Article

Financial Literacy Level and Management and Labour Studies

38(3) 241–253
Awareness Regarding Stock Market © 2013 XLRI Jamshedpur, School of
Business Management
& Human Resources
An Empirical Study of Individual SAGE Publications
Stock Investors of Punjab Los Angeles, London,
New Delhi, Singapore,
Washington DC
DOI: 10.1177/0258042X13509742
http://mls.sagepub.com

Sangeeta Arora
Kanika Marwaha

Abstract
The article is an exploratory attempt to have an insight towards awareness of stock market investments
and the financial literacy level of the individual stock investors. Additionally, the study gauges if there is any
significant difference in the financial literacy of the respondents regarding stock market traits across the
demographics, that is, age, income, occupation and qualification. A pre-tested, well structured questionnaire
was administered personally to 100 individual stock investors in Punjab and their responses were sought in
terms of frequencies, percentages and weighted average scores. Chi-square test has been applied to test the
differences in the financial literacy regarding stock market traits across demographics. Equity has been found
as the highly aware investment. The investment in Mutual funds is amongst the moderate level of awareness.
The slightest level of awareness is found among investors for ULIP’s and SIP’s and the investments, that is,
Bonds, Derivatives/Futures/Options/ Swaps, Commodities and Debentures are among unaware investments.
Stock investors in Punjab have highest level of knowledge regarding Benefits of diversification, Shares closing
price, Current Market indices (NSE/BSE), Inflation and return. Technical analysis and market efficiency,
Transaction costs, Mutual fund returns, Inflation and prices, Common Stock returns, P/E ratio and EPS,
Mutual fund and market risks are the stock market traits regarding which investors have a moderate level
of knowledge. Investors have slightest and least level of knowledge regarding Settlement period, Stock
split, Interest rates on debentures/bonds and Bonds. The understanding of the literacy level will provide
implications to financial service providers on how to enhance the knowledge of individual investors and help
them find suitable investments for their portfolio and guide them towards right direction.

Keywords
Individual stock investors, financial literacy, stock market traits, weighted average scores, chi-square
statistic

Introduction
Financial literacy is the ability to understand finance. Financial literacy or financial education can broadly
be defined as ‘providing familiarity with and understanding of financial market products, especially

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

242 Sangeeta Arora and Kanika Marwaha

rewards and risks, in order making informed choices’. In countries with diverse social and economic
profiles like India, financial literacy is particularly relevant for people who are resource-poor and who
operate at the margin and are vulnerable to persistent downward financial pressures (Seth et al., 2010).
More specifically, financial literacy refers to the set of skills and knowledge that allows an individual
to make informed and effective decisions through their understanding of finances. Financial literacy is
mainly used in connection with personal finance matters. It often entails the knowledge of properly mak-
ing decisions pertaining to certain personal finance areas like real estate, insurance, investing, saving, tax
planning and retirement and involves intimate knowledge of financial concepts like compound interest,
financial planning, the mechanics of a credit card, advantageous savings methods, consumer rights, time
value of money, etc. (Thilakam, 2012).
Individuals making investing decisions face a daunting task (Ackert and Church, 2006). Today, the
financial services and the economic sector are highly diversified than ever. This diversification implies
that the individual investors have a wider range of investment instruments to invest in and there is much
greater choice for them on how to invest their money (Warren et al., 1990). In this context of increasing
role and complexity, any lack of awareness about the available choices and their characteristics and the
consequent inability to choose products optimally, could significantly affect individuals’ financial out-
comes (Aggarwal et al., 2012). Individuals’ financial well-being is incumbent on their actions. Although
influenced by external forces such as economic factors and policy structures adopted by government and
private industry, decisions are ultimately made by individuals. Understanding the relationship between
knowledge of personal financial issues and corresponding financial behaviour is increasingly recognized
as an area of critical financial importance.1
The growing complexity of financial products over the past decade, coupled with financial innovations
and the increasing transfer of financial risks to households, have put enormous pressure and responsibilities
on the shoulders of financial investors. Financial services are becoming freely accessible, but they are
increasingly complex. The market offers the consumers myriad of products with intricate features and
services, which leave many people ill equipped to cope up with the sophisticated financial needs. The
economies around the world have increasingly considered financial literacy as a key pillar for the
development of financial system of a country. Creating financial literacy can play a critical role in
equipping the consumers with the information, fundamental knowledge and skills to evaluate their
options and enables them to understand the implications of alternative financial decisions (Jariwala and
Sharma, 2011).
Financial literacy has in recent years gained the interest of various groups including governments,
bankers, employers, community interest groups, financial markets and other organizations, especially in
developed countries. The importance of improving financial literacy has increased due to factors includ-
ing the development of new financial products, the complexity of financial markets and the changes in
political, demographic and economic factors (Al-Tamimi and Kalli, 2009).

