Table of Contents

CHAPTER I............................................................................................................................1
INTRODUCTION...............................................................................................................1
1.1. Background...........................................................................................................1
1.2. Statement of the Problem.....................................................................................3
1.3. Purpose of the Study.............................................................................................5
1.4. Significance of the Study......................................................................................5
1.5. Research Hypothesis............................................................................................6
1.6. Operational Definitions........................................................................................6
CHAPTER II...........................................................................................................................9
LITERATURE SURVEY AND THEORETICAL FRAMEWORK..................................9
2.1. Literature Review.................................................................................................9
2.2. Review of Major Studies in Nepalese Context...................................................16
2.3. Theoretical Framework......................................................................................19
CHAPTER III.......................................................................................................................22
METHODOLOGY............................................................................................................22
3.1. Research Plan and Design..................................................................................22
3.2. Description of the Sample..................................................................................22
3.3. Instrumentation...................................................................................................24
3.4. Data collection procedure and time frame..........................................................24
3.5. Validity and Reliability......................................................................................24
3.6. Analysis Plan......................................................................................................25
CHAPTER IV.......................................................................................................................29
RESULTS AND DISCUSSIONS.....................................................................................29
4.1. Respondent’s Characteristics..............................................................................29
4.2. Descriptive Statistics of Investor awareness and access to information............31
4.3. Correlation Analysis Between Investor Awareness and Level of Investment...31
4.4. Analysis of investor awareness and level of investment....................................32
4.5. Investor’s Suggestions for Nepalese Stock Market............................................33
CHAPTER-V........................................................................................................................35
SUMMARY AND CONCLUSIONS...............................................................................35
5.1. Summary of Findings.........................................................................................35
5.2. Conclusions........................................................................................................38
5.3. Recommendations..............................................................................................39
 CHAPTER I

INTRODUCTION
1.1. Background

Investor awareness is the term used in investor community which describes the level of
knowledge of the investor about the investment environment i.e. about the investment
rights and obligations, law and procedures, types of investment, investment service
provider and their control mechanism etc. The level of awareness helps to measure or helps
to benchmark the investor exposure and knowledge about the information of the industry as
a whole. The significance of the awareness is that investors are expected to base their
investment decisions on market information. In case of lack of access to the market
information, the investor may be placed at low profile amongst his/her peers in the market.
Thus, investor awareness contributes directly or indirectly to the competing business
participants for identifying the potential investment opportunities which ultimately leads to
achieve the investment objectives.

On the other hand, stock market is a part of the whole capital market mechanism. In the
stock market people buy and sell securities which are less tangible than gold but not less
valuable. The market in which new securities are resold is called secondary markets.
Secondary market provides liquidity to the economy through the role of financial
intermediaries between selling segments and buying segments. Secondary market
introduces the brokerage services for the sake of smooth operation of financial transactions.
Generally, stock brokers provide the brokerage services as agents of the investors and
execute on behalf of their customers against the commissions or fees. The typical roles of
the stock broker are to disseminate the information about the domestic and foreign markets
and securities, to provide appropriate advices to the clients, to buy and sell orders for
clients, to manage and review the investor portfolios, etc. Stock brokerage firms have the
direct interaction with the investors during the exchange of the securities and have the
obligation of advising and solving the investor problems. Thus, to develop the investor
awareness, brokerage firms can have significant role. (Ritter and Silber, 2008)

1
The inception of the capital market has been provided investment opportunities for the
individual and institutional investors in the financial market. The investment being the
current sacrifice of spending for the future benefits and the capital formation is an essential
macroeconomic parameter that enlarges the economic activities in the economy. The
capital market acts as a mechanism that creates investment alternatives for the saving
groups and long–term fund for individuals, institutions, and for the government. The
history of the capital market was began in early seventeen century, the Amsterdam stock
exchange is considered as the oldest stock exchange in the world which was started in
1602 followed by Paris Bourse in 1724 in Paris, France. The Bombay stock exchange
which was established in 1875 is a pioneer stock exchange in South Asia. The practice of
stock exchange in Nepal is of recent phenomenon which was started after issuance of
common stock by Biratnagar Jute Mills Limited in 1937 AD whereas the oldest existing
stock certificate was issued in 1606 for a Dutch company. The history of securities
exchange in Nepal shows that the first amendment in securities Exchange Act, 1983 in
1993 paved the way for the restructuring of stock market in Nepal, which led to establish
the Securities Board of Nepal (SEBON) in 1993 with a mandate to regulate and develop the
stock market. The act also led to convert the then Securities Exchange Centre into Nepal
Stock Exchange (NEPSE), a full-fledged open-out-cry trading system with the induction of
stock brokers in January 13, 1994. Now, the automated trading system is introduced in
Nepal. With the existence of automated trading system, numbers of financial institutions,
investment groups and independent investors have been engaging in financial sectors in
terms of their association in banking and finance, insurance, manufacturing and service
industries and hydropower sectors. As a result, the practitioners and beneficiaries or the
investment communities have grown tremendously in the short period. Such speedy growth
also raised the issue of the quality of growth and sustainability. To expand and to achieve
the sustainable growth of economy, the investors’ awareness and their commitment for the
long-term investment play the vital role. Thus, it is expected that the awareness and
commitment should moves in the same direction, and their association contributes a lot to
the economic development.

2
Capital market is the mechanism created to facilitate the exchange of the financial assets
with a maturity period of more than one year. It is the legal entity established to facilitate
the sale and resale of transferable securities. Capital market have significant stake on gross
domestic product (GDP) of the national economy which creates the employment
opportunities through capital formation and growth of the economy as a whole. But, only
the existence of the capital market does not guarantee the significant contribution for the
gross domestic product and the economic growth. The mechanism creates the micro-level
saving mobilization, opportunities along with its challenges, too. The financial literacy and
the awareness level might be the crucial element for the healthy growth of the market. The
term investor awareness has been used in investment communities frequently. It describes
the investors’ literacy and knowledge about the investment environment or about the
market.

1.2. Statement of the Problem

During last one and half decade the financial sector in Nepal has grown significantly.
Despite a history of almost half a century of development efforts under different plans,
conscientious efforts to develop financial sector started quite late in Nepal. The process of
financial sector development in the country actually started since 1976 when the
government establishes Securities Marketing Centre to provide and develop market for
securities. However, visible impact on the development of financial sector was observed in
the country only when the government changed its restrictive policy and opened up the
hitherto closed financial sector. In 1994 Securities Board of Nepal was established with the
main responsibilities to regulate, supervise, and monitor the securities market. Similarly,
the Securities Marketing Centre was converted into Nepal Stock Exchange Limited
(NEPSE) with the objective to provide secondary market a platform for securities
transaction and ensure smooth trading of securities. For this an open cry system was
introduced and investors were allowed to deal in securities only through licensed brokers.
In 2007 the stock market has been automated to facilitate the securities transactions.

