Behavioral Approach of Young Professionals Towards Financial Investmentstowards

Topics: Investment, Finance, Personal finance Pages: 46 (12046 words) Published: June 25, 2012
Chapter 1: Research Problem
This chapter contains the main text of the paper and includes the following parts arranged according to prescribed order: Background of the Study, Statement of the Problem, Hypothesis, Conceptual Paradigm, Significance of the Study, Scope and Limitation of the Study, and Definition of Terms. Background of the Study

Today, young professionals are in crucial financial condition. They are trapped between supporting aging parents and or supporting their own family. For single professionals, the dilemma of how they will handle their own finances is high. With the newly gained freedom over their own income, the possibility of spending it the way they like it is endless. Indeed, being able to manage the increasing demands of multiple social roles becomes an important measure of maturity as young adults take on more responsibility for planning and living the lives they choose ( Ecdes,Templeton,Barber&Stone, 2003). There are several factors that affects the behavioral approach of young adults when it comes to financial planning. One of which is financial literacy. Previous research has found that financial literacy can have important implications to financial behavior. People with low financial literacy are more likely to have problems with debt (Lusardi and Tufano 2009), less likely to participate in the stock market (van Rooij, Lusardi, and Alessie 2007), less likely to choose mutual funds with lower fees (Hastings and Tejeda-Ashton 2008), less likely to accumulate wealth and manage wealth effectively (Stango and Zinman 2007; Hilgert, Hogarth, and Beverly 2003), and less likely to plan for retirement (Lusardi and Mitchell 2006, 2007a, 2009). Financial literacy is an important component of sound financial decision-making, and many young people wish they had more financial knowledge. This research paper entitled “Behavioral Attitude of Young Professionals towards Financial Investments” is conducted to identify the level of behavioral attitudes of the respondents. It also aims to state relationships between the respondent’s socio-demographic profile and behavioral attitude determinants. Statement of the Problem

The study aims to identify the level of behavioral attitude of young professional towards financial investments. Specifically, the study seeks to answer the following research questions: 1. What is the socio-demographic profile of the respondents in terms of: age

civil status
monthly income
2. What is the level of the behavioral attitudes of the respondents in terms of the following? a) Willingness to invest
b) Confidence to invest
c) Awareness of investments
d) Belief in investment
e) Capability to invest
f) Capacity to invest
3. Is there a relationship between socio-demographic variables and behavioral determinants in terms of willingness to invest, confidence to invest, awareness of investments, belief in investment, capability to invest and capacity to invest. Hypotheses

a. H₀: There is no relationship between socio-demographics of the respondents and behavioral attitudes. b. H₁: There is a relationship between socio-demographics of the respondents and behavioral attitudes.

Theoretical Framework
The concept of Behavioral Finance is relatively unexplored and vast area which makes it hard to make the guidelines clear. Theories underlying the research are presented. It begins with the definition of behavioral finance. Further, socio-demographic profile and its relevance to behavioral attitude towards investing are discussed.

Introduction to Behavioral Finance

Behavioral finance is a new paradigm of finance, which seeks to supplement the standard theories of finance by introducing behavioral aspects to the decision-making process. Behavioral finance deals with individuals and ways of gathering and using information. It seeks to understand and predict systematic financial market implications of psychological decision...
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