STUDY OF FACTORS AFFECTING FINANCIAL DECISION MAKING OF YOUNG INVESTORS IN JAIPUR CITY

Ms. Geeti Sharma 1 and Dr. Kavaldeep Dixit 2 . 1. Assistant Professor, International School of Informatics & Management, Jaipur. 2. Professor & Vice Principal, International School of Informatics & Management, Jaipur. ...................................................................................................................... Manuscript Info Abstract ......................... ........................................................................ Manuscript History

Financial environment has become more susceptible because of financial revolution and the increasing intricacy of financial markets. The need for making correct financial decisions at correct time is the requirement of the time today. This paper tried to identify the factors which impacted financial decision making of an individual. To determine the factors, the technique of factor analysis was applied. Six factors were identified which affect financial decision making of an individual. The extracted variables were tested using cronbac's alpha which signified construct validity of the factors affecting financial decision making.

…………………………………………………………………………………………………….... Introduction:-
Financial decision-making process is complex in nature and with the emergence and innovation of new financial products the complexity is increasing day by day. Financial decision making is important for populace from all age groups. The decision making process under risk and uncertainty creates considerable problems for individuals in the framework of a turmoil financial market. The factors and experiences that shape the individual financial decisionmaking process vary from person to person and develop over the life course. In today's scenario the need for individuals to be equipped with the skills and confidence to make sound financial decisions is arising from a young age because of a set of change in global, economic and social trends. The consequence of it is that individuals need to make more multifarious financial decisions and should presume greater responsibility for their personal finances. All across the boundaries a turnaround in government policies is perceptible. A risk shift pattern in bearing financial responsibility from the government side to the individual side is evident. With the rollback of retirement benefits from the government side and a trend of individual taking caring of all financial responsibility, the need for financial knowledge is increasing at a rapid stage.
Lack of knowledge and confidence with respect to financial aspects and money management impacts the ability of an individual to tap their financial potential. Individuals face the fear of being known as uninformed and uneducated if they ask questions concerning their finances. The need for financial knowledge has increased more with time on account of deregulation of financial markets and the quick availability of credit, the rapid growth in financial products and the Government's encouragement for its citizens to take more self-responsibility for their retirement. Martha Klatt (2009) talked about women's lack of knowledge and confidence with regard to money management and investment programs and how it impacted their ability to reach their financial potential. The paper examined the resources needed to provide women with financial information. Challenges faced by women were also reviewed and explored.
Werner F M De Bondit and Richard H Tholer (1995) talked about the psychology behind decision making and the need for it in behavioral finance. This paper discussed behavioral concepts and the relevance of these concepts in investment theory and corporate finance.
Denis J Hilton (2001) attempted to identify possible applications of experimental and organizational psychology to improve the efficiency of financial institutions. This paper suggested how knowledge can be used to improve efficiency in financial strategy, market and human resource management.
It is evident from past studies that more focus was given on the analysis and techniques used in financial decisions rather than on variables affecting financial matters of individuals.

Objective of the Study;-
To find out the major factors affecting financial decision making process of young investors in Jaipur city.

Research Methodology:-Population Frame:-
The population of the study was young investors in the age bracket of 25-35 years in Jaipur city.
Sample Size:-Considering time constraint 200 questionnaire were distributed out of which 149 were received duly filled. These respondents were selected randomly.
Sample Unit:-Sample of this study included young individuals managing their own business or involved in family business. Individuals working in private and government sector were also included.
Survey Instrument:-A questionnaire was designed and respondents were asked to give their preference on 5-point Likert Scale (Strongly Disagree was coded as 1 and Strongly Agree as 5). Questions on money management and factors influencing financial decision making were covered. The cronbach's alpha for the 16 variables of factors influencing financial decision making as shown in Table 1 is 0 .669. Hence, this allows the researcher to perform factor analysis for these 16 variables of financial decision making.

Reliability Measure:-
Before proceeding further in factor analysis, the test of appropriateness of factor analysis was done. For this the following hypothesis was formulated: Ho: The variables do not have any correlation in the population. Ha: The variables have significant correlation in the population. For this correlation matrix was constructed and the above hypothesis was tested using Kaiser-Meyer-Olkin (KMO) Statistics and Bartlet's Test of Sphericity.
The Kaiser-Meyer-Olkin (KMO) Measure for Sampling Adequacy was used to examine the appropriateness of factors analysis. As shown in Table 2, the KMO value for variables preferred by respondents as source of information is 0.723, which is nearer to 1.0. Hence, this value was acceptable and justified the suitability of factor analysis.
The Bartlett's test of sphericity is a statistical test for computing the existence of correlations among the variables. It is used to test the null hypothesis that whether the variables are uncorrelated in the population or not. This test provides the statistical significance that the correlation matrix has significant correlation among at least some of the variables. As, shown in Table 2, the Bartlett's test of sphericity value was less than 0.05 so alternative hypothesis was accepted. .000 Hence the null hypothesis that the variables were not correlated was rejected by both tests. Therefore factor analysis was appropriate technique for analyzing the correlation matrix.
Factor Analysis:-Factor Analysis identified a set of measurements i.e. not easily detected in a large set of variables. The analysis summed up a greater part of the information available in the data set into the form of fewer new groups known as factors. This technique helped in simplifying the set of large data, which could be interrelated causing multi 1254 collinearity, into small controllable number of factors (Refer Table 3), which were not inter related but still hold a good number of information available in the original data. The principal factor analysis was used for analyzing the factors from 16 variables. On applying the principal factor analysis technique, communalities were calculated and based on Eigen Value Method and percentage of variance method the factors were determined. In this way from factor analysis six factors were extracted that explains a total variance of 64.703.

Rotated Component Matrix:-
Rotation of the factor recovers interpretation by reducing some of the obscurities that often accompany initial unrotated factor solutions. For the study purpose, the orthogonal factor rotation method was applied. Table 4 shows the Rotated Component Matrix. This method of factor rotation reduced the number of variables with higher loadings on a factor, thereby enhancing the interpretability of factors and had proved gainful as an analytical approach to obtain an orthogonal rotation. From the rotated component matrix six factors were identified. The first factor identified was named as financial awareness, the second factor was named as willingness to acquire financial knowledge, financial background was identified as third factor, the fourth factor was named as financial confidence, and money management was identified as fifth factor and financial aspiration as sixth factor. The determinant factors were identified and named on the basis of previous studies. Table 5 shows composition of factors identified in Factor Analysis with their respective factor loading.  Interpretation: Reliability statistics of scales for the study were tested by using Cronbach's Alpha and results were found acceptable. It's evident from the Table 6 that all the extracted factors using factor analysis were acceptable values of cronbach's alpha which signified construct validity of the factor affecting financial decision making.

Limitations of the Study:-
Responses of individuals residing in Jaipur city were only covered. The data used for analysis was on the basis of response given by respondents, so the possibility of biasness could be there. A large scale study including individuals from different part of the country may provide a more representative of the population.

Conclusion and Recommendation for Future Studies:-
From the results of the present study, it is evident that financial awareness plays the most important role in financial decision making among young investors followed by their willingness to acquire financial knowledge, financial background, financial confidence, money management habits and financial aspirations. The research would be useful to different stratum of the society. The research could be useful in designing financial product. It would also be useful to market regulators. The paper possibly could be useful in building a personal financial planning model that all professionals and families can use in maximizing personal financial decisions. It is hoped that this study could help other researchers and the community to expand the knowledge in the area of behavioral finance.