A study on Investors Preferences towards various investment avenues in Capital Market with special reference to Derivatives. by
Dr. K. RAVICHANDRAN, READER,
Bharathidasan Institute of Management, (School of Excellence of Bharathidasan University), Tiruchirapalli.
In India, generally all capital market investment avenues are perceived to be risky by the investors. But the younger generation investors are willing to invest in capital market instruments and that too very highly in Derivatives segment. Even though the knowledge to the investors in the Derivative segment is not adequate, they tend to take decisions with the help of the brokers or through their friends and were trying to invest in this market. This study was undertaken to find out the awareness level of various capital market instruments and also to find out their risk preference in various segments.
Need for the study:
To educate investors who are risk averse for trade in derivatives Awareness about the various uses of derivatives can help investors to reduce the risk and minimize the losses
REVIEW OF LITERATURE
“Investment property portfolio management and financial derivatives” by Patrick McAllister, John R. Mansfield. His study on Derivatives has been an expanding and controversial feature of the financial markets since the late 1980s. They are used by a wide range of manufacturers and investors to manage risk. This paper analyses the role and potential of financial derivatives investment property portfolio management. The limitations and problems of direct investment in commercial property are briefly discussed and the main principles and types of derivatives are analysed and explained. The potential of financial derivatives to mitigate many of the problems associated with direct property investment is examined.
“Derivatives, risk and regulation: chaos or confidence?” by R. Dixon, R.K. Bhandari said that there has been an extraordinary increase in the use of financial derivatives in the capital markets. Consequently derivative instruments can have a significant impact on financial institutions, individual investors and even national economies. This relatively recent change in the status of derivatives has led to calls for regulation. Using derivatives to hedge against risk carries in itself a new risk was brought sharply into focus by the collapse of Barings Bank in 1995. The principal concerns of regulators about how legislation may meet those concerns are the subject of current debate between the finance industry and the regulators. Recommendations have been made and reviewed by some of the key players in the capital markets at national and global levels. There is a clear call for international harmonization and its recognition by both traders and regulators. There are calls also for a new international body to be set up to ensure that derivatives, while remaining an effective tool of risk management, carry a minimum risk to investors, institutions and national/global economies. Having reviewed derivatives and how they work, proceeds to examine regulation. Finds that calls for regulation through increased legislation are not universally welcome, whereas the regulators’ main concern is that the stability of international markets could be severely undermined without greater regulation. Considers the expanding role of banks and securities houses in the light of their sharp reactions to increases in interest rates and the effect their presence in the derivatives market may have on market volatility. Includes the reaction of some 30 dealers and users to the recommendations of the G-30 report and looks at some key factors in overcoming potential market volatility. “Management's disclosure of hedging activity: An empirical investigation of analysts and investors reactions” by JenniferReynolds-Moehrle. This study aims to examine how market participants changed the way they process earnings information after learning of the...
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