Awareness is the level of existing information with the perception and ability of
understanding the upcoming environment. It is the general assumption that the more aware
investors make more investment decision and less aware investors comparatively make less
3
investment decision. As crawling in developing phase of our stock market, does investors
are aware of existing flow of information provided by the SEBON and other concern
information? Does the current rules and policies are applicable and fascinating for
upcoming investors? It is expected that the awareness and their commitment move in the
same direction, and their association contribute a lot to the economic development. Capital
market is divided into primary and secondary market. Primary market raise the seed capital
through the public offering and the secondary is only the platform which retains the long-
term investment through exchange of the securities. More specifically, secondary market
provides liquidity to the economy through the role of financial intermediaries and those
intermediaries have directly connected with the individual investors. Thus, there might be
sufficient room at the end of the brokerage firms and the financial intermediaries play vital
role in creating investor awareness in Nepalese financial market.

In such circumstance, if an investor knows the solutions of the stated issues can be placed
in aware category whereas investors who have no idea on these matters, can be placed in
unaware category. Level of awareness can be increased amongst the general public through
promotional campaigns, seminars, publications, and programs in FM/TV etc (Baidhya and
Parajuli, 2004). Therefore, in a developing economy like Nepal in case of existence of
majority of investors in unaware category, there would be a situation of raising question on
the performance of the concern authorities. In local context, security board of Nepal
(SEBON), Nepal stock exchange limited (NEPSE), are the authorities and their scope of
work is fully or partially focuses towards the growth and development of Nepalese capital
market.

The study deals with the following issues:

 What is the extent of awareness of common stock investors?

 How far the stock investors rely on their own expertise and awareness in decision
making?
 How could the awareness level determine the investment level?
 What is the correlation between the investment awareness and equity investment?

4
1.3. Purpose of the Study

The main objective of the study is to

i. To analyze the level of awareness among the equity investor and also extent of
relationship between investor awareness and level of equity investment in
secondary market
ii. To identify level of equity investors excess to market information

1.4. Significance of the Study

Stock market recognizes the situation of economy. When stock market is booming, the
economy is good and when stock market is declining the economy is bad. Stock markets
have direct relation with the economic growth. Economic growths come with more earning
capacity, opportunities to save and also the opportunity to invest. It must be noted that
economic growth is, too a great extent, dependent on the industrialization in a country.

It represents the study to find out the problem, prospects and growth in the near future.
What policies can be formulated, what regulatory acts are needed and necessity of
amendments regarding the rules and regulation to develop it and make the market perfect
functioning. The standard is one of the elements to stock market development. Financial
statement should maintain accordingly which fulfill the requirement of related parties
needed information.

This study will be useful to the university students who are curious to know about the
current status of Nepalese stock market, its growth, issues and challenges for the
development of stock market as well as investor behavior and awareness. Similarly, the
recommendations that this study intends to propose on the basis of its findings are expected
to be useful for the policy makers associated with the development of capital markets and
to identify the investor's behavior.

5
1.5. Research Hypothesis

The study formulates the following testable statement that can be tested in the following
sections. The null hypotheses have been presented follows:

H0: There is no significant difference in frequency distribution between less aware and
aware equity investors.

H0: There is no significant relationship between investor awareness and investment on

equity.

H0: There is no problem on access to market information for equity investors.

1.6. Operational Definitions

Investment Awareness

Investor Awareness is a term used in investor relations, by public companies and similar
bodies, to describe how well their investors, and the investment market in general, know
their business. Its significance is that investors are expected to base their investment
decisions on awareness and knowledge, and a lack of these may lead to a low profile
amongst its peers in the market (i.e. competing businesses and investment opportunities), to
the detriment of the business. It is also interchangeably used for terms like investor literacy,
investor education, investor knowledge, etc. because all of them help to create attentive
investors.

Investor Awareness is the functions of formal education, market familiarity, access to

information and willingness to learn. These independent variables directly are supposed to
influence investor awareness and thus, the equity investment.

Equity Investment

An equity investment generally refers to the buying and holding of shares of stock on
a stock market by individuals and firms in anticipation of income
from dividends and capital gains. Typically, equity holders receive voting rights, meaning
6
that they can vote on candidates for the board of directors (shown on a diversification of the
fund(s) and to obtain the skill of the professional fund managers in charge of the fund(s).
An alternative, which is usually employed by large private investors and pension funds, is
to hold shares directly; in the institutional environment many clients who
own portfolios have what are called segregated funds, as opposed to or in addition to the
pooled mutual fund alternatives

Formal education and training

Education is one of the variables that influences equity investor and thus, the participation
in equity market. Higher the level of education higher is the equity investment.

Low level of education can be the reason for low participation in equity investment. The
confidence in investor will be increased if individuals will be able to choose right
investment themselves. If individuals become formally educated and trained enough they
will be able to save and challenge financial service providers to develop products that truly
respond to their needs and that is believed to have positive effect on both investment level
and economic growths.

Understanding of subjects

Familiarity is described as investor knowledge on trading hours, brokerage commission rat

e, concept of adjustments in dilution such as rights share issue or bonus shares and issue of
initial public offering or further public offering. The tendency of market to apply the issued
shares exclusively over subscribing it is a result market familiarity. Different issue arises
when there is no familiarity in market behavior such as news outburst, insider trading and
bonus season etc.

The more the investor are familiar to the market, the level of equity investment is believed
to increase exponentially.

Learning expectations

7
Investment is a dynamic phenomenon. Rapid changes occur in the trading technologies,
issue of shares and operation of the market. The trainings are the methods through which
people can learn more about the equity investment. Training provides market familiarity
and thus the confidence in equity investment.

8
 CHAPTER II

LITERATURE SURVEY AND THEORETICAL FRAMEWORK

2.

2.1. Literature Review

Among the diverse range of financial literature, the awareness is the primitive issue which
is essential for the growth and development of the stock market regardless of geographic
location. This section of review focus towards the review of some of the major studies in
the area of investor awareness, investor participation, investor behavior and access of
information.

Verma.P. (2012) found that awareness of various equity oriented securities among Indian
investors is increasing due to various investor education programmes conducted by
Securities and Exchange Board of India (SEBI) and Association of Mutual Funds in India
(AMFI). He stated that, due to the increased awareness about equity oriented securities, the
number of new investors is growing at a healthy rate in India. He further stated that,
increased awareness is also motivating the equity investors to acquire knowledge on
various investment strategies and risk minimisation techniques.

Al Tamami and Kali ,(2009). Financial literacy and information requires that a person
knows and understands the forms, functions and use of money and financial services. In
today’s world financial literacy is important to every individual who wishes to select the
best way to carry out payments and take care of banking issues. The current paper
examines the impact of different demographic variables on the level of financial literacy
among Saudi investors. Furthermore, the impact of financial literacy on different kinds of
financial decision making is also investigated. The result of the current study confirms a
significant impact from gender and age on financial literacy. Males are more financially

9
literate than females, and older people also show a higher level of financial literacy
compared with younger people. There is no significant impact from educational level and
current work situation on financial literacy. Financial literacy is measured in reference to
retirement planning and stock market participation. People with a higher level of financial
literacy have a greater urge to engage in retirement planning and stock market participation.
However, there is a negative relationship between financial literacy and the need for
financial advice.

