Predicting a Model for the Financial Risk Tolerance of Retail Investors of Durgapur City on Their Demographic Factors Using Multiple Discriminant Analysis

Abstract

The prediction of investor behavior of a particular area/region is very useful for investment agencies to speculate markets. In particular, the financial risk tolerance (FRT) of the retail investors is often considered as the most important parameter for prediction of the investor behavior. However, it is a difficult task given its dependence on multiple demographic variables. The objective of this paper is to determine the FRT of the investors residing in the industrial city of Durgapur in the state of West Bengal in India. Several demographic factors of the investors were considered as independent variables and the response from the investors was collected through a questionnaire which was then analyzed using a multiple discriminant analysis (MDA) approach. A model was developed with the analyzed data to predict the FRT of the respondents which showed the number of earners as the most sensitive variable, whereas marital status was the least influential variable.