Literature Review
Chen and Volpe (1998) studied the relationship between financial literacy and student characteristics and
the impact of literacy on the students’ opinions and decisions. The authors surveyed the financial literacy

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

Financial Literacy Level and Awareness Regarding Stock Market 243

level of 924 college students of USA. 53 per cent of the questions were answered correctly. Cross
Tabulation and chi-square test were used to determine if any difference existed between the two groups,
that is, less knowledge groups and more knowledge groups regarding their opinions and decisions. Less
knowledgeable students were found to have wrong opinions and incorrect decisions.
Chen and Volpe (2002) studied gender differences regarding the personal financial literacy level among
college students. The questionnaire was sent to 1800 students from 14 colleges in USA. 924 useable
responses were used, with 51 per cent response rate. The study constituted of 44 per cent male and 56 per
cent female. It was found that education and experience have a significant impact on the financial literacy
of both men and women. Women were found to have less knowledge about personal financial topics and
were found to have less enthusiasm and less willingness to learn about personal finance topics than men do.
Al-Tamimi and Kalli (2009) focused on identifying the relationship between financial literacy and
investment decisions of UAE individual investors. A modified questionnaire was employed by the
researchers from that used by the Al-Tamimi (2006) and by the Monetary Authority of Singapore (2005).
Logistic regression was applied to measure the effect of the demographic/independent variables on the
financial literacy. The results revealed a partial positive relationship between demographic and financial
literacy. However, ANOVA was applied to determine significant difference between the financial liter-
acy and demographic variables. It was concluded that there was no significant difference in financial
literacy on the basis of their age, employment and monthly income but there was a significant difference
between financial literacy on the basis of gender, work activity and education level. The second part of
the study determined 37 factors affecting the investment decisions using a 5 point likert scale. The third
part identified the relationship between financial literacy level and the investment factors. The results
revealed that financial literacy had a negative effect on all factors categorized in five categories, with the
exception to the accounting information category.
Sabri et al. (2010) investigated the impact of personal and family background, academic experiences
and childhood consumer experiences on the financial literacy level of college students in Malaysia. The
sample of the study includes 2519 students from 11 public and private colleges. Less than half of
the questions were answered correctly by the students. Bivariate t-test, ANOVA and multiple regression
analysis were used for analysis purpose. The authors concluded that children who live in campuses and
attend private colleges are less likely to be financially literate.
Seth et al. (2010) assessed the literacy level of the people residing in Delhi and National Capital
Region (NCR) who were found to invest in different instruments like stock market, post office savings,
Mutual funds, life insurance, etc. The study focused on finding if any relationship existed between finan-
cial literacy and demographic variables, that is, age, income, education and also the most preferred
investments along with sources of information followed by them. It was found that no relationship
existed between financial literacy across age and education. However, there was found a relationship
between financial literacy and income. Respondents were found to rely more on advertisements on T.V.,
newspaper, magazines to know about financial products followed by advice from friends. It was found
that people considered Life Insurance as most effective instrument followed by fixed deposit.
Robb and Woodyard (2011) examined the relationship between personal financial knowledge; finan-
cial satisfaction and selected demographic variables in terms of best practice financial behaviour. A
sample of 1488 participants was analyzed using multiple regression analysis. Data was taken from the
Financial Industry Regulatory Authority (FINRA). It was found that both objective and subjective finan-
cial knowledge influence financial behaviour, with subjective knowledge having a larger relative impact.

