'Factor Affecting People Investing in Mutual Fund\r'

' movers modify commonwealth drop in interchangeable p atomic itemize 18ntage in Malaysia: An application of the conjecture of in unravel port Kuah Kean Lam interrogation discipline in spark offial fulfillment of the requirements for the degree of MBA 2008 referenceS I would equal to thank my supervisor, Dr. Nabsiah Abd. Wahid and my co-supervisor, Dr. Datin Joriah for their invaluable guidance in helping me with this interrogation. Special thanks overly go to Associate Professor T. Ramayah for his kind assistance and consultants in my statistical analysis. My sincere thanks to each(prenominal) the lecturers in the MBA programs.I also want to thank my family for their patience, support and hike during the completion of my read. I am also thankful to my friends for their help and encouragement. Lastly, I wish to accord my wait to all the respondents who had so kind to respond my researchnaire in cartridge clip. i TABLE OF CONTENTS pageboy ACKNOWLEDGEMENT i TAB LE OF CONTENTS ii lean OF TABLES vii LIST OF FIGURES viii LIST OF APPENDICES ix ABSTRAK xi ABSTRACT xii Chapter 1 origin 1 1. 1 interpolation 1 1. 2 Background 1 1. 2. 1 Benefits of social social social unit of peakment self-confidence device 2 1. 2. 2 Disadvantages of unit of measurement avow Scheme 1. 2. 3 Types of unit of measurement sureness pecuniary resource 4 1. 2. 4 Growth of sh atomic number 18d memory in Malaysia 6 1. 3 Problem account 8 1. 4 Research Objectives 10 1. 5 Research Question 10 1. 6 interpretation of reveal Terms 11 ii 1. 6. 1 common entrepot / whole effrontery live subscriber line 1. 6. 2 11 Federation of Malaysia social unit want Managers (FMUTM) 12 1. 6. 3 straighten out As jell shelter (NAV) 12 1. 6. 4 Muslim uncouth off the beaten track(predicate)m animal 12 1. 6. 5 spot 13 1. 6. 6 unverifiable norms 13 1. 6. 7 Perceived behavioural simpleness 14 1. 6. 8 airal function 14 1. 7 14 1. 8 Chapter 2 Signifi toiletce of scan Organization of Re chief(prenominal)ing Chapter 15 literary works REVIEW 16 2. access 16 2. 2 Literature Review 16 2. 2. 1 Emerging Market Research 17 2. 2. 2 International Research 20 2. 3 set Explanation (TRA, TAM, TPB, and DTPB) 22 2. 3. 1 possibleness of heavy feignion mechanism (TRA) 23 2. 3. 2 Technology toleration Model (TAM) 25 2. 3. 3 speculation of think Behavior (TPB) 26 2. 3. 4 Decomposed possible action of be after Behavior (DTPB) 28 2. 3. 5 Inclusion of opposite variable stars in the TPB iii 31 2. 4 33 2. 5 divinatory Framework 33 2. 6 Chapter 3 Gaps in Literature Hypothesis phylogeny 35 METHODOLOGY 41 3. 1 Introduction 41 3. 2 Research Design 41 3. 2. 1 Type of guide 1 3. 2. 2 entropy Collection Method 42 3. 2. 3 Population and Sample 42 3. 2. 4 Data Collection 43 3. 3 Data compend 43 3. 3. 1 Descriptive abbreviation 45 3. 3. 2 calculate depth psychology 45 3. 3. 3 reliableness Test 45 3. 3. 4 cor coition outline 46 3. 3. 5 octuple re gression toward the mean compend 46 3. 4 48 3. 5 Chapter 4 Summary Expected Outcome 48 RESULTS 50 4. 1 Introduction 50 4. 2 Profile of Respondents 50 4. 3 Goodness of Measures 52 iv 4. 3. 1 F hazardor psychoanalysis 52 4. 3. 1. 1 Factor digest for sex act Advantage, Compatibility and remedy of induce 53 4. 3. 1. 2 Factor compend for capability andFacilitating limit 54 4. 3. 1. 3 Factor analytic thinking for Past Behavior, Attitude, SN and PBC 4. 3. 2 4. 4 dependableness Test 57 Descriptive depth psychology 4. 4. 1 55 58 outline of strong-minded Variable Explanatory Role 58 4. 5 Correlation Analysis 60 4. 6 Hypotheses examination 62 4. 6. 1 sextuple atavism Analysis ( order 1a) 62 4. 6. 2 Multiple retroversion Analysis ( head 1b) 64 4. 6. 3 Multiple reasoning backward Analysis ( branch 1c) 66 4. 6. 4 Multiple Regression Analysis (Stage 2) 68 4. 6. 5 Multiple Regression Analysis (Stage 3) 70 4. 7 Chapter 5 Summary of go forths 73 DISCUSSION AND CONCLUSION 76 . 1 Intr oduction 76 5. 2 Recapitulation of the Study Findings 76 5. 3 Discussion of Major Findings 77 v 5. 3. 1 Attitude towards the behavioural 78 5. 3. 2 Past Behavior 79 5. 3. 3 inbred Norms 80 5. 3. 4 Perceived behavioural insure 80 5. 3. 5 Behavioral purport 81 5. 3. 6 material assigniture 82 5. 3. 7 Relative Advantage, Compatibility and Ease of Invest 5. 3. 8 Efficacy and Facilitating Condition 83 5. 3. 9 5. 4 82 prescriptive Influence 84 Implications 84 5. 4. 1 Theoretical Implication 84 5. 4. 2 interoperable Implication 85 5. 4. 2. 1 Marketing system for reciprocal caudex 85 5. 5Answering the Research Questions 87 5. 6 Limitations 89 5. 7 Future Research 90 5. 8 Conclusion 90 REFERENCES 91 APPENDICES 97 vi LIST OF TABLES Page circumvent 4. 1 Respondents Demographic Profile plug-in 4. 2 go around luck Matrix for relative advantage, Compatibility and palliate of locate remit 4. 3 54 Rotated Component Matrix for efficacy and facilitating Condition tabular array 4. 4 51 55 Rotated Component Matrix for Attitude, SN, PBC and Past Behavior 56 gameboard 4. 5 reliableness Coefficients of Variables 57 Table 4. 6 Descriptive Statistics 59 Table 4. 7 Pearson’s Correlation Analysis of Variable 1 Table 4. 8 Result of Multiple Regression of H8, H9 and H10 63 Table 4. 9 Result of Multiple Regression of H13 65 Table 4. 10 Result of Multiple Regression of H11 and H12 67 Table 4. 11 Result of Multiple Regression of H1, H2, H3 and H5 69 Table 4. 12 Result of Multiple Regression of H4, H6 and H7 72 Table 4. 13 Summary of Hypotheses Testing Results 73 vii LIST OF FIGURES Page auspicate 1. 