Fodor (2008), Lack of investor awareness campaigns lead to the financial crime in the
capital market. Like the increase in security enforcement increases the number of arrests.
Adversely, increases in investor awareness campaigns leads to decrease in financial crime.

Guiso, Luigi & Jappelli, Tullio. (2005), Awareness and Stock Market Participation. The
paper documents lack of awareness of financial assets in the 1995 and 1998 Bank of Italy
Surveys of Household Income and Wealth. It then explores the determinants of awareness,
and finds that the probability that survey respondents are aware of stocks, mutual funds and
investment accounts is positively correlated with education, household resources, long-term
bank relations and proxies for social interaction. Lack of financial awareness has important
implications for understanding the stockholding puzzle and for estimating stock market
participation costs.

Maruthu Pandian. P, Benjamin Christopher , (2010), conducted a study entitled, “A

Study on Equity Investor Awareness” in order to study the stock 31 market literacy of the
investors about the company, stock exchanges as well as capital market regulatory bodies.
The primary data using multiple regression, path analysis and chi-square test along with
ANOVA clearly revives difference in the awareness among the investors. The research
work found that the awareness index is high among young male investor, postgraduates and
meticulous business men.

Shobana. V.K. and Jayalakshmi. J, (2010), in their study entitled, “Investor Awareness
and Preferences”, studied the investors’ preferences, the level of investor awareness and the
factors influencing investor awareness of 100 respondents in Salem District. The study
10
reveals that real estate, bank deposits and jeweler were the preferred investments. Investors
above 50 years of age, post graduates and professionals had high level of awareness. Age
and education do not have any significant influence over investor awareness but
occupational status leads to difference in the awareness level of people.

Panda. K, Tapan N.P and Tripathi, (2011), in their study entitled, “Recent Trends in
Marketing of Public Issues: An Empirical Study of Investors Perception”, attempted to
identify the investors awareness and attitude towards public issues. One hundred and
twenty five investors covering the salaried and business class, from the city of
Bhuvaneshwar were selected at random. The data was collected by administering a
questionnaire and was analysed using simple percentage and weighted average analysis.
The study revealed that majority of the investors relied on newspapers as the source of
information. Financial journals and business magazines were ranked next to newspapers. A
large number of investors were of the opinion that they were not in a position to get the
required information from the company in time. A sizable number of investors were found
to face problems while selling securities. ‘Safety and Regular Return’ stood first and
second with regard to the factors associated with investment activities. Equity shares were
preferred for their higher rate of return by the investors.

Fieldstein and Yitzhaki, (2011), in their study entitled, “Are High Income Individuals
Better Stock Market Investors?” have presented evidence to suggest that the corporate
stock owned by high-income investors appreciate substantially faster than stock owned by
investors with lower incomes. They have indicated that high-income individuals have
larger portfolios and can therefore denote more time or resources to their investments, thus
resulting in higher returns.

Bloomfield, Libby and Nelson, (2011), in their study entitled, “Confidence and the
Welfare of Less Informed Investors”, have indicated that less informed investors are over
confident in investments. Providing more information to professional investors only could
harm the welfare of less informed investors if less informed investors are not aware of the
extent of their informational disadvantage.

11
Andreas Kemmerer and Tom Weidig, (2005), in his study, “Reporting Value to the
private Equity Fund Investor”, in this article, we look at the actual reporting behaviour and
information flow of the private equity (mainly venture capital) fund manager to the fund
investors, based on access to a fund investor’s database. Overall, the study revealed we find
that the European private equity industry has improved their reporting qualitatively and
quantitatively, especially in terms of shorter delivery times of reports. This change is
mainly due to the introduction of the EVCA reporting guidelines and willingness by both,
fund managers and investors, to report voluntary or contractually bind by contract to report
in accordance to these standards. The study also pointed out that aspects of the relationship
between the entrepreneur and fund manager are also often found at the next level, between
fund managers and investors.

The study on relationship between information uncertainty and stock returns by Zhang,
(2006) was based on the substantial evidence of short-term stock price continuation. The
literature often attributes to investor behavioral biases such as under reaction to new
information. The study investigated the role of information uncertainty in price
continuation anomalies and cross-sectional variations in stock returns. The result shows
greater information uncertainty produce relatively higher expected returns following good
news and relatively lower expected returns following bad news. The sample data were
derived from the three sources: Returns from the CRSP monthly stocks which include
NYSE, AMEX, and NASDAQ stocks, Book value and other financial data are from
COMPUSTAT, Analyst forecast revisions are from I/B/E/S for the period January 1983 to
December 2001. Since, the Fama and French three-factor model does not capture the
momentum effect, the study used a four-factor model to test portfolio returns. If short-term
price continuation is due to investor behavioral biases, there should be greater price drift
when there is greater information uncertainty. Specifically, the study focused on two price
continuation anomalies: post-analyst forecast revision price drift and price momentum,
using ex- post returns as a proxy for expected returns, the analysis found consistent
results across six proxies for information uncertainty: firm size, firm age, analyst coverage,
dispersion in analyst forecasts, return volatility, and cash flow volatility. For each of the six
proxies, greater information uncertainty leads to relatively lower future stock returns

12
following bad news and relatively higher future returns following good news, suggested
that uncertainty delays the flow of information into stock prices.

Media coverage and the cross-section of stock returns, Fang and Peress (2009) tested the
hypothesis by reaching a broad population of investors, mass media can alleviate
informational frictions and affect security pricing even if it does not supply genuine news.
The finding shows that stocks with no media coverage earn higher returns than stocks with
high media coverage even after controlling for well-known risk factors. These results are
more pronounced among small stocks and stocks with high individual ownership, low
analyst following, and high idiosyncratic volatility. The findings suggest that the breadth of
information dissemination affects stock returns. Data constitutes all the listed companied on
the NYSE, contains mainly large stocks and 500 randomly selected companies listed on the
NASDAQ between 1993 and 2002. Univariate analysis, average return comparison of
stocks with firm characteristics and media coverage, multivariate analysis: the market
model, the Fama-French (1993) three-factor model, the Carhart’s four-factor model, and a
five- factor model were used for the analysis. High-media coverage stocks earn lower
returns is the major finding of the study.

Dougal, Engelberg, Garc´ıa, and Parsons (2011) conducted a study on Journalists and
the Stock Market. The study shows the widespread speculation that the news media has the
power to influence financial markets, apart from simply reporting events. The study
reveals that such claims are often based on anecdotal associations that make causal
inferences difficult. The identification strategy of the study was based on two
assumptions. The first is that authors of the Wall Street Journal’s “Abreast of the Market”
column exhibit persistent stylistic differences, such that even for the same set of facts,
article content will vary. The second is that the selection of journalists is not systematically
related to future returns, an assumption relatively easy to justify given that we are
examining returns on a nearly unpredictable market index.