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

244 Sangeeta Arora and Kanika Marwaha

Other variables that have a significant impact on financial behaviour include financial satisfaction,
income, education, age, race and ethnicity.
Nidar and Bestari (2012) studied the personal financial literacy level of the university students of
Padjadjaran. Data was collected with the help of questionnaire from 400 active students using stratified
random sampling. Logistic regression was used to analyze the data. The literacy level of students was
found to be 42.1 per cent. Knowledge of parents, pocket money/income, education level, faculty, parent
income and property insurance were found as major factors having significant influence on the financial
literacy of the students. It was concluded that the level of literacy of the students was within low category
and therefore needed to be improved especially in the areas of investment, credit and insurance.
Thilakam (2012) explored the literacy level of the people of Coimbatore district, Tamil Nadu. The
author analyzed the responses of Indian rural household’s level of awareness towards saving modes and
investment avenues. Further, he evaluated the influence of various factors that determine their savings
and investment followed by perception towards financial service availability in rural areas. Weighted
average scores, Chi-square test, Pearson’s correlation and Factor analysis was used to analyze the data.
Under the aspect of safe risk investment avenues, the savings accounts, bank fixed deposits, pubic
provident fund, national savings certificate have secured the I, II, III, IV ranks. Under moderate risk
investment avenues, the products of life insurance, mutual funds, debentures, bonds have secured the
I, II, III, IV ranks. Under high risk investment avenues, equity share market, commodity market and
forex market have secured the I, II, III ranks. Under the traditional investment avenues gold, silver, real
estate and chit funds have secured the I, II, III ranks. The safety of money, high liquidity, regular returns,
long term benefits, higher return factors have secured the I, II, III, IV and V ranks. The authors concluded
that the government should literate rural people financially through camps, seminars and conference,
then only the rural masses can make their investment in an efficient manner.

Need and Objective of the Study

The need for the study arises, as in Punjab; the research focusing on identifying the financial literacy
level of the individual stock investors regarding stock market on the basis of various traits has not been
studied so far. This study assesses the financial literacy of the individual stock investors of Punjab who
invest in the local financial markets. So, the present study aims to fulfil the gap with following objectives:

• To identify the ranking for the awareness of various investment options in stock market.
• To identify the financial literacy level of individual stock investors towards stock market traits.
• To explore if there is any significant difference in the financial literacy of the respondents regard-
ing stock market traits across the demographics, that is, age, income, occupation, qualification.

Database and Research Methodology

The present study is mainly based on primary data collected from 100 individual stock market investors
from Punjab. These investors were interviewed through a pre-tested, well structured questionnaire which

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

Financial Literacy Level and Awareness Regarding Stock Market 245

was administered personally. Convenience sampling technique has been used keeping in view the socio-
economic characteristics. The responses of the investors were sought for identifying the ranking for
awareness of the major stock market investment options on a scale ranging from Most Aware to Unaware.
Further, the financial knowledge of individual investors is identified on a scale ranging from Strongly
Agree to Strongly Disagree and relationship between demographic variables and financial literacy level
of investors has also been analyzed. To analyze the responses, weights were assigned to these responses
(5 for Most Aware/ Strongly Agree, 4 for Aware/Agree, 3 for Indifferent, 2 for Least Aware/Disagree and
1 for Unaware/Strongly Disagree). Weighted Average Scores and chi-square test are the statistical
analysis used to carry out results.

Awareness of Stock Market Investment Options

This section deals with identifying the awareness for the various investment alternatives available to
individual investors in the stock market. The responses were sought for five major stock market invest-
ment options on a five point likert scale ranging from Most Aware to Least Aware. To analyze these
responses, weights were assigned to these responses (5 for Most Aware, 4 for Aware, 3 for Neutral, 2 for
Least Aware and 1 for Unaware). A description of these in terms of frequencies, percentages, values,
weighted average scores is given in Table 1. Ranks have been assigned according to the importance of
awareness level of the investment by the respondents as per their respective weighted average scores
(WAS).
Table 1 reveals the most to least aware investment by individual stock investors in Punjab as per their
weighted average scores. The ranking of the various investment options is analyzed in Table 2 revealing
that the stock investors in Punjab place equity as their highly aware investment. The investment in
mutual funds is amongst the moderate level of awareness. The slightest level of awareness is found
among investors for ULIP’s and SIP’s. The investors are unaware about investments such as, Bonds,
Derivatives/Futures/Options/Swaps, Commodities and Debentures.