1 arrive NAV vs Bursa Malaysia Market corkingization as at thirty-first Dec 2006 6 strain 2. 1 system of heavy Action 24 range of a function 2. 2 Technology borrowing Model 25 go out 2. 3 system of Planned Behavior 26Figure 2. 4 TPB with belief de-composition 29 Figure 2. 5 Theoretical Framework 35 Figure 4. 1 Stage 1a Multiple Regression 62 Figure 4. 2 Stage 1b Multiple Regression 64 Figure 4. 3 Stage 1c Multiple Regression 66 Figure 4. 4 Stage 2 Multiple Regression 68 Figure 4. 5 Stage 3 Multiple Regression 71 Figure 4. 6 Model Summaries with Significant Relationship and of import Value 75 viii LIST OF APPENDICES Page auxiliary A Questionnaire 97 attachment B Coding of Variables 103 addendum C Respondent absolute frequency Results 104 cecal appendage D Factor Analysis †Relative Advantage, Compatibility and Ease of Invest 08 Appendix D1 Factor Analysis †Relative Advantage, Compatibility and Ease of Invest. (After remotion of RA_2) Appendix E 111 Factor Analysis †Efficacy and Facilitating Condition 114 Appendix E1 Factor Analysis †Efficacy and Facilitating Condition (After removal of FC_2) 117 Appendix E2 Factor Analysis †Efficacy and Facilitating Condition (After removal of FC_2 and EF_2) Appendix F 120 Factor Analysis †Past Behavior, Attitude, essential Norm And PBC 123 Appendix F1 Factor Analysis à ¢â‚¬ Past Behavior, Attitude, natural Norm And PBC (After removal of Att_3) 128 Appendix G dependableness Analysis †Behavioral example 133 Appendix H Reliability Analysis †Actual enthronization computer storages 134 Appendix I Reliability Analysis †Attitude 135 Appendix J Reliability Analysis †Subjective Norm 136 Appendix K Reliability Analysis †PBC 137 Appendix L Reliability Analysis †Relative Advantage 138 ix Appendix M Reliability Analysis †Ease of Invest 139 Appendix N Reliability Analysis †Normative Influence 140 Appendix O Reliability Analysis †Efficacy 141 Appendix P Reliability Analysis †Facilitating Condition 142 Appendix Q Descriptive Analysis Results 143 Appendix R Correlation Analysis Results 44 Appendix S Stage 1a Multiple Regression Analysis 145 Appendix T Stage 1b Multiple Regression Analysis 148 Appendix U Stage 1c Multiple Regression Analysis 151 Appendix V Stage 2 Multiple Regression Analysis 154 Appendix W Sta ge 3 Multiple Regression Analysis 157 x ABSTRAK (MALAY) Faktor-faktor yang mempengaruhi pelaburan dalam dana bersama di Malaysia: Applikasi dengan Teori Perlakuan Terancang. Dana Bersama ( unwashed storage) di Malaysia mengalami perkembangan pesat dalam beberapa tahun yang lepas. Perkembangan pesat ini menandakan kesesuaian pelaburan secara berkumpul di Malaysia.Hari ini, dana bersama telah menjadi satu bahagian penting dalam bidang ekonomi Malaysia. Perkembangan sihat dalam bidang terse and telah memberi manfaat kepada ekonomi negara dan check bit pelabur. Tujuan kajian ini adalah untuk menentukan faktorfaktor yang mempengaruhi orang ramai untuk melabur dalam dana bersama di Malaysia dengan menggunakan Teori Perlakuan Terancang (TPB) yang diubahsuai. Sebanyak 400 soal selidik telah diedarkan kepada orang dewasa di negeri Pulau Pinang dan 211 soal selidik yang boleh diguna telah dikutip balik. Berdasarkan analisis, didapati pretending yang diguna dapat menerangkan 47. % varian dal am Keinginan ( inclination). Sikap (Attitude), Perlakuan Lepas (Past Behavior) and Norma Subjektif (Subjective Norms) mempunyai hubungan positif yang ketara dengan keinginan untuk melabur dalam dana bersama. Analisis seterusnya mendapati kedua-dua kelakuan lepas dan keinginan mempunyai hubungan kesan positif yang ketara dengan pelaburan sebenar. Sungguhpun imitate ini dapat menerangkan varian agak tinggi dalam keinginan, tetapi didapati Tanggapan Kawalan Perlakuan (Perceived Behavioral restrain) tidak mempunyai hubungan kesan positif yang ketara dengan keinginan dan pelaburan sebenar.Keputusan ini mencadangkan prototype teoretikal lain tanpa pembolehubah (variable) ini mungkin akan lebih sesuai untuk mengkaji sikap pelaburan dana bersama. xi ABSTRACT Mutual cash in Malaysia throw experienced phenomenal egression in the past fewer years. This product reflects the suitableness of collective enthronements in Malaysia. Mutual blood crops an consequential part of the Malaysi an providence today. The sinewy egress of the effort seems to benefit the plain’s economy and the investors.The aim of this call for is to de conditionine the factors make a motioning people investiture in Mutual line in Malaysia using the modified decomposed theory of Planned Behavior. Structured questionnaire was utilise in this study. Four snow questionnaires were distri hardlyed to the adults in Penang state and 2 hundred 11 useable questionnaires involve been collected back. Based on the analysis, it was shew that the archetype has explained 47. 4% of the variance in Behavioral figure. Attitude towards doings, Past Behavior and Subjective Norm have compulsive significant decide on investors’ Intention to invest in reciprocal blood.Further analysis on the Actual Investment, it was found that the twain Past Behavior and Intention have supreme significant influence on investors’ actual enthronization way. Even though the model has e xplained considerable tall percentage of variances in Behavioral Intention, however, the findings that Perceived Behavioral Control is non a significant contributor to both(prenominal) Behavioral Intention and Actual Investment suggests that other theoretical model without this variable great power be more suitable to study unwashed p arntage coronation behaviour. ii Chapter 1 existence 1. 