The study suggest that financial journalists have the potential to influence investor
behavior, at least over short time horizons. Adding journalist fixed effects to a daily return
regression significantly increases explanatory power, and when these fixed effects are
interacted with recent returns, the implied return predictability is even more dramatic. An
13
important caveat is that although our empirical design permits a causal interpretation, our
analysis does not shed light on the specific rhetorical tools that authors use to influence
investor behavior. That is, we do not attempt to say whether longer articles, more complex
words, or less pessimism leads to a predictable market response.

The current economic turbulent and the role of media has been severely contributing for the
stock returns. The most recent study, Engelberg and Parsons (2011) on the causal impact
of media in financial markets aimed to disentangling the causal impact of media reporting
from the impact of the events being reported. It was conducted by comparing investor’s
behaviors with access to different media coverage of the same information event. The study
presented the two approaches. First, select events for which determinants of media
coverage and market responses can be decoupled, Brute- force approach. Second, the cross-
sectional approach, the basic idea is to take two groups of agents and for the same
information event vary only the media exposure. This study is primarily focused on second
approach. Using the multivariate regression model for 19 mutually exclusive trading
regions corresponding with large U.S. cities, the results indicates that the local media
coverage strongly predicts local trading, after controlling for earnings, investors, and
newspaper characteristics for all earnings announcements of S&P 500 Index firms.
Moreover, local trading is strongly related to the timing of local reporting. Thus, analyzing
the simultaneous reactions of investors in 19 local markets to the same set of information
events like earnings releases of S&P 500 Index firms, this study concluded the presence or
absence of local media coverage is strongly related to the probability and magnitude of
local trading.

Solomon (2012) conducted a study on Selective Publicity and Stock Prices. The study
shows the evidence that media coverage affects the price response to news announcements.
Greater coverage of positive news stories raises investor expectations. of future
profitability, leading to price increases in the short term and lower returns in the future
around earnings announcements. The study suggest that investors rely on the media to help
them process information and decide which stories are economically important. With the
proliferation of free online news services, the problem becomes deciding which press
releases and articles to read in the limited time available. Media coverage can help here by

14
carrying an imprimatur of importance for a story. Greater coverage of good news relative to
bad news is thus interpreted as indicating that the good news is more economically
significant. The evidence of the study also indicates that reporters and newspapers are not
unbiased in their decisions about which stories to cover. Instead, they are susceptible to
influence by investor relations firms, who are able to increase the chances of particular
stories being covered. Moreover, this influence appears to operate through the channel of
personal connections between reporters and investor relations firms. The study indicates
that the predictable nature of the patterns in returns indicates that investors are not
incorporating publicly available information on investor returns firm usage into prices. The
study suggest that the investors do not distinguish between media coverage arising from
investor relations influence and media coverage from general newsworthiness, and are
surprised when hard information turns out to be worse than expected. Investors, it appears,
can be fooled, but not forever.

Chen, Pantzalis, Park (2013) conducted a study on press coverage and stock price
deviation from fundamental value. The study found (1) mispricing significantly rises with
abnormal press coverage and (2) information risk measures are significantly positively
related to abnormal news coverage. These two pieces of evidence, combined with the fact
that abnormal news coverage is associated with greater trading volume, are consistent with
the predictions of both the biased media and the mediaIinduced sentiment hypotheses. The
study tests to determine the relative importance of the biased media and mediaIinduced
sentiment hypotheses. Firstly, investigated the impact of abnormal press coverage
separately for undervalued and overvalued firms, that is, for firms that likely have been
recently experiencing bad news and good news, respectively. In line with the media
sentiment hypothesis, found that abnormal press coverage increases the magnitude of
mispricing only for overvalued (good news) firms. This finding of an asymmetric
response to negative and positive news coverage could be interpreted as consistent with a
combination of the media induced sentiment and binding short selling constraints. On the
other hand, the study found that the concurrent existence of both a media induced sentiment
and a media bias effect. In both of the above environments (i.e., the media Induced
sentiment with binding short selling constraints and the media induced sentiment with
biased media) abnormal news coverage will have a stronger (weaker) effect on prices in
15
the case of good (bad) news. The study finally indicate that abnormal news coverage leads
to mispricing that is rooted primarily in the fact that press coverage creates sentiment
among investors. However, mispricing can also be attributed to the tendency of the local
press to provide biased coverage for nearby allocated firms.

2.2. Review of Major Studies in Nepalese Context

Besides the voluminous and diversified studies in the area of finance in developed capital
market, limited studies have been conducted in Nepalese context. Even though the
Nepalese capital market is a recent practice in the economy, there are number of studies
based on secondary and the primary database. Some of the major studies which is relevant
to the study and that carry useful knowledge as well as provides some rational insights:

Dongol (2009) conducted a study on “Stock market Reaction to public information” where
the study found that Nepalese stock market was sensitive to new public information means
that the new information reacts immediate to the price movement of the Nepalese stock
market. The study was conducted in June 2007 within the Kathmandu valley where the
survey questionnaire has been focused on self- administered, structured questionnaire. The
survey comprises 10 questionnaires. Out of the 124-questionnaire distributed to the
individual 93 responses has been usable. Most of the respondents have been found to have
strong belief on impact of new information of price movement of the Nepalese stock
market based on the flow of the new information. The Nepalese investors are found to be
more aware of the new information announcements. The findings of the survey analysis
have indicated that the Nepalese stock market is sensitive to new public information. The
investors believe that the stock prices are adjusted immediately after the occurrence of new
events. This is the positive part of the investors as being rational and way to the efficient
market as a developing stock market in the South Asia region.

Adhikari (2010) conducted a study on “Investment Behavior of Nepalese Investors” with

the aims to explore why Nepalese investors invest in share market and whether their
decision to invest in share market are in a way influenced by behavioral factors. The

16
existence or otherwise of three selected behavioral bias, namely heuristics relating to
information, herding behavior and overconfidence were empirically tested through data
collected from self-administered questionnaire from Nepalese investors and supplemented
by interviews with brokers. The study has found that varying availability of information
and the level of understanding of the respondents have an influence in their investment
decision making process. While interviewing with the brokers the study found that most of
the Nepalese investors do not have necessary skills to analyze financial information related
to the companies they are considering investing in and this affects the quality of their
investment decision making. As a second variable overconfidence; on this matter the study
has found that the respondent investors are mostly overconfident regard to their self-
reported level of investment related knowledge, experience and their ability to pick stock.
They exhibited wishful thinking that the shares they hold will appreciate value. There was a
notable difference in the level of confidence in various aspect of investing according to the
age and gender of the respondents. The last variable is herding behavior; the study has
found that the respondent exhibited herding behavior. Their need to confirm with others
was on of the influences on their investment decision making process. Data collection for
the study was done in two phases. The first phase involved collection of data from
individual and second collection from security brokers. 60 questionnaires were distributed
through 4 securities brokerage firm and 49 completed questionnaires were returned. Based
on the analysis it is observed that Nepalese investors invested in share for both financial
and non-financial reasons, behavioral factors have an important influence in Nepalese
investors’ investment decision making process, investors are found to exhibit some
facets, all above three selected behavioral biases, influence their investment decisions.