Table 1. Weighted Average Scores for Awareness of Stock Market Investments

Investment Most Aware Aware Neutral Least Aware Unaware

Options (Freq.) (Freq.) (Freq.) (Freq.) (Freq.) WAS
Equity 58 33 8 1 0 4.48
Bonds 0 0 0 11 89 1.11
Mutual Funds 10 50 27 11 2 3.55
Derivatives/Futures/ 2 7 14 26 51 1.83
Options/Swaps
Commodities 0 0 0 1 91 1.01
ULIP’s 0 16 41 28 15 2.58
SIP’s 0 8 34 38 20 2.30
Debentures 0 0 0 10 90 1.10
Source: Data collected through questionnaire (primary source).
Notes: ULIP’s—Unit Linked Insurance Plans, SIP’s—Systematic Investment Plans.

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

246 Sangeeta Arora and Kanika Marwaha

Table 2. Ranking of the Investment Options

Average Score Significance Level of Awareness Investment Options

4.00–5.00 Highest Equity
3.00–3.99 Moderate Mutual Funds
2.00–2.99 Slightest ULIP’s, SIP’s
1.00–1.99 Lowest Bonds, Derivatives/Futures/Options/
Swaps, Commodities, Debentures
Source: Arora and Sandhu (2011).

Financial Literacy Level of Individual Stock Investors

This section of the study identifies the financial literacy level of the individual stock investors regarding
the various stock market traits/variables. Weights have been allocated to the responses ranging from
Strongly Agree to Strongly Disagree (5 for Strongly Agree, 4 for Agree, 3 for Indifferent, 2 for Disagree
and 1 for Strongly Disagree). A description of these variables in terms of frequencies, percentages,
values, weighted average scores and standard deviation is interpreted in Table 3. However, ranks have
been assigned according to the level of knowledge of each variable to the respondents as per the weighted
average score of each variable.

Table 3. Level of Knowledge of Stock Market Traits to Judge Literacy Level

Stock Market SA A ID DA SDA Std.

Traits/Variables (Freq.) (Freq.) (Freq.) (Freq.) (Freq.) WAS Deviation
Benefits of 56 38 3 3 0 4.47 0.703
diversification
Shares closing price 32 45 18 4 1 4.03 0.870
Technical analysis and 8 33 33 21 5 3.18 1.019
market efficiency
Current Market 34 50 11 4 1 4.12 0.832
indices (NSE/BSE)
Interest rates on 3 20 19 38 20 1.48 1.114
debentures/bonds
Transaction costs 27 49 14 5 5 3.88 1.028
Mutual fund returns 9 42 29 14 6 3.34 1.027
Inflation and return 32 48 10 8 2 4.00 0.964
Settlement period 13 21 19 32 15 2.85 1.282
Stock split 2 21 44 21 12 2.80 0.974
Inflation and prices 10 25 33 20 12 3.01 1.159
Bonds 5 19 26 35 15 1.64 1.106
Common Stock 13 59 16 11 1 3.72 0.866
returns
P/E ratio and EPS 5 34 37 21 3 3.17 0.922
Mutual fund and 13 53 23 11 0 3.68 0.839
market risks
Source: Data collected through questionnaire (primary source).

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

Financial Literacy Level and Awareness Regarding Stock Market 247

Table 4. Ranking of the Knowledge of Stock Market Traits

Average Significance Level

Score of Knowledge Stock Market Traits
4.00–5.00 Highest Benefits of diversification, Shares closing price, Current
Market indices (NSE/BSE), Inflation and return
3.00–3.99 Moderate Technical analysis and market efficiency, Transaction costs,
Mutual fund returns, Inflation and prices, Common Stock
returns, P/E ratio and EPS, Mutual fund and market risks
2.00–2.99 Slightest Settlement period, Stock split
1.00–1.99 Lowest Interest rates on debentures/bonds, Bonds

The ranking of stock market traits is analyzed in Table 4 revealing that the stock investors in Punjab
have highest level of knowledge regarding Benefits of diversification, Shares closing price, Current
Market indices (NSE/BSE), Inflation and return. Technical analysis and market efficiency, Transaction
costs, Mutual fund returns, Inflation and prices, Common Stock returns, P/E ratio and EPS, Mutual fund
and market risks are the stock market traits regarding which investors have moderate level of knowledge.
Investors have slightest and least level of knowledge regarding Settlement period, Stock split, Interest
rates on debentures/bonds and Bonds.

