BUS105 Business Statistics

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21-06-2022

Course Code: BUS105
University: Kings Own Institute

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Country: Australia

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Section 1: Introduction

Investment normally entails the utilization of funds/money at present on either some projects that can generate some income with the hope of having better returns in the future.

It is presumed in the traditional financial theories that investors are rational. That is to mean that, people rationally and critically choose between a number of alternatives presented to them, they also act rationally in the process of making decisions regarding their investment plans (Arano, Parker, & Terry, 2010). In the later years, most researchers sometimes individual investor makes irrational decisions concerning their investment plans (Barberis & Thaler, 2003).

The purpose of this study was therefore to determine if there are any gender differences in the amount invested by the individuals. The following research question underpinned this study; Are there gender differences in the investment amount? To answer this question a series of analysis were conducted to come to a conclusion. The next sections are divided as follows;

Section 2: Review of academic sources
Section 3: Presentation of a simple bivariate analysis
Section 4: Investigation of the variable return per $1000
Section 5: Recommendations
Section 6: Conclusions
Section 7: Reference list

Section 2: Reviewing Academic Source(s) or Website(s) Relevant to Investors

A number of the previous research studies on investment and gender has found that males tend to have less risk aversion when compared to their female counterparts in investing decisions (Graham, Stendardi , & Myers, 2002). However, a more recent study by (Arano, Parker, & Terry, 2010) yielded mixed reactions.

It is believed that even though a number of females have control of the day-to-day finances in their households, most of them have less or no experience when it comes to investments. In general, it is believed that males tend to be more acquainted with both financial wealth and knowledge putting them ahead when it comes to confidence in investing and ready to tackle risks involved in investments (Barber & Odean, 2001). A study conducted between 1993 to 2003, established that both female and male fund managers have equal returns though each of them have different strategies of obtaining returns (Gudmunson & Danes, 2011). The study also found out that males dominate the mutual fund industry (representing 90% against the females’ 10%). The fact that females are underrepresented poses a challenge to the females; majority of them are not educated on how best they can invest their assets.

Section 3: A simple Bivariate Analysis of the Investor Data and Hypothesis Test

In this section, we analysed the relationship between gender and amount of money invested

Table 1 below gives the mean, standard deviations and the standard errors of the mean for both the males and the females. What can be observed is that males, on average, invest more ($207,417.14) compared to the females ($145,978).

Table 1: Group Statistics
	gender	N	Mean	Std. Deviation	Std. Error Mean
amount invested	Female	50	145978.0000	80035.42823	11318.71881
amount invested	Male	50	207417.1400	93398.40983	13208.52979

Table 2: Independent Samples Test
		Levene's Test for Equality of Variances		t-test for Equality of Means
		F	Sig.	t	df	Sig. (2-tailed)	Mean Difference	Std. Error Difference	95% Confidence Interval of the Difference
									Lower	Upper
amount invested	Equal variances assumed	2.067	.154	-3.532	98	.001	-61439.1	17394.78815	-95958.53	-26919.75
	Equal variances not assumed			-3.532	95.753	.001	-61439.1	17394.78815	-95968.66	-26909.62

An independent samples t-test was performed to compare the mean amount of money invested by the males and the females. As predicted, the males (M = 207417.14, SD = 93398.41, N = 50) invested much more of their money as compared to the females (M = 145978.00, SD = 80035.43, N = 50), t (98) = -3.532 p < .001, two-tailed. The difference of 61439.1 indicated a very large difference. Essentially results showed that male respondents tend to invest more of their money as compared to the females.

Section 4: Investigate the variable return per $1000

95% Confidence Interval

Table 3: 95% Confidence Interval for 'return per $1000'

return in $ per thousand

Sample Mean	40.65
Standard Error	1.445395
Sample Standard Deviation	14.45395
Sample Variance	208.9167
Significance level	0.05
Confidence Coefficient	0.95
Margin of error	2.867977
Point estimate	40.65

These intervals imply that at 95% confidence, the average of return expected to range between 37.782 and 43.518 thousand dollars.

Test the claim the return per $1000 is above $30

This claim is tested using One-sample T-test, at 0.05 significance level.

Hypothesis:

Null hypothesis (H0): µ = 30

Alternate hypothesis (HA): µ > 30

One Sample t-test

t-Test: Two-Sample Assuming Equal Variances
	return in $ per thousand	Claim test
Mean	40.65	30
Variance	208.9166667	0
Observations	100	100
Pooled Variance	104.4583333
Hypothesized Mean Difference	0
df	198
t Stat	7.368228132
P(T<=t) one-tail	2.28898E-12
t Critical one-tail	1.652585784
P(T<=t) two-tail	4.57796E-12
t Critical two-tail	1.972017478

A one-sample t-test was conducted on the return on investments to evaluate whether the mean was significantly different from 30, the claim mean return on investment. The sample mean of 40.65 (SD = 14.45) was significantly different from 30, t (99) = 7.368, p = 0.000, the 95% confidence interval for the difference in return on investment ranged from 7.782 to 13.518. We then conclude that, the mean return on investment is significantly greater than 30 (in thousand dollars).

Section 5: Advice to the New Employees at the XYZ Company

Basing my arguments on the findings, I would like to advice the new employees not to look back when it comes to investing. Results have shown that on average, the returns on investment are by far greater than $30,000. This should make the new employees to really think about investing as early as they join company XYZ. My other advice would go to the female employees whom research has shown that they tend to fear investing, I would encourage them follow the male footsteps and increase their investment amounts in order to get good returns.

Section 6: Conclusions and Recommendations for Further Research.

This study concludes that there is relationship between gender and amount invested by the investors. In particular, the study concluded that male investors are more likely to invest more money as compared to the female investors. Study also showed that the return on investments is significantly greater than $30,000. This shows that good returns are “harvested” from investing.

The study recommends that risks associated with investments should be minimized in order to encourage more women to invest since research showed that women were not very proactive in investing as compared to the men. The study goes ahead to recommend further that policies aimed at increasing confidence among the women in investing should be rolled out and be implemented since women with low investment confidence tend to have high risk aversion as compared to the men.

For the future research, this study recommends that in future research should be done to identify that different genders consider when making investment decisions. This could further explain the reason as to why females are more reluctant to invest.

Section 7: Reference list

Arano, K., Parker, C., & Terry, R. (2010). Gender-based risk aversion and retirement asset allocation. Economic Inquiry, 48(1), 147-155.

Barber, B. M., & Odean, T. (2001). Boys Will be Boys: Gender, Overconfidence, and Common Stock Investment. Quarterly Journal of Economics, 116(1), 261-292.

Barberis, N., & Thaler, R. (2003). A survey of behavioral finance. Handbook of the Economics of Finance, Elsevier Science, 1051-121.

Graham, J. F., Stendardi , J., & Myers, J. K. (2002). Gender differences in investment strategies: An information processing perspective. International Journal of Bank Marketing, 20(1), 17-26.

Gudmunson, C., & Danes, S. (2011). Family financial socialization: Theory and Critical Review. Journal of Family Economic Issues, 1(32), 644-667.