Amagain and Shrestha (2011) examine the movements of stock price in Nepalese market.
Daily stock prices are used to test the independence of changes in stock price by applying
the Augmented Dickey Fuller (ADF), and Philips-Perron (PP) unit root test. The results
obtained from these tests imply that Nepalese stock market follow random walk model. It
means the future stock prices cannot be predicted in advance from the past observed stock
prices and hence is no scope for traders to make abnormal profits from modeling the past
observed stock prices. The paper analyses the pricing behavior in Nepalese stock market
and found that past movement in stock prices cannot be used to predict their future changes
17
and investors cannot devised various trading rules or techniques to make abnormal returns
from transactions.

Joshi, (2012) conducted a study on Effects of Dividends on Stock Prices in Nepal. The
study reveals the two different views regarding the dividend policy and stock price. Those
who think dividends have more impact in determining share price, argues that shareholder
prefers current return rather than future return and dividend distribution is an indicator of
earning capacity in future. The other views are based on the importance of retained
earnings. They argue that retained earnings are indicator of future investment opportunities.
The shareholders can enjoy tax advantages in retained earnings. For tax purpose, retained
amount is not treated as income until it is realized. The study concluded after taking the
observation the impact of dividends on stock price of Nepalese stock market and found that
dividend per share is a motivating factor in the Nepalese financial sector which is strong
enough to increase market price per share of the banking and non-banking firms.
Comparatively, they also found that the effect of dividend per share greater than return on
equity per share on the impact of market price per share. Lagged market price per share is
an accelerator to increase market price per share in subsequent years. Finally, the study
shows that dividends and retained earnings significantly explain the variations in share
price in both banking and nonbanking sectors. The impact of dividend, however, is
much more pronounced than that of the retained earnings. The relation of dividends and
retained earnings on share price is positive in all cases.

Research Gap

Financial investment can be categorized as a productive investment compares to others in

the economy. The investment if yield the future returns comparatively better than others are
treated as the best investment decisions. To make such best investment decisions, an
investor needs to consider numbers of things at the same time and need to choose best out
of the multiple options. In sum, to analyze all the market information at the same time and
to select the best out of worst, investor awareness plays the vital role. Numerous studies
show that there are multiple factors that directly or indirectly influences the stock returns
for instance, investors’ personal behavior, cash return or equity return, media coverage, the

18
behavior of market itself, the effect of firm specific variables, the level of economic
development and the growth level, etc.

Some review of the previous study show that investor behavior influences the stock returns,
there are numerous determinants that influence the individual investor’s behavior in stock
market, investors tend to react slowly on the bad news information and some studies shows
that media coverage has significant effect for stock market movement, the downside risk
series for various markets are fractionally cointegrated and move in the same direction in
the long run sophisticated investors can earn superior returns by taking advantage of under-
reaction and overreaction without bearing extra risk.

All these review of studies shows that development of financial literature in the foreign
context which ultimately leads to increase the investor awareness level. In the local context,
there are some evidences which adopt the scientific procedures to establish the relation
between the market information and stock returns. Thus, the existing literature support the
research gap in the area of investor awareness in the local context which justifies the need
of further study in this area.

2.3. Theoretical Framework

Fig 2.3 Framework of Study

Independent Variables Dependent Variables

Formal Education &

training
Investor
Understanding of Awareness
Subjects

Access to Information Level of

Investment
19
 Learning Expectation

Investor awareness is the outcome of multiple interacting efforts made by the investor own-
self, listed companies, stock exchange, government, financial intermediaries, media, and so
on which play the role in investment environment. Basically, investors get aware through
their exposure on investment community, economic issue analysis, number of participation
in investment training, workshops, formal education, learning expectation, amount of
media coverage, number of awareness campaign, etc. The researchers are confined these
variables into 21 yes/no questionnaires and the cut-off point is 50%. For instance, if a
respondent has 50% and less "yes" responses/agreement is considered as less aware/low
access.

The framework to convert categorical responses into numerical value corresponding to

investor awareness (for objective 1 ) is calculated as:

IA = (Sum of ‘Yes’ response of ET, AI, US and LE)/N

Where,

ET = Formal education and training

US = Understanding of subjects

AI = Access to information

LE = Learning expectation

N = Total number of question

Similarly, equity investor’s access to market information (for objective 2) numeric

responses can be determined as:
20
AI = (Summated scale responses on Likert items)/N
Where,
N = Total Likert items x Scale

For instance, in the four Likert items if one investor responds 3 for first item, 2, 4 and 2 for
forth item then the ‘sum of responses on Likert items’ constitute 11 and ‘N’ is the (4x5) i.e.
20 so that AI level is 0.55 meaning that the respondent is aware. Since, the measurement of
the variables IA and AI are in percentile form. Thus, the values of these variables restricted
between 0 and 1.

The benchmarks of categorization for each statements and variables:

Table 2.3. Benchmark for Categorization
Classification Classification Benchmark
Less Aware Low Access 50 percent & Below
Aware Satisfactory Access 50 – 70 percent
Fairly Aware Fairly Access 70 – 85 percent
Highly Aware Highly Access 85 percent & Above

21
 CHAPTER III

METHODOLOGY

This chapter is organized into five sections. First section deals with the brief description of
research design, while second section describes the nature and sources of the data and
selection of sample. The detail about selection of sample enterprises has been provided in
section three and section four explains the method of analysis employed for the
interpretation of data. The limitations of the study have been presented in section one.

3.

3.1. Research Plan and Design

The research design employed for the study consists of descriptive and analytical research
design.

The descriptive research design is selected for the study to learn the profile of the
respondents, presentation and description of the data collection, and to describe the
characteristics of the investors in the Nepalese stock market.

The analytical research design is employed for the study to identify how strongly the
selected variables are related or delineating the association of the variables. Here
correlation research design is used to obtain description of the phenomena and to ascertain
the extent of relationship of two variables. The correlation research design identifies how
strongly the selected variables are related.

22
3.2. Description of the Sample

The primary data were collected from the stock investor within the Kathmandu valley.
More specifically, responses were collected from the broker offices in the Kathmandu.
Selection of the stock investors are based on the convenience way. Total 100 structured
questionnaires were distributed among the stock investors during the month of December
2016 and 65 filled-up questionnaires were collected. Thus, the response rate is about 65
percent.

Equity investors in the secondary market are considered as the population of the study.
Nepalese capital market is characterized with semi-automated trading system, central
database/depository system is in preliminary phase. At present there is no formal source to
state the number of investors. Thus, this study is based on the infinite population of
common stock investors in the secondary market.

The study is based on the collection of primary data. Questionnaire method is adopted to
explore awareness and to know the access in market information. Investors were requested
to respond to a total of 37 statements comprises 21 yes/no questions designed to know the
extent of awareness, 5 Likert items with 1 to 4 scale developed to identify the investors
access to information, 4 statements of yes/no questions and 1 open question were
formulated in suggestions section, and 6 personal questions were asked to know the
demographic characters of the respondent. The content of variables in stated questionnaires
were identified through review of literatures and consultation with academician and
experts. Valid questionnaires were developed keeping in mind that the objectives of the
study. Since, the objective of the study is to construct the relationship between awareness
level and investment; personal questionnaire was developed in a manner to identify the
level of investment of each respondent.