Differences in Financial Literacy Level Across Demographics

The study also explores whether there is any significant difference in the financial literacy of respond-
ents across the demographics, that is, age, gender, income, occupation and qualification. That is, to
explore in-depth whether these demographic variables exert significant impact towards the literacy level
of various stock market traits, chi-square test has been applied.
So, the hypothesis to be tested here is:

H01: There is no significant difference in financial literacy across the age groups of the investors.
H02: There is no significant difference in financial literacy across the income groups of the investors.
H03: There is no significant difference in financial literacy on the basis of qualification of the inves-
tors.
H04: There is no significant difference in financial literacy on the basis of occupation of the investors.

The chi-square statistic is applied to the data and tested at 1 per cent, 5 per cent and 10 per cent
confidence level. The present study segments the sample respondents into four classes according to their
age. These are categorized as—(i) Upto 30 years (ii) 30 to 45 years (iii) 45 to 60 years (iv) above 60
years. The results achieved in Table 5 reveal that there is a significant difference in the literacy level of
the individual stock investors across age groups for four stock market traits, that is, Technical analysis
and market efficiency, Mutual fund returns, Bonds, Settlement period which means hypothesis H01 stands
rejected for these four traits. On the other hand, for traits: Benefits of diversification, Shares
closing price, Current Market indices (NSE/BSE), Interest rates on debentures/bonds, Transaction costs,

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

248 Sangeeta Arora and Kanika Marwaha

Inflation and return, Stock split, Inflation and prices, Common Stock returns, P/E ratio and EPS;
hypothesis is accepted revealing that there is no significant difference in literacy level across the age
groups for these traits. Income groups for the purpose of investigation have been classified into four
groups as follows (i) Low or Average Income group—Less than 20000 p.m. (ii) Middle Low Income
Group—21000–30000 p.m. (iii) Middle High Income Group—31000–40000 p.m. (iv) High Income
group—41000–50000 p.m. Table 5 shows that there is significant difference in the financial literacy
level of the individual stock investors across the income groups for five traits: Technical analysis and
market efficiency, Transaction costs, Mutual fund returns, Settlement period, Common Stock returns,
thus hypothesis H02 stands rejected for these five traits. On the other hand, for the traits: Benefits of
diversification, Shares closing price, Current Market indices (NSE/BSE), Interest rates on debentures/
bonds, Inflation and return, Stock split, Inflation and prices, Bonds, Mutual fund and market risks, P/E
ratio and EPS; hypothesis is accepted revealing that there is no significant difference in literacy level
across the income groups for these traits.

Table 5. Difference in Financial Literacy Level across Age Groups and Income Groups

Stock Market Age Income

Traits/Variables Chi-square Statistic Null Hypothesis Chi-square Statistic Null Hypothesis
Benefits of p = 7.917 Accepted p = 8.209 Accepted
diversification df = 9 df = 9
Sig. = 0.543 Sig.= 0.513
Shares closing price p = 13.461 Accepted p = 12.107 Accepted
df = 12 df = 12
Sig. = 0.336 Sig. = 0.437
Technical analysis p = 21.531 Rejected p = 19.033 Rejected
and market efficiency df = 12 df = 12
Sig. = 0.043 Sig. = 0.088
Current market p = 16.713 Accepted p = 12.010 Accepted
indices (NSE/BSE) df = 12 df = 12
Sig. = 0.161 Sig. = 0.445
Interest rates on p = 15.929 Accepted p = 13.273 Accepted
debentures/bonds df = 12 df = 12
Sig. = 0.195 Sig. = 0.350
Transaction costs p = 15.372 Accepted p = 25.324 Rejected
df = 12 df = 12
Sig. = 0.195 Sig. = 0.013
Mutual fund returns p = 31.594 Rejected p = 20.708 Rejected
df = 12 df = 12
Sig. = 0.002 Sig. = 0.055
Inflation and return p = 12.749 Accepted p = 14.852 Accepted
df = 12 df = 12
Sig. = 0.388 Sig. = 0.250
(Table 5 continued)

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

Financial Literacy Level and Awareness Regarding Stock Market 249

(Table 5 continued)