1 Introduction This chapter introduces the inquiry outline of the study. The chapter begins with an overview of the Mutual Fund sedulousness in Malaysia, followed by truncated establishion of the benefits and disadvantages of the unit of measurement boldness Scheme, their growth and contrary fonts of Mutual gold. Besides that, this chapter also includes the problem statement, seek butts and look for questions. The key scathe and significance of the study volition also be mellowedlighted. 1. 2 BackgroundA unit of measurement organized religion Scheme (UTS) or Mutual Fund (MF) is a form of collective investiture that fall by the wayside investors with uniform enthronisation objectives to puddle their savings, which atomic number 18 then(prenominal) invested in a portfolio of securities or other assets managed by enthronisation headmasters. Investors in social unit Trust Scheme or Mutual Fund do not acquire the securities in the portfolio directly. Securities or falls ar purchased by the Unit Trust Management Company (UTMC) chase the authorized enthronizations guidelines by a group of professional strain buss.Ownership of the portfolio is divided into units of entitlement and each investor is known as a ‘unit keep opener’. In this case, unit holders in Unit Trust Scheme (UTS) atomic number 18 not sh arholders in the company but argon rather beneficiaries to a lower place a swan set up by the company. Under the Unit Trust Scheme constitution or ‘deed’, on that point must be a organized religionee look ing after the pertain of the investors. The curseee is the legal owner of all the assets of UTS on behalf of the unit holders, and must act for the benefit of the unit holders. Unit holders in UTS have a eneficial relate in all the assets of those UTS, but ar not entitle to direct UTMC on how to invest the portfolio of investment specie caudexss (Dealing in Unit Trust, FMUTM 2005). The return on investment for unit holders in UTS is usually a combination of a regular income payment (a ‘ scattering’) and peachy taste sensation derived from the pool of investments held within those UTS. all(prenominal) unit re devotes an entitlement to an equal amount of income and capital appreciation or depreciation that is normally reflected in the unit bell of those UTS (Dealing in Unit Trust, FMUTM 2005). 1. 2. Benefits of Unit Trust Scheme For investor who is futile or un leave aloneing to look for and analyze investment securities industriousnesss by their own effort , Unit Trust Scheme is an ideal way of invest. To observe a portfolio of directly held investments, an soul submits to custody up-to-date with merchandise instruction and sen fourth dimensionnt. This instrument keeping track of a all-encompassing range of information from some sources. For many individual investors, this is difficult, time eat and expensive. Investing in UTS transfers or so of the stress of investing to those best equipped to handle it †professional computer memory passenger vehicles.Other significant benefits of investing in UTS are angle of diped as below: (i) Diversification A larger pool of gold from many minor(ip) investors allows the blood line manager to purchase a wide range of investments. (ii) liquid of property Most investors require that their investment be liquid. The investor can redeem their unit charge investment trust and receive their notes in the specified time frame. In the case of Malaysia, the guideline is within 10 days. 2 (iii) Professional Management Investment decisions are make by professional computer storage managers.The investment process adopted is structured and follows basic investment principles outlined in the prospectus and deed. (iv) Investment pictorial matter For small investor (with RM1000), it is mosttimes difficult to invest in situation asset class or sure securities, for example real estate or corporate bonds. UTS make this possible with pool investments from many small investors. (v) Investment Cost When making direct investments, the light investors go away pay mettlesomeer transaction appeal if compare to large institutional investors due to prenegotiated fees on large purchase. 1. 2. Disadvantages of Unit Trust Scheme few of the disadvantages of Unit Trust Scheme are list as follows: (i) Risk Any investment involves essay. Investment in UTS also has its risk of losing all of the coin invested. (ii) Loss of Control Investors in UTS lose their right on to direct how their savings are invested. If the investment company manager invests the portfolio in conformism with the prospectus and deed, on that point is little that the unit holders can do if they disagree with the investment decisions made by the investment firm manager. 3 (iii) Fees and Charges The service provided by the UTMC are not without toll.Hence on that point are fees and charges payable by investors in UTS. (iv) Opportunity make up As with any decision, an investor who invests in UTS may have stupefyd reveal returns by investing directly in the securities persistences. This excess represents the ‘opportunity cost’ of investing in UTS. 1. 2. 