Systematic calculation for determination of sample size in infinite population for this
research has not been used. 100 questionnaires, were produced and most of them were
distributed in three trading observation floors at the brokerage firms and few were
distributed within family and friends circle. Clear description about the purpose of the
research and objectives of the work is stated at the beginning of the questionnaire. Out of

23
distributed questionnaire, 73 were collected and 65 were qualified for the research purpose.
The remaining 8 responses were excluded because of incomplete data. Thus, the response
rate of this study is 73 percent and valid response rate is 65 percent. For the matter of
incorporating diversified respondents, responses were collected from the banking,
academic, government, and business sectors.

There is inverse relationship between level of significance and the sample size. The sample
size of this research was determined as 100. Generally, sample size which is more than 50
is considered as the statistically accepted sample size but for the scope of this study
remains on all the equity investors in Nepalese capital market. Thus, the level of
significance for the study is determined as 5% and it is not determined as 1% considering
the large sample size.

3.3. Instrumentation

The study intends to analyze the investor awareness and equity investment. The descriptive
statistics, the correlation analysis, Cronbach’s alpha and one sample t-test are applied for
the primary data analysis.

3.4. Data collection procedure and time frame

The study employs the primary data. The primary data has been collected through the
structured questionnaire from the stock investors in Nepalese stock market.

Primary Data
A survey was carried out to collect opinions of investors in Nepalese stock market. The
stock investors were randomly selected. The structured questionnaire contains the
demographic characteristics along with stock market issues which is designed to measure
the investor awareness were provided to the respondents. Those questionnaires were
provided to the respondents in different locations within Kathmandu as per convenience.

3.5. Validity and Reliability

24
Since the prior of the study is not the directional or the objectives of the study are not
concentrated on certain dimensions, thus, two tailed test is applied for hypothesis testing.
For the data analysis, selection of the statistical tools is based on the normality test. For
mean test to support the objective 2, One-Sample t-test (parametric) is selected but the
contradiction is; in case of the sample size is greater than 30, z-test is the appropriate.
Moreover, the statistical software like - Statistical Package for Social Science (SPSS) has
the facility of One-Sample t-test which follows the normal distribution and also applicable
for large sample mean test. Thus, One-Sample t-test is applied. On-probability sampling
design was used due to infinite population and convenience sampling technique was
adopted to draw the sample.

Since, the exam type yes/no questions were asked to the respondents to explore their level
of awareness thus, for data analysis concerning the first objective, theoretical framework
was designed accordingly. On the other hand, reliability test is conducted for scale
evaluation. The calculated Cronbach's Alpha is 0.751 with four statements for the second
objective. As a general rule, a coefficient greater than or equal to 0.70 is considered
acceptable and a good indication of construct reliability (Nunnally, 1978). To get the
accepted level of Cronbach's Alfa, statement 3.1 is removed. The corresponding values of
Cronbach's Alfa if item deleted of those retained statements are presented in Table 3.5.

Table 3.5: Cronbach's Alpha Test (for objective 2)

Statements Cronbach's Alpha
(if Item Deleted)

3.3 Brokerage firms have been providing sufficient

trading information 0.609
3.4 Listed companies have been disclosing require 0.631
information on time.
3.2 NEPSE has been providing sufficient market 0.754
information.
3.5 Newspapers & magazines have allotted sufficient
space for economic issues and for market information 0.751
25
3.6. Analysis Plan

The information or data obtained from the different sources are in the raw form. From that
information, direct presentation is not possible. So, it is necessary to process data and
converts it into required form. After then only, the data are presented for this study. This
process is called data processing. For this study, only required data are taken from the
primary data.

3.6.1. Data Analysis Tools

Any analytical tools can be used in solving the problem of the study. For the purpose of the
study, all of the collected secondary data will have arranged, scanned, tabulated under
various heads and then after descriptive cum statistical analysis have been carried out to
enlighten the study. To get the concrete results from this research, data have been analyzed
by using different types of tools. As per topic requirements, emphasis is given on statistical
tools rather than financial tools. So, for this study following statistical tools are going to
use.

3.6.1.2 Arithmetic Mean

It is the sum of all the observations divided by the number of observations. In such a case
all the items are equally important. As arithmetic mean is most common and popular tools
for data analysis, here in this study also, arithmetic mean is used. It is computed by using
following formula:

∑X
Mean ( X ) = n Where X = Mean
∑ X = Sum of all the Variable X
n = Variables involved

26
3.6.1.3 Standard Deviation
The standard deviation is the best tools to study fluctuation in any data. It is usually
denoted by the letter sigma (δ). Karl Pearson suggested it as a widely used measure of
dispersion and is defined as the positive square root of their arithmetic mean of squares of
the deviation of the given observations from their arithmetic mean of a set of value.

It can be computed by using following formula.

1
S . D ( δ )=
√ n
∑ ( X −X )2

Greater the magnitude of standard deviation, higher will be the fluctuation and vice versa.

3.6.1.4 Coefficient of Correlation

By this statistical tool, the degree of relationship between to variables is identified. In other
words, this tool is used to describe the degree to which one variable is linearly related to
other variables. Two or more variables are said to be correlated if change in the value of
one variable appears to be linked with the change in the other variables. The correlation
analysis refers the closeness of the relationship between the variables.

Correlation may be positive or negative and ranges from -1 to +1. Simple correlation
between interest rate and deposit amount, interest rate and credit or lending amount and
interest rate (both deposit rate and lending rate) and inflation is computed in this thesis. For
example, let’s say that the correlation between interest rate and inflation is positive. It
indicates that when inflation increases, interest rate also increases in same direction and
vice versa. For our study following reference is used.

 Correlation may be positive or negative and ranges from -1 to +1. When r = +1, there is
positive perfect correlation; when r = -1, there is perfect negative correlation; when r =
0, there is no correlation and when r < 0.5 then there is low degree of correlation.
 When ‘r’ lies between 0.7 to 0.999 (or -0.7 to -0.999), there is high degree of positive
(or negative) correlation.
 When ‘r’ lies between 0.5 to 0.699, so there is a moderate degree of correlation.
27
The simple correlation coefficient, r, is calculated by using following formula:

nΣX 1 X 2 −( ΣX 1 )( ΣX 2 )
2 2
Simple Correlation Coefficient (r) = √nΣX 1
2 −( ΣX 1 ) √nΣX 2
2 −( ΣX 2 )

Alternately,

Cov ( X 1 X 2 )
r = VarX 1 , VarX 2

Where,

1
Covariance (X1, X2) = n ∑ ( X 1 −X 1 )( X 2 −X 2 )

n = Total number of observations.

X1 and X2 = two variables, correlation between them are calculated.

T-test for significance of sample correlation coefficient:

If ‘r’ is the observed sample correlation coefficient of ‘n’ pairs of observations from bi-
variate normal population, the test statistics for significance of correlation under null
hypothesis is given by

r
t= √1−r 2 × √ n−2 ~ tn – 2

i.e. t follows t-distribution with n-2 degree of freedom (d.f.), ‘n’ being the sample.