Stock Market Age Income

Traits/Variables Chi-square Statistic Null Hypothesis Chi-square Statistic Null Hypothesis
Settlement period p = 18.759 Rejected p = 24.869 Rejected
df = 12 df = 12
Sig. = 0.095 Sig. = 0.015
Stock split p = 10.863 Accepted p = 13.030 Accepted
df = 12 df = 12
Sig. = 0.541 Sig. = 0.250
Inflation and prices p = 5.432 Accepted p = 17.072 Accepted
df = 12 df = 12
Sig. = 0.942 Sig. = 0.147
Bonds p = 24.982 Rejected p = 24.982 Accepted
df = 12 df = 12
Sig. = 0.015 Sig. = 0.015
Common Stock p = 15.235 Accepted p = 15.235 Rejected
returns df = 12 df = 12
Sig. = 0.229 Sig. = 0.229
P/E ratio and EPS p = 7.361 Accepted p = 7.361 Accepted
df = 12 df = 12
Sig. = 0.883 Sig. = 0.833
Mutual fund and market p = 8.560 Accepted p = 8.560 Accepted
risks df = 9 df = 9
Sig. = 0.479 Sig. = 0.479
Source: Results achieved through application of Chi-square test on the data collected through questionnaires.
Notes: Significant (p < 0.10), ** Significant (p < 0.05), *** Significant (p < 0.01)

Educational qualification is one of the other major variables influencing financial literacy. Table 6
reveals the literacy level according to education profile of the individual stock investors. The present
study segments the sample respondents into four classes according to their education profile. These are
categorized as—(i) Undergraduates; (ii) Graduates; (iii) Post graduates; and (iv) others. Table 6 shows
that there is significant difference in the financial literacy level of the individual stock investors across
the qualification for four traits, that is, Shares closing price, Technical analysis and market efficiency,
Current Market indices (NSE/BSE), Stock split, thus hypothesis H03 stands rejected for these four traits.
On the other hand, for the traits, that is, Benefits of diversification, Interest rates on debentures/
bonds, Transaction costs, Mutual fund returns, Inflation and return, Settlement period, Inflation and
prices, Bonds, Common Stock returns, P/E ratio and EPS, Mutual fund and market risks; Hypothesis is
accepted revealing that there is no significant difference in literacy level across the educational groups
for these traits.
The present study segments the sample respondents into three classes according to their occupation,
that is, (i) salaried; (ii) businessman; and (iii) others. Significant difference is found in the financial lit-
eracy level of the individual stock investors across the occupational groups for two traits that is, Mutual
Fund returns and P/E ratio and EPS, thus hypothesis H04 stands rejected for these two traits. On the other

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

250 Sangeeta Arora and Kanika Marwaha

Table 6. Difference in Financial Literacy Level across Qualification and Occupation

Stock Market Occupation Qualification

Traits/Variables Chi-square Statistic Null Hypothesis Chi-square Statistic Null Hypothesis
Benefits of p = 0.772 Accepted p = 9.505 Accepted
diversification df = 3 df = 9
Sig.=0.856 Sig.=0.392
Shares closing price p = 5.611 Accepted p = 22.925 Rejected
df = 4 df = 12
Sig. = 0.230 Sig. = 0.028
Technical analysis and p = 1.293 Accepted p = 21.340 Rejected
market efficiency df = 4 df = 12
Sig. = 0.863 Sig. = 0.046
Current market p = 1.641 Accepted p = 24.292 Rejected
indices (NSE/BSE) df = 4 df = 12
Sig. = 0.801 Sig. = 0.018
Interest rates on p = 4.821 Accepted p = 6.671 Accepted
debentures/bonds df = 4 df = 12
Sig. = 0.306 Sig. = 0.879
Transaction costs p = 6.564 Accepted p = 8.899 Accepted
df = 4 df = 12
Sig. = 0.161 Sig. = 0.711
Mutual fund returns p = 8.563 Rejected p = 3.325 Accepted
df = 4 df = 12
Sig. = 0.073 Sig. = 0.993
Inflation and return p = 1.108 Accepted p = 11.473 Accepted
df = 4 df = 12
Sig. = 0.893 Sig. = 0.489
Settlement period p = 4.196 Accepted p = 17.217 Accepted
df = 4 df = 12
Sig. = 0.380 Sig. = 0.142
Stock split p = 7.714 Accepted p = 9.165 Rejected
df = 4 df = 12
Sig. = 0.103 Sig. = 0.089
Inflation and prices p = 0.270 Accepted p = 17.091 Accepted
df = 4 df = 12
Sig. = 0.992 Sig. = 0.146
Bonds p = 4.018 Accepted p = 11.929 Accepted
df = 4 df = 12
Sig. = 0.404 Sig. = 0.451
Common Stock p = 2.912 Accepted p = 8.662 Accepted
returns df = 4 df = 12
Sig. = 0.573 Sig. = 0.732
(Table 6 continued)