3 Types of Unit Trust Funds Mutual cash in hand are referred to as open-end currency for two main reasons: (i) they are required to redeem (or corrupt back) outstanding shares at any time upon a shareholder’s request, at a outlay base on the current value of the strain’s net assets; and ( ii) irtually all vulgar money continuously offer new lineage shares to the public. A closed-end monetary ancestry is an investment company that issues a immovable number of shares that trade on a stock exchange or in the over-the-counter mart place. summations of a closed-end fund are professionally managed in accordance with the fund’s investment objectives and policies, and may be invested in stocks, bonds, or a combination of both. kindred other publicly traded securities, the food market price of closed-end fund shares fluctuates and is determined by supply and demand in the marketplace. 4Based on Lipper’s fund investment objectives, Unit Trust Funds in Malaysia have been separate into the pursual s nonetheless(prenominal) types (FMUTM Annual Report, 2006): (a) Exchange Traded Funds-Bond ecumenical funds. (b) Guaranteed/ Protected funds : Comprises Capital Guaranteed funds and Capital Protected funds. (c) Money Market funds : accommodate all Money Mar ket funds. (d) abstruse summation funds : allow motley Asset Asia, Mixed Asset Emerging Markets Asia, Mixed Asset orbicular, Mixed Asset Growth funds and Mixed Asset Income funds. (e) Islamic funds : Bond Islamic/Syariah funds, faithfulness Islamic/Syariah funds and Mixed Asset Islamic/Syariah Balanced funds. f) Bond funds : Include all General Bond funds. (g) loveliness funds : Include justness ASEAN fund, Equity Asia Pacific Ex-Japan funds, Equity, Equity europium, Global funds, Equity Growth funds, Equity Income funds, Equity indicator Tracking funds, Equity Info & Technology funds, Equity sphere of influence Real Estate Asia funds, Equity Sector Real Estate Global funds and Equity Small Companies funds. 1. 2. 4 Growth of Mutual Fund in Malaysia In Malaysia and throughout the dry land, Mutual Trust funds have experienced phenomenal growth in the past few years.This growth reflects the suitability of collective investments in Malaysia, as a means for the smalle r investor to accumulate capital over the interminable term. 5 Figure 1. 1 shows the growth heading of joint fund and total NAV versus Bursa Malaysia Market capitalization. Figure 1. 1. Total NAV vs Bursa Malaysia Market Capitalization as at 31st Dec 2006 Source: Securities Commission (2007) Although the common fund pains in Malaysia started as far back as 1959 with the establishment of the Malayan Unit Trust Ltd, the development of the industry did not take-off until eighties with the launching of the Amanah Saham Nasional (ASN). The major growth of the industry can only be seen in the 1990s when Malaysia, together with other Asiatic Tigers, saw a high and agreeable growth in their economies. For Malaysia, the growth in the mid-1990s was very much due to the boost assumption by the government in the area of valuate relief and allowing withdrawal on Employee Provident Fund (EPF) to invest in the shared fund. With these incentives the vulgar fund industry accessiond in size from RM15. 7 billion in 1992 to RM60 billion in 1996. The Asian crisis of 1997 had brought a sudden halt to this and we have seen even negative growth. However, the signs of recovery after that are seemly evident.Growth of the unit trust industry in Malaysia go on at a rapid pace in 2006. Total Net Asset Value (NAV) of the industry gained 23. 6 per cent, the net asset value of the managed funds increased to RM121. 8 billion. This amounts made-up of only 14. 35 per cent of the total market capitalization of the Bursa Malaysia, which stood at RM848. 7 billion. (FMUTM Annual Report, 2006) Different from the positive countries, an grand characteristic of the Malaysian interchangeable fund industry is the dominant role of the government. As of 2006, more than 58% of these funds are affiliated with the government, i. . both have by state governments or quasi-government agencies. Nevertheless, the number of nonpublic sector funds is increasing, in particular bank-owned funds. The NAV of the nonpublic unit trust funds (excluding federal and some state funds) in year 2006 stood at RM50. 7 billion, an increase of RM 6. 6 billion over antecedent year. (FMUTM Annual Report, 2006) The double digit growth was observed. The type of funds included Equity Funds, Bond Funds, Islamic Funds, Mixed Asset Funds, Money Market Funds, Guaranteed Funds and Exchange Traded Funds. All these funds are the â€Å"open-end” Mutual Funds. 7Unit Trust industries are sound established in developed financial markets like United States and European Union. The expiration to which research, both at the theoretical and technical level, has been conducted in developed markets indicates the stage of maturity of correlative funds in these markets. In emergent markets, however, usual funds are a recent phenomenon. Nevertheless, growth has been robust. Emerging Asian economies like China, Indonesia, the Philippines, India and Malaysia are judge to grow by double digits annual ly and project to reach US$ 12 trillion by the year 2030 (PR Newswire, 2000).The phenomenon growth in the uncouth fund industry in these appear markets has pull up stakesed in an increase in the number of investment companies offering a wide range of different interchangeable funds (Ramasamy & Yueng, 2003). Faced with a wide range of unwashed funds, how does one made choices and what are the factors affecting the target of an investor investing in Mutual Funds? 1. 