Table of Contents

Chapter No. Contents Page No.

Preface i
Acknowledgements iv
Certificate by Guide vi
Declaration by Candidate vii
Pre-Synopsis Certificate viii
Thesis Approval Certificate ix
List of Tables xv
List of Figures xviii
List of Abbreviations xix

1 Introduction 1-8
1.1 Introduction 2
1.2 Rationale of the Study 5
1.3 Research Objectives 6
1.4 Significance and Potential Value 6
1.5 Outline of the Thesis 6

2 Traditional Approach for Stock Analysis 9 -28

2.1 Fundamental Analysis 10
2.1.1 Equity Valuation Model 10
2.1.2 Quantitative Analysis 12
2.2 Technical Analysis 26
2.3 Conclusion 28

3 Review of Literature 29 - 52
Investor’s Behaviour towards Equity
Market and its Impact on Stock Price
3.1 Is individual investor rational? 31
3.1.1 Mental Accounting 31

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 3.1.2 Overconfidence 32
3.1.3 Home Biases 33
3.1.4 Regret 34
3.1.5 Risk Attitude 35
3.2 Is the stock market efficient? 35
3.3 Behavioural Finance and Investor’s 37
Sentiment
3.3.1 Concept of Investor’s Sentiment 40
3.4 Asset Pricing and Investor’s Sentiment 40
3.5 Factors affecting individual investor’s 41
sentiment towards equity market
3.5.1 Market Specific Factors 41
3.5.1.1 Herd Behaviour 41
3.5.1.2 Internet Led Access to Information and 43
Trading
3.5.1.3 Best Game in Town Philosophy 43
3.5.1.4 Performance and Confidence level of 44
Institutional Investors
3.5.1.5 Risk and Cost Factors 44
3.5.1.6 Macro-Economic Factors 44
3.5.2 Stock Specific Factors 45
3.5.2.1 Recommendations of Financial Community 45
3.5.2.2 Psychological Factors 45
3.5.2.3 Who else is buying? 45
3.5.2.4 Financial Characteristics of Stock 46
3.5.2.5 Quality of Management 46
3.5.2.6 Past Price Performance and Sector 46
Attractiveness
3.5.2.7 Expected Events Surrounding the Stock and 47
Book Value
3.6 Different Models of Investor’s Sentiment 47

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 3.7 Conclusion 51

4 Research Methodology 53 - 83
4.1 Introduction 54
4.2 Statement of Problem 54
4.3 Objectives of the Study 55
4.4 Hypothesis 55
4.5 Research Design 58
4.5.1 Research Study 58
4.5.1.1 Exploratory Research 58
4.5.1.2 Descriptive Research 58
4.5.1.3 Causal Research 59
4.5.2 The Universe 59
4.5.3 Sampling Element 60
4.5.4 Sampling Frame 60
4.5.5 Sample 60
4.5.6 Sampling Technique 60
4.5.7 Sample Size 61
4.5.8 Method of Data Collection 61
4.5.9 Tools of Data Collection/Research 62
Instrument
4.5.10 Description of the Measurement Scale 63
4.5.11 Pilot Testing of Questionnaire 78
4.5.12 Coding the Questionnaire 78
4.5.13 Time Dimension of the Study 80
4.5.14 The Research Environment 80
4.5.15 Procedure of Research 80
4.5.15.1 Dependent Variables 81
4.5.15.2 Independent Variables 82
4.5.16 Data Analysis 82
4.5.17 Software used for Data Analysis 82
4.6 Conclusion 83