The (1-α) % confidence limits for estimating population correlation coefficient (ρ) are
given by

r ± tα (n-2) × S.E. (r)

2
1−r
= r ± tα (n-2) × √n

28
29
 CHAPTER IV

RESULTS AND DISCUSSIONS

This is the section where the filtered data are presented and analyzed. In this chapter, the
relevant data and information necessary for the study are presented and analyzed keeping
the objectives set in mind. This chapter consists of various calculation made for the
analysis of investor awareness and equity investment. The analysis is fully based on
primary data available. In presentation section data are presented in terms of table. The
presented data are then analyzed using different statistical tools and interpreted
accordingly.

For simplicity, in this research, presentation analysis and interpretation of data are made
according to the nature. While analyzing, different statistical tools like the descriptive
statistics, the correlation analysis, Cronbach’s alpha and one sample t-test are applied for
the primary data analysis.

3.7. Respondent’s Characteristics

The analysis was based on the revised list of variables after considering Cronbach’s Alpha
at satisfactory level. Demographic characters with level of investor awareness and access to
market information is presented in Table 4.1 and the descriptive statistics is presented in
Table 4.2 as follow. The questionnaire asked each respondent to provide demographic data
that included age, sex, sector of employment, academic background, and level of equity
investment. The characteristics of respondents showed about 42% of the respondents lie in
age group 35 to 45 years, with respect to gender 83% are male and remaining female
investors, about 31% of respondent are individual investor, similarly around 51%
characterize the academic background of masters and above and about 43% respondents
are from the investment level 5 to 25 lakhs.

30
Table 4.1: Respondent's Characteristics

Characteristics Category Frequency Percentage

Age 25 – 35 24 36.92
35 – 45 27 41.54
45 – 55 12 18.46
Above 55 2 3.08
Sex Male 54 83.08
Female 11 16.92
Sector of employment College/campus 11 16.92
Bank/finance 7 10.77
Government office 8 12.31
Private business 19 29.23
Others (individual 20 30.77
investor)

Academic background SLC 2 3.08

Intermediate 3 4.62
Bachelor 27 41.54
Masters and above 33 50.77
Level of investment Below 5 lakh 23 35.38
5 to 25 lakh 28 43.08
25 & above 14 21.54
Investor Awareness Less Aware 3 4.62
Aware 9 13.85
Fairly Aware 27 41.54
Highly Aware 26 40.00
Access to information Low Access 18 27.69
Satisfactory Access 32 49.23
Fairly Access 12 18.46
Highly Access 3 4.62

This study result show that about 42% of total investors are fairly aware and around
49% of respondents lie corresponding to satisfactory access. In totality, more than 50%
investors lie in awareness and access categories.

31
3.8. Descriptive Statistics of Investor awareness and access to
information

Table 4.2 Investor awareness and access to information

Statistics N Investor Awareness Access to information

Mean 65 0.785 0.613

Median 65 0.810 0.625

Mode 65 0.810 0.625

Std. Deviation 65 0.125 0.163

Minimum 65 0.476 0.313

Maximum 65 0.952 1.000

From the Table 4.2, the statistics shows that mean response of investors' awareness is 0.785
which is greater than the cutoff point 0.50 thus the result of this study shows the equity
investors in secondary market are aware, more specifically, investors are fairly aware. On
the other dimension, mean response of equity investors in terms of access to market
information is measured as 0.613 which is also greater than benchmark 0.50 thus, another
result of this study is that equity investors have access to information, more specifically,
investors have satisfactory access to market information.

3.9. Correlation Analysis Between Investor Awareness and Level of

Investment

The parametric test, Pearson Correlation provides the degree of association between two
variables; investor awareness and level of investment is presented in the Table 4.3. The
result shows that there is positive relationship between two variables and it is significant at
the 0.05 level of significance. Thus, the alternative hypothesis i.e. there is significant
relationship between investor awareness and investment on equity is accepted.

32
Pearson Correlation (Parametric)

Table 4.3 Investment Awareness and Level of Investment

Description Level of investment

Pearson Correlation 0.29
Sig. (2.tailed) 0.019
N 65
*Correlation is significant at the 0.05 level( 2-tailed)

Thus, the major finding of the study is that there is positive correlation between investor
awareness and the level of stock investment in Nepalese stock market.

3.10. Analysis of investor awareness and level of investment

The Table 4.4(i) shows the frequencies corresponding to different classes of investor
awareness with classes of investment. The frequencies with indication of percentage based
on total responses are presented in each category. Investor awareness is equally important
in each level of investment thus the frequency distribution corresponding to investment is
high. The extreme frequencies in cross tabulation shows that 0% less aware investor invests
in 25 lakh & above and 15.38 % highly aware investors have 5 to 25 lakh equity investment
in secondary market.

Investor Awareness Level

Table 4.4(i): Cross tabulation of investor awareness and investment level

Investor Investment Below 5 lakh 5 to 25 lakh 25 & above Total

Awareness level
Level
F % f % F % F %

Less Aware 1 1.54 2 3.08 0 3 4.62

Aware 6 9.23 2 3.08 1 1.54 9 13.85
Fairly Aware 9 13.85 14 21.54 4 6.15 27 41.54

33
Highly Aware 7 10.77 10 15.38 9 13.85 26 40.00
Total 23 35.38 28 43.08 14 21.54 65 100.00

One sample t-test of access to information

Under the parametric test, one-sample t-test is used to test the hypothesis that there is
problem on access in market information for equity investors as alternative hypothesis.

Table 4.4(ii): One Sample t-test of investors' access to information

Test Value = 0.50 T Df Sig. {2-tailed)

Access to market information 5.609 64 0.005

Table 4.4 (ii) shows the test value assumed to be 0.50 which is the cutoff point of
investors' responses for this study. The critical t-statistics at 5% level of significance and 64
degrees of freedom is 2.000 (2-tailed), which is lesser than calculated t-value. Thus, the
null hypothesis is rejected in favor of alternative hypothesis i.e. there is problem on access
to market information for equity investors in secondary market.

3.11. Investor’s Suggestions for Nepalese Stock Market

The structured questionnaire also included a section which is designed to get the investor
suggestion for the Nepalese stock market participants. Four statements were provided with
Yes and No response options. The analysis is simply conducted in frequency distribution
with percentage. Table 4.5 shows summary of the analysis where about 91 percent
respondents are not satisfied with the current sources of information, nearly 88 percent are
in favor of advertisement, almost 85 percent believed that existing brokerage firms are not
sufficient to meet the current demand and about 75 percent felt that new stock exchange is
necessary.

Table 4.5 Investor Suggestions

34
 Responses
Statements
N No % Yes %
Do you think the current sources of information are
65 59 90.77 6 9.23
sufficient?
Do you think advertisement is necessary to create
65 8 12.31 57 87.69
investor awareness?
Do you think the existing brokerage firms are
65 55 84.62 10 15.38
sufficient to meet the current/market needs?