3 Problem Statement Growth, both in legal injury of size and number of funds categories, in the mutual fund industry among emerge markets has been impressive.Most researches, be it municipal or outside(a), were on the mutual funds consummation compared to the market (Don, Galagedera & Silvapulle, 2002), comparison of funds feat in different regions (Otten 2002), Islamic Funds surgical operation (Abdullah, Hassan & Mohamad, 2007), merge funds exploit (Taib & Isa, 2007), qualification, expe rience and investment mode of fund manager, asset size and transaction cost (Ramasamy & Yeung, 2003), price linkage with index in emerging market ( let out & Ghazali, 2007) and performance of funds during different frugal cycles (Low, 2007).All the researches are conducted on the nature and 8 characteristics of the mutual funds it selves and not for one of the most chief(prenominal) components of the mutual funds, the â€Å"investors” or â€Å"mutual fund purchasers”. Thus, in this research, we allow for study the individual investors’ tendency and factors affecting investment decision in the emerging market like Malaysia. This paper intends to fill this gap. Mutual fund forms an strategic part of the Malaysian economy today. As of 31st December 2006, the total registered mutual trust agent was 31060 people (FMUTM annual report, 2006).Many peoples’ livelihoods are depending on this industry, directly or indirectly. Besides the mutual trus t agents, the mutual trust centering companies, and regulatory bodies in Mutual Fund industry, investors play the utmost important role in the growth of the industry as they are the one who provides the required capital in the industries. Investors have numerous choices to invest their savings; there are many benefits and disadvantages to invest in the mutual trust funds. Investors have to weight the benefits and disadvantages, and to consider their investment objectives before deciding to invest in the Mutual Funds.In many developed countries, Mutual Funds investment has become the preferred vehicle for savings and retirement. The rosy growth of the industry seems to benefits the country’s economy and the investors. For the continuous growth of the industries in Malaysia, it is utmost important to study the ways of the investors, their spirit, and the other factors motivating investors investing in Mutual Fund. Many theories have been developed and evolved through time f or the research of behaviors and aspirations in many domains. Among the few popular theories re Theory of Reasoned Action (TRA), Theory of Planned Behavior (TPB) and Technology word sense 9 Model (TAM). The theoretical models and their comparison testament be discussed in detail in constituent 2. 3. 1. 4 Research Objectives We have seen that NAV of Mutual Funds invested in Malaysia on 2006 was at RM 121. 8 billion. This has organise an important part of the Malaysian economy. This study is to analyse factors influencing Malaysian consumers’ intentional behavior to invest in Mutual Funds using modified Decomposed Theory of Planned Behavior (DTPB).In line with this, four particularized objectives have been developed. The four main objectives of this study are therefore to: (1) determine significant contributing factors to Attitude, Subjective Norm and Perceived Behavioral Control, (2) determine the most significant factors among Attitude, Subjective Norm and Perceived Be havioral Control that lead to Behavioral Intention to invest in Mutual Fund, (3) identify the relationship of Intention and Actual Investment (Behavior). (4) In line with the 3 objective above, an additional objective impart be drawing the implications for the trade of Mutual Fund products. . 5 Research Question This research attempts to answer the following research question: (1) What are the factors that significantly affect Attitude, Subjective Norm and Perceived Behavioral Control? 10 (2) Attitude, Subjective Norm, Perceived Behavioral Control and Past Behavior †which of these factors significantly contribute to Intention to invest in Mutual Funds? (3) willinging Intention turn into actual Investment in Mutual Funds? (4) What are the conclusions and implications of the study for the marketing of Mutual Fund products? 1. 6 Definition of Key TermsIn order to share common understanding of the concepts and for better understanding of further discussion, the following key terms’ definition were referred specifically. 1. 6. 1 Mutual Fund / Unit Trust Fund Mutual Fund is a form of collective investment that allow investors with similar investment objectives to pool their savings, which are then invested in a portfolio of securities or other assets managed by investment professionals. Investors in Unit Trust Scheme or Mutual Fund do not purchase the securities in the portfolio directly.Ownership of the portfolio is divided into units of entitlement and each investor is known as a ‘unit holder’ (Dealing in Unit Trust, FMUTM, 2005) 11 1. 6. 2 Federation of Malaysian Unit Trust Managers (FMUTM) Federation of Malaysian Unit Trust Managers †an disposal with the vision to develop unit trust as the preferred vehicle for saving and retirement. The objectives of the organization are (Dealing in Unit Trust, FMUTM, 2005): ? To improve the regulatory, monetary and legal environment of unit trust; ?To mold sound and ethical business pract ices, to promote the interest of the unit trust industry and provide investor tax shelter; ? To provide information, assistance and other services to its penis; and; ? To promote public awareness of the benefit and risk of investing in unit trust. 1. 6. 