Informed Investors and Their Risk Propensity in Capital Markets

Abstract

This paper analyses the investors’ tendency to take risk in capital market investments after acquiring information through various sources. Perceived risk increases both the amount of information search and transaction frequency while it lowers the proportion of assets invested. Risk propensity, on the other hand, increases the likelihood of obtaining investment advice from professionals, as well as the proportion of assets invested in various investment avenues. The results revealed that there is significant difference between demographic factors and sources of fund for investment taking into consideration the two difference sources were their own savings and borrowed funds. The empirical result using chi-square test explored that there is a strong association between the risk bearing capacity of the investors and the sources of fund for their investments. It is concluded that every investor is expecting overall high return from their investment, irrespective of their age and position and their percentage of risk bearing capacity varies based on various factors.