Do you think new stock exchange is necessary? 65 16 24.62 49 75.38

Despite the suggestions provided in the above statements, respondents were also prescribed
the additional suggestions to increase the investors’ awareness in Nepalese capital market
through the end of concern authorities. Respondents believed that to enhance the existing
level of investor awareness following suggestions need to be executed.

 Disseminating timely and sufficient information

 Conducting the effective training and workshops
 Investors need to be alert to get the information own-self
 Advertising through media
 Developing proper data storage and management system
 Introducing basic investment courses from school level
 Government initiatives and support to expand the market
 Creating attraction to Non-resident Nepalese in capital market, and
 Introducing online trading system

35
 CHAPTER-V

SUMMARY AND CONCLUSIONS

In summary part, revision or summary of all four chapters is made. In conclusion part, the
result from the research is summed up and suggestion and recommendation is made based
on the result or the study. Recommendation is made for improving the present situation to
the concerned sector as well as for further research.

4.1. Summary of Findings

From the inception of the financial market various factors have been directly or indirectly
influencing for the stock market so that financial market participants believe that the events
that burst-out expectedly or unexpectedly that have significant impact on investors’
mindset and that information play an important role in individual investment decisions. The
investor knowledge on such events and its contribution can be termed as the investor
awareness.

Investor awareness is the level of existing information with the perception and ability of
understanding the upcoming environment. It is the general assumption that the more aware
investors make more investment decision and less aware investors comparatively make less
investment decision. As crawling in developing phase of our stock market, does investors
are aware of existing flow of information provided by the SEBON and other concern
information. Does the current rules and policies are applicable and fascinating for
upcoming investors? It is the expected that the awareness and their commitment move in
the same direction, and their association contribute a lot to the economic development.

The finding of the study is that fully aware equity investors have more chances of holding
high volume of equity investment. In other words, there is positive correlation between
awareness and level of investment. Investors are keen to get market information timely and
sufficiently to make a profitable investment. Nepalese capital market is characterized with
limited sources of information. The rational fact is that investors need to have good access
to market information but the study shows that there is problem on access to information
for equity investors in secondary market.
36
Majority of the equity investors provides the suggestions; disseminating timely and
sufficient information, conducting the effective training and workshops, investors need to
be alert to get the information own-self, advertising through media, developing proper data
storage and management system, introducing basic investment courses from school level,
government initiatives and support to expand the market, creating attraction to Non-
Resident Nepalese in capital market, and introducing online trading system to improve the
equity investor awareness in Nepalese capital market.

Equity investors with higher investment have more knowledge/aware in investment than
those with lower investment. Equity investors with higher educational background have
more investment than those with lower level of education. Mass equity investors in
secondary market experienced that existing sources of information are not sufficient and
realized the need of advertisement. Similarly, majority of them believed that existing
brokerage firms are not sufficient to meet the market needs and think the need of new stock
exchange.

The study is based on the descriptive and analytical research design which employed the
primary data. The sample of primary data is 100 stock investors. The response rate for the
primary data collection is 65 percent.

The findings suggest that level of investment would increase, if various efforts were done
to enhance the level of investor awareness. The stakeholders in the securities market has
been engaging for investor awareness activities but the investor base or attraction of
investors has not been reached in required level. Investors are always intense to get first
hand market information and want to be updated to protect their investment. One the other
hand, regulating bodies are also trying to protect the investors from the malpractices and
fraud in the capital market. With the same line, the research finding shows that there is
problem for equity investors to get the information which help to create and expand level of
awareness and there is progressive relationship between awareness and level of investment.
Thus, researchers would like to suggest regulators with some techniques which help to
create investor awareness: Publications for investors; Facilities of hotlines and Toll Free
numbers; Websites with up-to-date information; Investors alerts System; Financial
Awareness Curriculum; Public/community meetings; Specific investing tools; and Plain
37
language disclose In this way, securities regulators can implement the above techniques
individually or, two or more simultaneously. But, the regulators must distinguish investor
advice from investor awareness and have to think that one approach may not be applicable
for the different investor groups. Thus, the differentiation of the of investor awareness
techniques is essential in practice.

Further research can be conducted by extending the scope of the study to cover the
variables including income level and period of residency in capital and major cities.

38
4.2. Conclusions

In this study, investor awareness and its relationship with investment decision in equity and
investors' access to market information were examined. Investor awareness is crucial for
the investment decision making and sustainable growth of capital market. The result of the
study depicted that equity investors are aware and their level of awareness is high
compared to desired level. The finding of the study is that fully aware equity investors have
more chances of holding high volume of equity investment. In other words, there is positive
correlation between awareness and level of investment. Investors are keen to get market
information timely and sufficiently to make a profitable investment. Nepalese capital
market is characterized with limited sources of information. The rational fact is that
investors need to have good access to market information but the study shows that there is
problem on access to information for equity investors in secondary market.

The investor awareness level is found to be affected by the related work experience,
understanding of investment environment, learning expectation, and access to market
information. Equity investors in secondary market are not satisfied with the available
sources of information and efforts of information disseminating mechanism. Majority of
the equity investors provides the suggestions; disseminating timely and sufficient
information, conducting the effective training and workshops, investors need to be alert to
get the information own-self, advertising through media, developing proper data storage
and management system, introducing basic investment courses from school level,
government initiatives and support to expand the market, creating attraction to Non-
Resident Nepalese in capital market, and introducing online trading system to improve the
equity investor awareness in Nepalese capital market. Equity investors with higher
investment have more knowledge/aware in investment than those with lower investment.
Equity investors with higher educational background have more investment than those with
lower level ofs education. Mass equity investors in secondary market experienced that
existing sources of information are not sufficient and realized the need of advertisement.
Similarly, majority of them believed that existing brokerage firms are not sufficient to meet
the market needs and think the need of new stock exchange. Since, the objectives of this
study are to find out the extent of relationship between investor awareness and volume of
39
equity investment in secondary market and to identify the level of equity investors' access
to market information. The results show that there is positive relationship between
awareness and equity investment and problem on access to market information.

4.3. Recommendations

Based on the analysis of primary database and their major findings, the following
recommendations are suggested for the stock market participants.

The initial development phase of the stock market is yet to be succeeded to attract the
number of investors. For the grow and development of such stock market, it is essential to
attract more participant so that based on the insight of the study, it is recommended that it is
the time to launch more investor awareness campaign through the end of concern
authorities.

i. Along with the awareness programs, investors are suggested to participate in such
programs and to get the diverse range of knowledge on stock market performance.
ii. The level of access to market information is satisfactory based on the findings of the
study so that it is essential to provide more options to the stock investors for getting
easily and cheaply the available market information.
iii. The study is based on relatively small sample size thus for the future study, it is
recommending that increase the sample size in such a way that the statistical tests
would be justified.
iv. The secondary data analysis includes the limited variables so that it is recommends
that increase the number of variables in future studies.
v. The future studies on the similar topic would be more conclusive if the study
includes diverse range of structure questionnaire.

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