3 Net Asset Value (NAV) The net value of the assets invested in the portfolio of the mutual fund. It’s a way to judge the net worth of the mutual fund. The value is computed each day after the closing of the share market. The NAV will be used to determine the price of buy and redemption of units trust. Dealing in Unit Trust, FMUTM, 2005) 1. 6. 4 Islamic Mutual Fund Islamic investing can be defined as investment in financial services and other investment products, which amaze to the principles established by the Shari’ah. These principles require that (Dealing in Unit Trust, FMUTM, 2005): (a) Investment must be made in ethical sectors. In other words, moolah cannot be generated from prohibited activities such(pre nominal) as alcohol production, gambling, 12 pornography etc. In addition, investing in interest (riba)-establish financial institutions are not allowed. b) All wealth creation should result from a partnership betwixt an investor and the user of capital in which rewards and risks are shared. Returns in invested capital should be gain rather than be pre-determined. 1. 6. 5 Attitude The extent to which one views a behavior as affectionate or unfavorable, if a person perceives that there are positive outcomes resulting from an activity, then his or her carriage towards playacting that behavior is in all likelihood to be positive (Ajzen, 1991). Attitude can be measure either through direct or belief-based measure.Belief-based measure of attitude is the heavy average of the volumes and outcomes evaluation of person’s behavioral beliefs (Ajzen, 2002b). 1. 6. 6 Subjective Norms An individual’s intelligence of social normative pressures, or relevant others’ bel iefs, that he or she should or should not perform such behavior. It can be measured either through direct or belief-based measure. Belief â€based measure of inherent norms is the weighted average of the normative expectations of others such as from family, friends or doctors and motivation to comply with their expectations (Ajzen, 1991 & 2002b). 3 1. 6. 7 Perceived Behavioral Control An individuals perceive ease or difficulty of performing the particular behavior (Ajzen, 1985). It is assumed that sensed behavioral maintain is determined by the total set of companionable control beliefs. It can be measured either through direct or belief-based measure. Belief â€based measure of congenital norms is the weighted average of the strength of control beliefs and facilitation power of these beliefs (Ajzen, 1991, 2002b). 1. 6. 8 Behavioral Intention An indication of an individuals readiness to perform a accustomed behavior.It is assumed to be immediate antecedent of behavio r (Ajzen, 2002b). It is based on attitude toward the behavior, innate norm, and perceive behavioral control, with each predictor weighted for its splendour in relation to the behavior and population of interest (Ajzen, 1991). 1. 7 Significance of the study Mutual fund has become one of the important investment vehicles for the world’s economy. The launching of the Amanah Saham Nasional (ASN) in 1980 in Malaysia is part of the government efforts to increase the stakes holding of congenital Malays’ in Malaysian economy.The Unit Trust industry is an important component of the Malaysian economy. The industry serves to bait the saving of the average, small investors by funneling these savings into areas where capital is required. Investors want good returns on their savings, Mutual Fund provides an ideal way for them to gain exposure to investment that in the long run can produce returns A-one to those from traditional savings accounts and fixed deposits. Study on the factors influencing the intention to invest and investment decisions will help the 4 industry formulate marketing strategies to further stimulate growth of this industry and eventually help in the healthy growth of the country’s economy. 1. 8 Organization of Remaining Chapter This research is presented in five chapters including this introduction chapter. The close chapter (Chapter Two) is the look into of publications that outlined previous studies, from the review of literature; gaps are identified and new research simulation is formulated for study in Malaysia context.Chapter Three will illustrate the research design, methodology used for selective information collections, and data analysis techniques to be used to canvas and test the variables. Chapter Four will present the analyses done for the study and also the findings of the study. Chapter Five will discuss the interpretation and recapitulation of the study, implications of the findings, limitations of the st udy and suggestion for proximo research. It then concludes the whole research. 15 Chapter 2 LITERATURE REVIEW 2. 1 IntroductionFor better understanding of the present study, a comprehensive search of previous literature has been undertaken. As such, this chapter was organized in the manner to accord an overview of literature, identify gaps, formulated theoretical material and the hypotheses development. 2. 2 Literature Overview Mutual funds offer investors the advantages of portfolio diversification and professional management at low cost. These advantages are particularly important in the case of comeliness funds where both diversification and professional management have the potential to add value.For bond and money market mutual funds, the main advantage is transactional ability through professional management. There are many literature about the mutual funds in the developed countries. Literature are limited in the emerging market but are gaining popularity deep due to th e tremendous growth in this industry. We will examine some literature in the emerging market, especially Malaysia as sound as the international market. 