A Fuzzy Rough Feature Selection Framework for Investors Behavior Towards Gold Exchange-Traded Fund

A Fuzzy Rough Feature Selection Framework for Investors Behavior Towards Gold Exchange-Traded Fund

Biswajit Acharjya, Subhashree Natarajan
Copyright: © 2019 |Pages: 28
DOI: 10.4018/IJBAN.2019040103
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Abstract

Behavioural finance has gained research interest among researchers because of investor behavior and market anomalies. Investor behaviour varies with demographics and geographic characteristics. Further, investor behavior towards a gold exchange trade fund is gaining research interest due to various factors. Not much research has been carried out in this direction, with the exception of some comparisons. Therefore, the performance of a gold exchange traded fund needs to be assessed from the investor behavior perspective. Additionally, the investors behavior contains uncertainties. Thus, there is a need for intelligent techniques for identifying the investors behavior despite the presence of uncertain behavioral characteristics. Therefore, to study uncertain behavior characteristic in gold exchange traded fund, in this article the authors employ a fuzzy rough set. They employ fuzzy rough quick reduct algorithm to find the superfluous attributes. Further decision rules are generated to identify the chief feature of investors' behavior towards gold exchange traded fund.
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1. Introduction

Investment decision where each investor identifies best investment portfolio among various other alternatives. The prime objective is to earn higher profit by minimizing the portfolio risk. Choosing a right portfolio becomes a difficult task for any investor. Hence, it is the investor’s emotional and cognitive belief which encourages the investor for choosing the best portfolio among others. The finial investment decision of the investor starts with investor’s own observation and experiences, and its ends in the form of belief for the future performance of the portfolio (Shyng et al., 2010). Investment in gold has outperformed many investment alternatives both for retail and institutional investors. Among all, gold exchange traded fund (GETF) is an emerging instrument, renowned for its high return capability and its ability for hedging the risk. Pricing of GETF glitters similar like physical gold price, additionally, it avoids hassle of keeping gold in physical form. It is traded in the established stock markets and helps the investors for getting quality gold at transparent price. Availability in small denominations attracts retail investors to invest in GETF. Hence, investor prefers to invest in GETF for balancing the portfolio risk and diversifying other risk of loss at economic slowdown. In the global perspective GETF is growing every year but in Asian countries especially in India it has not reached up to the level. There is a need for proper awareness about the GETF product in Indian market. Performance of GETF needs to be assessed from both the fund perspective and the investors’ perspective. As financial market is wide, filled with uncertainties and incomplete information, there is a need for defining data driven decisions. Better predictive technique is required which can deal with these uncertainties, as the macro factor affects the GETF price movement and investor preference. All these lead to study the behaviour of investor towards GETF.

Theory of planned behaviors (TPB) deals with behavioral belief, normative belief and control belief of an individual. All these affect the behavioral intension (Ajzen, 1991). Financial behavior of an individual is affected by the individual attitude towards saving, investment and borrowing (Agarwalla et al., 2015). In India, Financial attitude deals with anxiety, interest in financial issue, precautionary saving, free spending, materialistic attitude, propensity to plan for short term and long-term goal (Paluri and Mehra, 2016). Stock market participants attitude deals with performance, hassle factor, risk avoidance and perception towards regulator (Sivaramakrishnan et al., 2017). Consumer’s money attitude deals with power prestige, retention, anxiety achievement and respect (Tsui and Sheng, 2014). Subjective norm is the social praise on the individual belief for performing or non-performing certain activity. But, it has a positive significant influence on human behavior. Additionally, subjective norms found to be very significant especially saving, equity investment, internet banking, borrowing decision, gold investment decision etc. (Kennedy and Wated, 2011; Chudry et al., 2011; Fauzi et al. 2017). But, subjective norm research towards GETF is limited and required further research.

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