and awareness about various saving and investment avenues as
compared to non-working women. The working women are more independently taking the
financial decision and are active participants in family financial discussions also.

Vasagadekar (2014) has argued that in metropolitan cities women are more conscious towards
their career and even ready to hold the marriages for the same. Even the culture of adoption is also
on rise in this strata of unmarried women which is giving more growth to solo parenting. Due to
which it becomes a necessity for them to have financial independence to carry out the all the
responsibilities of them and the child. It also talked about the behavioral pattern of women while
taking investment decisions.

Sendilvelu and Shah, (2021) was of the view that majority of the sole parents were assured of their
investment patterns and had elementary understanding of it. However the major proportion of them
have preference for less risky investment avenues instead of high risky instruments though they
are fetching comparatively more return. The major reason behind it was that they don’t want to
lose any money as there is no another chance of reinvesting of the same amount in the present state
of affair.

Statman (2017) had emphasized on the behavioral portfolio theory to give a detailed picture of
wants and desire of the individuals and also their psychological and intellectual requirements. They
always look for the portfolios which is having maximum returns with minimum risk as given in
behavioral wheel but there is a barrier in the form of fragile self-discipline which make it taxing
to move in the right path of saving and spending.

Upadhyay (2019) study was confined to the city of Ahmedabad in which he studied the investors
and the reverberation of behavioural decisions. In this particular study he stressed on the need to
find out the thinking pattern of the people while investing in different investment instruments.

OBJECTIVES

1. To high point the demographic profile of solo parents in India.

2. To ascertain the various categories of investment done by solo parents in India

3. To analyze the impact of behavioral factor on investments done by solo parents in India.
4 To analyze the factors influencing the saving and investment decisions of solo parents in India.

SCOPE

The present study focuses on providing extensive and significantly comprehensive understanding
of impact of behavioral finance on solo parent’s investment decisions with special reference to
India. A very limited work has been done in the Indian scenario on above area. So keeping this
thing in mind, an effort has been made to evaluate the level of influence of behavioral finance on
investment pattern of single parents. This main aim of this study is to fill the gap in the Indian
context in relation to the above topic. It will take into consideration a very wide horizon in
connection to the subject of behavioral finance canopying all the important components of it.

HYPOTHESIS

1. H0: There is no relationship between behavioral factors - confidence level, risk appetite,
biasness and psychological accounting with investment proportion.
2. H0: There is no correlation between income level and investment proportion.
3. H0: There is no association between income level and risk appetite of solo parents.
4. H0: There is no association between age and psychological accounting

RESEARCH METHODOLOGY

The present study is based on empirical research so it make use of verifiable evidence in order to
arrive at outcomes. The research was able to give conclusion based on the cues and data which
were collected through convenience sampling method. The respondents for this particular study
are individuals residing in India. The 75 data was collected from the respondents through Google
form and out of which corrected 60 were used as a sample for the study. The Cronbach Alpha was
used to determine the reliability of the instrument. Confidence level (0.865), risk appetite (0.852),
biasness (0.728) psychological accounting (0.854) and investment proportion (0.732) each and
Cronbach Alpha score of 0.832. To investigate the impact of behavioral finance on solo parent’s
investment decisions descriptive statistics, correlation analysis and Kruskal-Wallis rank sum test
were used.

Table1

Descriptive Statistics

Categories Respondents Percentage (%)

21-30 15 25%
31-40 10 17%
Age 41-50 20 33%
Above 50 15 25%
Unmarried 25 41%
 Married 10 17%
Divorced 15 25%
Marital Status Separated but not divorced 10 17%
Graduate 18 30%
Post Graduate 31 52%
Education Professional 10 17%
Others 01 .01%
Less than 5 Lakhs 02 .03%
5 Lakhs- 10 Lakhs 21 35%
Income Level 10 Lakhs- 15 Lakhs 27 45%
More than 15 Lakhs 10 17%
Friends & relatives 18 30%
Websites & Print Media 09 15%
Sources of Investment Information Experts 15 25%
Self 18 30%
01 27 45%
02 32 54%
Number of Dependent Children 03 01 .01%
More than 03 00 00

Table 2: Descriptive Statistics

Mean Standard Deviation
Confidence Level 35.43 8.29
Risk Appetite 24.22 7.17
Biasness 24.92 9.79
Psychological Accounting 21.98 6.72
Investment Proportion 71.08 16.44

HYPOTHESIS TESTING:

1. H0: There is no relationship between behavioral factors - confidence level, risk appetite,
biasness, psychological accounting and Investment Proportion.
A Pearson correlation analysis was conducted between confidence level, risk appetite, biasness
psychological accounting and Investment Proportion. Cohen's standard was used to evaluate
the strength of the relationship, where coefficients between .10 and .29 represent a small effect
size, coefficients between .30 and .49 represent a moderate effect size, and coefficients above
.50 indicate a large effect size (Cohen, 1988).
Table 3: Result
 Combination N rp p-Value Significance Relationship
60 0.672 < .001 Significant Positive
Confidence level- Investment at < 0.01
level
Proportion
60 0.642 < .001 Significant Positive
Risk appetite - Investment at < 0.01
level
Proportion