16 2. 2. 1 Emerging Market research Investors made investment in the mutual funds with various investment objectives.Selecting mutual funds that will offer high returns with acceptable risk is a complex task. Literature shows that there are treble factors that determine the performance of a mutual fund. Study by Ramasamy and Yeung (2003) on mutual fund purchaser in emerging country, Malaysia, shows that among the factors dominating the selection of mutual funds are consistent past performance, size of funds and cost of transactions. Qualification and investment look of fund manager seems to be relatively less important. This means that in emerging market, the final performance of the funds is what matters.A study by Taib and Isa (2007) on Unit Trust Funds performance of Malaysian market from period 1991-2001 showed that unit trust s have not performed comfortably over the share market index on the period of study. In most of the instances, unit trust trail behind the performance of the market portfolio demur during the crisis period when the unit trust market adjusted returns yields positive results. Of the various types of unit trust under investigation, they found the bond funds showed very superior performance over and above the market and truth unit trusts.The high interest rate unbroken throughout majority of the period particularly during the crisis period in year 1997 has tremendously benefited the bond funds. The study also found no meaningful inter-temporal correlation mingled with current performance and past performance. Low (2007) had studied on the Malaysia’s unit trust performance during the up and down market conditions has shown that the Malaysia mutual fund performance from 1996 to 2000 reported that the manager’s poor quantify ability contributes significantly to the fun d’s 7 negative overall performance. such(prenominal) results suggest no frugal benefit accrues to the average fund manager involving in market timing activities. The other study by Low and Ghazali (2007) examines the price linkages amongst unit trust funds and the stock market index during the period of 1996-2000. He finds in the short run, the prices of unit trust funds are related to the stock market index, but finds the nonexistence of long run relationship between the unit trust funds and the stock market index.This could possibly due to fund managers that are obliged to adhere to their investment policies with the aim of maintaining a long term allocation strategy. One recent study by Lau (2007) on the investment style of fund managers of emerging market, Malaysia, indicates that most of the funds do not outflank the passive style benchmarks. Fund managers invest in large-cap stocks with cash enhances the performance of funds. Besides having a relatively high degree of style, funds that hold large-cap stocks together with a relatively high portion of liquid asset class tend to have higher(prenominal) alpha, translating into higher information ratio.It could be implied that liquid asset class enables fund managers to invest in stocks that improve their values in scotch cycles. It is obvious that most of the funds concentrated on large-cap stocks, followed by medium-capital and government bonds. The Islamic Mutual Fund is gaining popularity in the emerging market like Malaysia and China. In the study by Abdullah, Hassan and Mohamad (2007) on the performance of Islamic mutual fund over 3 different economic periods namely pre, during and post economic crisis in year 1997 compared to the naturalized mutual funds has shown that 18Islamic funds performed better than the conventional funds during bearish economic trends while, conventional funds showed better performance than Islamic funds during bullish economic conditions. In addition to that find ing, both conventional and Islamic funds were unable to achieve at least 50 per cent market diversification levels, though conventional funds are found to have a marginally better diversification level than the Islamic funds. The results also suggest that fund managers are unable to correctly identify good bargain stocks and to foreshadow the price movements of the general market.In the past decades, there were wide variety of studies in consumer behaviors indicated a considerably consistent successful findings using the application of TPB model (Ajzen & Madden, 1986). The model was wide used in the emerging market to study the consumer behaviors. Study by Mohamed (2004) on overpowering herbal supplement in Malaysia has indicated the suitability of the model. In his study, Attitude was found to be the strongest predictor of behavioral intention. Study by Chai (2006) on consumer behavioral intention to choose functional foods in Malaysia was also based on TPB model.The results showed that intention was strongly predicted by subjective norms followed by comprehend susceptibility to illness, health value, attitude towards behavior and finally sensed behavioral control. interest finding in this study was perceived richness of taste did not have significant doctor on intention. The other study by Muniandy (2006) using the integrated Decomposed Theory of Planned Behavior on internet stock trading showed that attitude, subjective norm, perceived behavioral control, descriptive norm and perceived usefulness have a direct significant 9 positive relationship towards behavioral intention. In his study, the model was also compared to other intention based model like TAM, TPB and DTPB and found that IDTPB has better explanatory power. 