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5 Data Analysis and Interpretation 84 – 139
5.1 Introduction 85
5.2 Descriptive Analysis 85
5.3 Reliability and Normality of Data 87
5.4 Factor Analysis 88
5.4.1 Factor Analysis for Market Specific 89
Variables
5.4.1.1 Bartlett's Test of Sphericity 89
5.4.1.2 Measures of Sampling Adequacy (MSA) 90
5.4.1.3 Anti-Image Correlation Matrix for Market 90
Specific Variables
5.4.1.4 Method of Factor Analysis 93
5.4.1.5 Method of Factor Rotation 94
5.4.1.6 Communalities 95
5.4.1.7 Eigenvalue and Total Variance Explained 111
for Market Specific Variables
5.4.1.8 Factor Loading 113
5.4.1.9 Naming of Market Specific Factors 115
5.4.2 Factor Analysis for Stock Specific 118
Variables
5.4.2.1 Anti-Image Correlation Matrix for Stock 118
Specific Variables
5.4.2.2 Communalities Statistics for Stock Specific 122
Variables
5.4.2.3 Revised Total Variance Explained for Stock 126
Specific Variables
5.4.2.4 Naming of Stock Specific Factors 127
5.5 Multiple Regression Analysis 130
5.6 Risk Attitude 135
5.7 Conclusion 139

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6 Findings, Conclusion and Suggestions 140 - 150
6.1 Introduction 141
6.1.1 Findings based on Descriptive Analysis 141
6.1.2 Findings for Factor Analysis (Market 141
specific variables)
6.1.3 Findings of Regression Analysis (Impact of 142
M.S.F. on Individual Investor’s Optimism)
6.1.4 Findings for Factor Analysis (Stock 143
Specific Variables)
6.1.5 Findings of Regression Analysis (Impact of 144
S.S.F. on Individual Investor’s
Participation)
6.1.6 Findings of Regression Analysis (Impact of 145
M.S.F. and S.S.F. on the Investor’s Stock
Market Outlook)
6.1.7 Findings based on Risk Attitude 146
6.2 Conclusion, Implications of the Study and 147
Suggestions
6.3 Limitations of the Study 149
6.4 Future Scope of Research 150

Bibliography 151 – 165

Annexure 166 - 172

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 List of Tables
Table No. Contents Page
No.
Table 4.1 Description of the measurement scale 63
Table 4.2 Coding of Questionnaire 79
Table 5.1 Demographic profile of the Sample 85
Table 5.2 Cronbach’s alpha for the Market Specific Variables 87
Table 5.3 Cronbach’s alpha for the Stock Specific Variables 87
Table 5.4 KMO and Bartlett's Test of Sphericity for Market Specific 89
Variables
Table 5.5 Anti-Image Correlation Matrix for Market Specific Variables 91
Table 5.6 Communality Statistics for Market Specific Variables 96
Table 5.7 Communality Statistics for Market Specific Variables When A66 97
Variable is deleted
Table 5.8 Communality Statistics for Market Specific Variables When A13 98
Variable is deleted
Table 5.9 Communality Statistics for Market Specific Variables When A26 99
Variable is deleted
Table 5.10 Communality Statistics for Market Specific Variables When A14 100
Variable is deleted
Table 5.11 Communality Statistics for Market Specific Variables When A42 101
Variable is deleted
Table 5.12 Communality Statistics for Market Specific Variables When A39 102
Variable is deleted
Table 5.13 Communality Statistics for Market Specific Variables When A11 103
Variable is deleted
Table 5.14 Communality Statistics for Market Specific Variables When A32 104
Variable is deleted
Table 5.15 Communality Statistics for Market Specific Variables When A18 105
Variable is deleted

