Middle-week thoughts: hunger treatment or investment amnesia

Tags: IMF, investment, strategy, Yevhen Pentsak, inflation, investments, crysis

The fourth phase of the survey: «The impact of socio-demographic characteristics of the investor on his attitude to financial risk» had completed in Kyiv Mohyla Business School (KMBS).

The results of the fourth phase of the survey on the attitudes of the Ukrainian people to venture investments are interesting, regarding the rising inflation, instability in the banking system, crisis at the real estate market, political instability, etc. (the econometric analysis was conducted by Irina Timoshenko). Undoubtedly, the worsening of the conditions of uncertainty in Ukraine and throughout the world have an influence on the attitude of the Ukrainian population to the financial risks.

The database of the fourth phase is given by the Kiev International Institute of Sociology and Education on the basis of respondents’ survey in all regions of Ukraine, evenly representing all levels of the population. The database includes the following socio-demographic characteristics of respondents in Ukraine as age, sex, occupation, education, financial status, region of residence, type of settlement (town, village) as well as the respondent’s answer to the following question (the question does not change during all phases of research):

If you were offered to choose one of three opportunities to invest, which of the following options you will select:

  1. Small profit - low risk.
  2. Moderate profit - moderate risk.
  3. Big profit - high risk.
  4. Hard to say.

We got the following statistical image of the distribution of responses over the four phases of the survey keeping only informative responses, i.e., observation where the variable «risk» possesses the value of 1, 2 or 3:

Table 1

risk 1 wave, % 2 wave, % 3 wave, % 4 wave, %
1 53 52 54 50
2 38 39 36 41
3 9 9 10 9
Total 100 100 100 100

We see that the distribution of data of the fourth wave differs from previous ones. The proportion of those who preferred a small profit in a low-risk (50%) considerably decreased in comparison with the previous wave, which took place six months ago. At the same time, the proportion of those who are inclined to the moderate (average) risk, which is providing moderate (average) income (41%), has increased. And the proportion of those who are inclined to the high risk for getting big profit (9-10%) virtually remained unchanged.

We can also state that the subjective assessment of theirs financial situation in March 2009 has significantly worsened in comparison with the previous wave of research, which was held in October 2008.

Table 2

Financial position

October 2008

March 2009
Not enough money to buy food 12% 15%
We have money to buy food, but there is not enough money to buy clothes 36% 44%
We have enough money to buy food and clothes and we can make savings 39% 33%
We can afford to buy expensive things 11% 6%
We can afford everything we want 1% 0%
HARD TO SAY / I DON'T KNOW 1% 1%
Total 100 100

In the fourth wave of research the education factor, which was not significant at the earlier stages of the survey, became evident: together with increasing of education level the propensity to risk increases too. So, the proportion of people with higher education who are willing to risk equals 56%, while the proportion of people with incomplete secondary education - only 30%.

Table 3

risk incomplete secondary secondary incomplete special higher
1 70% 52% 49% 44%
2 24% 40% 42% 45%
3 6% 8% 9% 11%

The financial status has not affected the investor's attitude to risk earlier, but now it proved to be important for investment decisions: together with the increase of the financial status increases the willingness to risk. Among those people who highly assesses their financial status, the proportion of people who are willing to risk equals 71%, in comparison with 33% of those people who assesses their financial situation as low.

Table 4

risk not enough money for food enough money only for food enough money for food and we can make savings can afford to buy expensive things
1 67% 53% 43% 28%
2 26% 40% 46% 52%
3 7% 7% 11% 21%

We can make a conclusion according to the results of the survey:

  • People become less inclined to risk with age, that is why they are less inclined to invest in risky projects.
  • Religious beliefs of a person negatively affects the attitude to risk: believers are less inclined to risk than those who are atheists.

The reduction of the propensity towards risk with age can be explained by the fact that young people are more active, more effective human beings, who are tend to see more opportunities, and accordingly are more inclined to risk. Since Christianity, which dominates in Ukraine, assumes a passive contemplation and reconciliation with the changes, the believer is less inclined to take risks and do not «change their own destiny» as atheists do.

The attitude of the Ukrainian investor to risk over the past two years is constantly changing considering the continuing crisis in the world and in Ukraine in particular. However, factors affecting the attitude of Ukrainians to take risks are changing too. The age and the gender are constant factors, which influence investor’s attitude to risk. The influence of region and the size of settlement, which were important factors of influence in 2008, are losing its relevance gradually. However, such factors as education, religion and financial status have become influential factors during the crisis in 2009.

The desire to invest disappears when you realize that there is not enough money even to buy food. The crisis will not affect the desire to play at the stock market, but only in case when there is plenty of food! This is a summary of our survey. The full materials of two years’ survey, and factors, which are influencing the risky decisions-making by various categories of the Ukraine population, you can find in KMBS on a commercial basis.

So, the players stayed in the market – the only thing you need is to determine the optimal investment strategy. We want to surprise our readers: the Markowitz model, the model of optimal investment have begun to work already! You will be able to follow our advices on its practical use at the Ukrainian stock market in the nearest future. You will be aware in what quantities and which shares you need to buy in order to ensure optimal balance between risk and profitability in your investment portfolio!

Today, at May 8, IMF will decide the fate of the second tranche of the loan for Ukraine. Let's keep fingers crossed!

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See also:

Мысли среди недели:путь к спасению мировой экономики

Последние события на мировых фондовых рынках заставили задуматься, как близко мы стоим к краю мировой экономической пропасти. События 11 марта 2011 года, 4 августа 2011 уверенно указывают на то, что депрессивное десятилетия начала третьего тысячелетия будет иметь еще более депрессивное продолжение. Движется ли мир в хорошем направлении во всех смыслах слова «добрый»? Может долго держаться макияж, если наносить один слой пудры за другим?

Comments:

Alexandr 08/05/2009 16:24

Євген, вітаю вас з першим нормальним дослідженням ставлення українців до ризику. І вітаю нас усіх з тим, що інвестиції у фондовий ринок знов стають цікавими.
Моя особиста думка, що зараз унікальний час для створення реального українського фондового ринку. Оскільки підприємствам вкрай потрібні інвестиції, а у інвесторів багато чого лежіть просто під матрацом. Передумови для розвитку вітчизняного ринку чудові. Але ж чи станеться воно нарешті?

pentsak@kmbs.com.ua 08/05/2009 20:52

Олександре, на мою думку український інвестор (10% населення згідно до дослідження) вже готовий до інвестицій у фондовий ринок України напряму чи через ІСІ (інститути спільного інвестування). Якщо вкачування грошей в Україну буде продовжуватись, а перші сигнали прямого західного інвестування ми вже спостерігаємо, то нова булька українського ринку не за горами. Проте це не значить, що ринку потрібно уникати. Головне - вчасно закрити позицію. Будемо разом за цим пильно стежити. У вересні 2008 року модель Марковиця нам у цьому здорово допомогла. Ми порадили нашим інвесторам закрити усі позиції у акціях. І не помилилися. Зараз ми потрохи входимо в ринок, але це не означає, що ми входимо на роки. Можливо через два - три місяці потрібно буде ці позиції закривати. Найближчим часом модель Марковиця відновить свою роботу у нас на сайті.
Ще місяць і можливо потрібно буде знову приглядатися до ПІФів!

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