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

Financial Literacy Level and Awareness Regarding Stock Market 251

(Table 6 continued)

Stock Market Occupation Qualification

Traits/Variables Chi-square Statistic Null Hypothesis Chi-square Statistic Null Hypothesis
P/E ratio and EPS p = 9.177 Rejected p = 8.563 Accepted
df = 4 df = 12
Sig. = 0.057 Sig. = 0.740
Mutual fund and p = 2.211 Accepted p = 8.849 Accepted
market risks df = 3 df = 9
Sig. = 0.530 Sig. = 0.451
Source: Results achieved through application of Chi-square test on the data collected through questionnaires.
Notes: Significant (p < 0.10), ** Significant (p < 0.05), *** Significant (p < 0.01).

hand, for the traits Benefits of diversification, Shares closing price, Technical analysis and market effi-
ciency, Current Market indices (NSE/BSE), Interest rates on debentures/bonds, Transaction costs,
Inflation and return, Settlement period, Stock split, Inflation and prices, Bonds, Common Stock returns
and Mutual fund and market risks, hypothesis is accepted revealing that there is no significant difference
in literacy level across the occupation groups for these traits.

Managerial Implications
The study focuses on assessing the literacy level of the individual stock investors of Punjab. By
identifying the literacy level of the individual stock investors, this study aims to contribute under-
standing of financial literacy of the individual investors in their day to day financial matters. The traits
taken into account would contribute to the field of finance by lending an insight into the literacy
level of the individual stock investors of Punjab and helping a prudent investor search for proper
information and analyze the pros and cons of different investment avenues and then take investment
decisions. The understanding of the literacy level will provide implications to financial service
providers to help individual investors find their investment preferences and guide them towards right
direction. However, it will help financial service providers to offer more effective advice after knowing
their level of financial literacy and help their investors improve their personal financial management.
The ultimate aim of the study is to make financial service providers help individual stock investors take
effective decisions regarding the use and management of their money by understanding the level of
financial literacy they have towards stock market and to avoid being a victim of bad buying and selling.

Conclusion
The present study is an exploratory study to know the financial literacy level regarding stock market of
the individual stock investors of Punjab. As far as awareness of the individual investors regarding stock
market investment options is concerned, investors in Punjab are highly aware of equity or common stock

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

252 Sangeeta Arora and Kanika Marwaha

investment. However, individual stock investors have moderate level of awareness towards mutual funds
followed by slightest awareness for ULIP’s and SIP’s and are least aware about Bonds, Derivatives/
Futures/Options/Swaps, Commodities, Debentures. These results imply that financial intermediaries or
brokers need to provide more knowledge and make the investors aware about investments, that is,
ULIP’s, SIP’s, derivatives, bonds so as create their interest in such investments and diversification of
their portfolio. The financial literacy level of the individual stock investors regarding the various stock
market traits has been studied and results show that individual investors in Punjab have high level of
knowledge regarding Benefits of diversification, Shares closing price, Current Market indices (NSE/
BSE), Inflation and return and slightest and least level of knowledge regarding Settlement period, Stock
split, Interest rates on debentures/bonds and Bonds. These results are useful to investors as well as finan-
cial intermediaries to gauge the areas which need to be studied and increase knowledge about those areas
so as to diversify investments to maximize returns. Further, the study explores whether demographic
variables exert significant impact towards the literacy level of various stock market traits. Significant
difference in the literacy level of the individual stock investors across their age groups is found for four
stock market traits that is, Technical analysis and market efficiency, Mutual fund returns, Bonds,
Settlement period. Significant difference in the financial literacy level of the individual stock investors
across the income groups is found for five traits, that is, Technical analysis and market efficiency,
Transaction costs, Mutual fund returns, Settlement period, Common Stock returns. Significant differ-
ence in the financial literacy level of the individual stock investors across the qualification is found for
four traits i.e. Shares closing price, Technical analysis and market efficiency, Current Market indices
(NSE/BSE), Stock split. Significant difference is found in the financial literacy level of the individual
stock investors across the occupational groups for two traits i.e. Mutual Fund returns and P/E ratio and
EPS. After knowing the literacy level of individual stock investors of Punjab, the results achieved in the
present study would help financial service providers to provide more effective advice to the individual
stock investors towards their stock market investment decisions.

