Financial Literacy Level and Awareness Regarding Stock Market

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.