INDIVIDUAL INVESTMENT BEHAVIOR WITH RESPECT TO FINANCIAL KNOWLEDGE AND INVESTMENT RISK PREFERENCE: A

Traditional investment theory suggests that individuals invest rationally with the intention of maximizing their utility for a given level of risk. If this were to hold true, all investment decisions would be taken rationally. But it is observed that this maxim may not be adhered to because of many other factors influencing individual investment decision making. This study attempts to understand the relationship between the level of knowledge and investment behavior. It examines, if individuals with high financial knowledge tend to invest more in any particular investment avenue like equity, fixed deposits, gold or real estate. No significant relationship was found between financial knowledge and investment behavior. The study also tries to understand if an individual’s financial risk preference affects investment behavior. It examines if risk averse investors, moderate risk takers and aggressive investors differ with respect to their investment behavior. No significant relationship was found. It also gauges the association of financial knowledge and investment risk preference. We find that investors with high financial knowledge tend to invest more in risky avenues. This finding supports result from previous research studies