Note
1. http://www.afcpe.org/assets/pdf/vol_22_issue_1_robb_woodyard.pdf

References
Ackert, Lucy F., & Church, Bryan K. (2006). Firm image and individual investor decisions. Journal of Behavioral
Finance, 7(3), 155–167
Aggarwal S.K., Barua, S., Jacob, J., & Varma, R.J. (2012). A survey of financial literacy among students,
young employees and the retired in India. Available online at http://www.iimahd.ernet.in/fls/fls12/
youngemployessandretired2012.pdf (last accessed on 18 February 2013)
Al-Tamimi, H.H.A. (2006). Factors influencing individual investor behavior: An empirical study of the UAE
markets. The Business Review, 5(2), 225–232.
Al-Tamimi, H.H.A., & Kalli, Bin Anood Al. (2009). Financial literacy and investment decisions of UAE investors.
The Journal of Risk Finance, 10(5), 500–516.
Arora, S., & Sandhu, S. (2011). IT impression on the dimensionality of the banking service quality—what customers
have to say? Business Analyst, 32(1), 35–45.
Chen, H., & Volpe, P.R. (1998). An analysis of personal financial literacy among college students. Financial Services
Review, 7(2), 107–128.

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016

Financial Literacy Level and Awareness Regarding Stock Market 253

Chen, H., & Volpe, P.R. (2002). Gender differences in personal financial literacy among college students. Financial
Services Review, 11, 289–307.
Jariwala, H., & Sharma, M. (2011). Financial literacy: A call for an attention. Proceedings of the Conference on
Inclusive & Sustainable Growth Role of Industry, Government and Society, 2011. Retrieved from ojs.ijacp.org/
index.php/ISG/article/download/17/20
Monetary Authority of Singapore. (2005). Quantitative research on financial literacy levels in Singapore. Available
online at http://www.mas.gov.sg/~/media/resource/news_room/press_releases/2005/Financial%20Literacy%20
Levels%20in%20Singapore%20Full%20Report.ashx (last accessed on 19 February 2013)
Nidar R.S., & Bestari, S. (2012). Personal financial literacy among university students (case study at Padjadjaran
University students, Bandung, Indonesia). World Journal of Social Sciences, 2(4), 162–171.
Robb, A.C., & Woodyard, S.A. (2011). Financial knowledge and best practice behavior. Retrieved from http://www.
afcpe.org/assets/pdf/vol_22_issue_1_robb_woodyard.pdf
Sabri, F.M., MacDonald, M., Hira, K.T., & Masud, J. (2010). Childhood consumer experience and financial literacy
of college students in Malaysia. Retrieved from http://tkhira.user.iastate.edu/file/childhoodconsumerexperiene
andthefinancialliteracyofCollegestudentsinmalaysia.pdf (last accessed on 20 February 2013)
Seth, P., Patel, N.G., & Krishnan, K.K. (2010). Financial literacy & investment decisions of Indian investors—A case
of Delhi & NCR. Retrieved from http://210.212.115.113:81/Pallavi%20Seth/Financial_Literacy_&_Investment_
Decisions_of_Indian_Investors_Pallavi_Seth_BIMTECH.pdf
Thilakam, C. (2012). Financial literacy among rural masses in India. 2012 International Conference on Business
and Management, Phuket—Thailand. Retrieved from http://www.sharjah.ac.ae/en/about/agc/conferences/iceb/
Documents/papers/f5.pdf
Warren, William E., Stevens, Robert R., & McConkey, William C. (1990). Using demographic and lifestyle analysis
to segment individual investors. Financial Analyst Journal, 46(2), 74–77.

Sangeeta Arora is Associate Professor at Department of Commerce and Business Management, Guru
Nanak Dev University, Amritsar, Punjab, India. E-mail: sukhsangeet@yahoo.com

Kanika Marwaha is Senior Research Fellow, Department of Commerce and Business Management,
Guru Nanak Dev University, Amritsar, Punjab, India. E-mail: kanikamarwaha85@yahoo.com

Management and Labour Studies, 38, 3 (2013): 241–253

Downloaded from mls.sagepub.com at PENNSYLVANIA STATE UNIV on February 21, 2016