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Table 5.16 Communality Statistics for Market Specific Variables When A27 106
Variable is deleted
Table 5.17 Communality Statistics for Market Specific Variables When A38 107
Variable is deleted
Table 5.18 Communality Statistics for Market Specific Variables When A35 108
Variable is deleted
Table 5.19 Communality Statistics for Market Specific Variables When A23 108
Variable is deleted
Table 5.20 KMO and Bartlett's Test for Market Specific Factors after deleting 109
Variables
Table 5.21 Revised Anti-image Matrices for Market Specific Variables 110
Table 5.22 Communality Statistics for Market Specific Variables after 111
Deleting Variables
Table 5.23 Total Variance Explained for Market Specific Variables 113
Table 5.24 Guidelines for Identifying Significant Factor Loadings based on 114
Sample Size
Table 5.25 Rotated Component Matrix for Market Specific Variables 115
Table 5.26 Factor wise Reliability statistics of Market Specific Variables 117
Table 5.27 KMO and Bartlett's Test for Stock Specific Variables 118
Table 5.28 Anti-Image Correlation Matrix for Stock Specific Variables 119
Table 5.29 Communalities Statistics for Stock Specific Variables 122
Table 5.30 Revised KMO and Barkett’s Test for Stock Specific Variables 123
Table 5.31 Revised Anti Image Matrix for Stock Specific Variables 124
Table 5.32 Revised Communality Statistics for Stock Specific Variables 125
Table 5.33 Revised Total Variance Explained for Stock Specific Variables 126
Table 5.34 Revised Rotated Component Matrix for Stock Specific Variables 127
Table 5.35 Factor wise Reliability statistics of Stock Specific Variables 129
Table 5.36 Investor’s Optimism 130
Table 5.37 Model Summary of Multiple Regression Analysis for Dependent 130
Variable Individual Investor’s Optimism
Table 5.38 ANOVA result of Model fit for Individual Investor’s Optimism 130

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Table 5.39 Multiple Regression Analysis result for Dependent Variable 131
Individual Investor’s Optimism
Table 5.40 Investor’s Participation 132
Table 5.41 Model Summary of Multiple Regression Analysis for Dependent 132
Variable Individual Investor’s Participation
Table 5.42 ANOVA (Model Fit for Individual Investor’s Participation) 132
Table 5.43 Multiple Regression Analysis result for Dependent Variable 133
Individual Investor’s Participation
Table 5.44 Stock Market Outlook 134
Table 5.45 Model Summary of Multiple Regression Analysis for Dependent 134
Variable Individual Investor’s Stock Market Outlook
Table 5.46 ANOVA (Model Fit for Individual Investor’s Stock Market 134
Outlook)
Table 5.47 Multiple Regression Analysis result for Dependent Variable 135
Individual Investor’s Stock Market Outlook
Table 5.48 Q. No. 16 - Frequency Analysis of Risk Attitude under Loss 136
Making Situation
Table 5.49 Q. No. 17 - Frequency Analysis of Risk Attitude under Profit 136
Making Situation
Table 5.50 Q. No. 18 - Frequency Analysis to check Mental Accounting in 137
Stock Market context under the given condition
Table 5.51 Q. No. 19 - Frequency Analysis to check Mental Accounting in 137
Stock Market context under the given condition
Table 5.52 Q. No. 20 - Frequency Analysis to confirm existence of Mental 138
Accounting under the given condition
Table 5.53 Q. No. 21 - Frequency Analysis to confirm existence of Mental 138
Accounting under the given condition

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 List of Figures

Figure No. Contents Page

No.
Figure 3.1 Model of Investor’s sentiment By Daniel et al. (1998) 47
Figure 3.2 Model of Investor’s sentiment By Barberis et al. (1998) 48
Figure 3.3 Model of Investor’s sentiment by Robert J Shiller (1999) 49
Figure 3.4 Model of Investors’ Sentiment by Vandana Singhvi (2001) 50
Figure 3.5 Model of Investor’s sentiment by Baker and Wurgler (2007) 51

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 LIST OF ABBREVIATIONS

ABBREVIATION DESCRIPTION

GDP Gross Domestic Product

GNP Gross National Product
FII Foreign Institutional Investor
FDI Foreign Direct Investment
CEO Chief Executive Officer
ANOVA Analysis of Variance
DF Degree of Freedom
VIF Variance Inflation Factor
P/E Ratio Price to Earning per Share Ratio

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