60 0.724 < .001 Significant Positive

Biasness - Investment at < 0.01
level
Proportion

60 0.688 < .001 Significant Positive

Psychological accounting - at < 0.01
level
Investment Proportion

2. H0: There is no correlation between income level and investment proportion.

A Kruskal-Wallis rank sum test was conducted to assess if there were significant
differences in income level and investment proportion. The Kruskal-Wallis test is a non-
parametric alternative to the one-way ANOVA and does not share the ANOVA's
distributional assumptions (Conover & Iman, 1981).

Table 4: Result

Combination N Mean Rank χ2 df P

Less than 5 02 18.06 8.657 3 0.030
Lakhs
5 Lakhs- 10 21 28.39
Lakhs
10 Lakhs- 27 31.64
15 Lakhs
More than 10 22.00
15 Lakhs

Table 5

Dwass-Steel-Critchlow-Fligner Pairwise comparisons- investment proportion

W p
Less than 5 5 Lakhs- 10 Lakhs
2.31 0.476
Lakhs
 Less than 5 10 Lakhs- 15 Lakhs
2.305 0.269
Lakhs
Less than 5 More than 15 Lakhs
-0.739 0.834
Lakhs
5 Lakhs- 10 10 Lakhs- 15 Lakhs
2.954 0.037
Lakhs
5 Lakhs- 10 More than 15 Lakhs
-1.342 0.504
Lakhs
10 Lakhs- 15 More than 15 Lakhs
0.245 0.895
Lakhs

3 H0: There is no association between education level and risk appetite of solo parents.
Table 6: Result

Mean p
Income Level N χ2 df
Rank
Risk Graduate 18 22.03 7.44 3 0.030
Appetite Post Graduate 31 27.82
Professional 10 16.92
Others 01 12.08

Table: 7

Dwass-Steel-Critchlow-Fligner Pairwise comparisons- Education Level

W p
Graduate Post Graduate 2.42 0.562
Graduate Professional -2.39 0.034
Graduate Others 2.12 0.256
Post Graduate Professional 2.72 0.462
Post Graduate Others -2.89 0.234
Professional Others 2.52 0.226

4 H0: There is no association between age and psychological accounting

Table: 8

Age N Mean Rank χ2 df p

Psychological 21-30 15 20.03 8.42 3 0.040
Accounting 31-40 10 27.82
 41-50 20 27.92
Above 50 15 18.08

Table: 9

Dwass-Steel-Critchlow-Fligner Pairwise comparisons- Age

W P
21-30 31-40 2.82 0.562
21-30 41-50 2.39 0.034
21-30 Above 50 2.12 0.256
31-40 41-50 3.02 0.462
31-40 Above 50 1.89 0.234
41-50 Above 50 2.92 0.226

Pairwise comparisons were examined between different age group. The results of the multiple
comparisons indicated significant differences based on an alpha value of 0.05 between 31-40 and
41-50.

DISCUSSION OF FINDINGS:

 The present work take in to consideration the influence of behavioral finance on solo
parent’s investment decision in India. The data of 60 respondents were taken into
consideration for the present study. The hypothesis were formed and tested using
correlation analysis, Kruskal-Wallis rank sum test and later on the analysis were
discovered. A significant positive relationship exist between behavioral finance and
investment decisions of solo parents.
 A Kruskal-Wallis rank sum test was conducted to assess if there were significant
differences in between income level and investment proportion. The results of the Kruskal-
Wallis test were significant based on an alpha value of 0.05
 A Kruskal-Wallis rank sum test was conducted to assess if there were significant
differences between education level and risk appetite of solo parents. The results of the
Kruskal-Wallis test were significant based on an alpha value of 0.05
 Association between age and psychological accounting: The results of the Kruskal-Wallis
test were significant based on an alpha value of 0.05.

CONCLUSION
In India the decision on investment amount, avenues, duration all is taken into consideration on
the basis of self-understanding, information from relatives or friends, print and web media and
very less services of expertise are taken for it, which all result in poor or not up to the mark for
long term investment planning and execution of the same. This become more important for the
sole parents as they are wholly and solely responsible for each and every decisions. On their own
they have to carry out all the responsibilities so they have to be more cautious about the investment
decision as there should be a proper balance of risk and return. They have to give equal importance
to long term planning also along with short term. Individual investors are taken as logical and
normal, so they will be affected by various prejudices which will have impact on individual
investment decisions. Thus the impact of behavioral finance have to control especially in the case
of single parents.

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