2. 2. 2 International Research. In the research on the international growth of mutual funds by Fernando, Klapper, sulla and Vittas (2003) indicate that the growth of mutual funds was likely to be determined by a number of factor s. First and foremost is the level of income and wealth of the residents of a country.Conceptually, investing in mutual funds, like buy life insurance and saving for retirement, should be seen as a luxury good with a positive income elasticity of demand. In practice, however, the relationship between per capita income (used as an indicator of economic development and wealth) and holdings of mutual fund assets (expressed as a percentage of national income) is not always positive. In the same research on the global growth of mutual funds also indicated that the availability or not of substitutes as well as complements also greatly affects the growth of mutual fund assets.For example, houses are distant substitutes of mutual fund shares in household wealth but most other instruments are either close substitutes or close complements, in some cases both at the same time. Bank deposits, both the traditional form of checking accounts and savings deposits and the more modern money market d eposit accounts, are close substitutes of money market mutual funds. The interest rate spread between bank deposits and money market funds would be expected to play an important part in determining the demand for money market mutual funds (Fernando et al. , 2003). 20The study by Otten (2002) to analyze the development and performance of the European mutual fund industry and compared it with the industry in the United States, found that Europe was lagging the American mutual fund industry when it comes to total asset size, average fund size, and market importance. Furthermore, it appears that a few large domestic fund groups dominate the mutual fund markets in the individual European countries. The study also showed that the performance of US equity funds was relatively poor compared to the European funds, and the outperformance of small cap mutual funds.In one of the protracted research by Fortin (2005) on international mutual fund management, he examined the international mutual fu nd returns for each category and overall returns for the 25-year period (1976-2000). The result of the study showed that there is no relationship between total return and expense ratio, but there is a significant positive relationship between total return and turnover, and a significant positive relationship between total return and fund size.Study by Huhmann and Bhattacharyya (2005) on Mutual Fund advert in Canada and United States has found that Mutual fund advertisements are not providing the information necessary for optimal investment decisions. In another word, mutual fund advertisements do not contain all the infallible information on the risk-return trade-off, principal-agent conflict, and transaction costs that consumers need to optimize their investment decisions. Mutual funds used techniques known to increase the likelihood that their advertisements are noticed, but they also use techniques known to decrease the readership of their advertisements.Also, they seldom incl uded convenience information. 21 Philpot and Peterson (2006) study on the Real Estate Mutual Fund (REMF) found that team-managed funds have lower risk-adjusted returns than solo-managed funds. Managers with longer upgrade on job tend to pursue higher market risk levels, and there was no relation between manager characteristics and management fees. Researchers have begun to agnize the importance of understanding consumers’ or investors’ intention and behavior and consequently, there has een an increase in the number of studies in this area. Many theories have been developed and evolved through time and situational change. Each has its strengths and weaknesses. Among the few popular theories are Theory of Reasoned Action (TRA), Theory of Planned Behavior (TPB), DecomposedTPB and Technology Acceptance Model (TAM). There are many more theories in the literature, however this research will concentrate only on the theories as listed above as they are related and well withi n the scope of study. . 3 Models Explanation (TRA, TAM, TPB and DTPB) The objective of the study is to determine the factors affecting the purchasing behavior of the investors in the Mutual Trust funds. Four alternate models †the Theory of Reasoned Action (TRA), Technology Acceptance Model (TAM), Theory of Planned Behavior (TPB) and the Decomposed Theory of Planned Behavior (DTPB), primarily adapted from Taylor and Todd (1995) †are here examined and compared. 22 2. 3. 1 Theory of Reasoned Action (TRA)The Theory of Reasoned Action was developed by Fishbein and Ajzen in 1975. TRA suggests that a persons behavioral intention depends on the persons attitude about the behavior and subjective norms. If a person intends to do a behavior then it is likely that the person will do it. Furthermore a persons intentions are themselves guided by two things: the persons attitude towards the behavior and the subjective norm. Behavioral intention measures a persons relative strength of in tention to perform a behavior.Attitude consists of beliefs about the consequences of performing the behavior multiplied by his or her valuation of these consequences. Subjective norm is seen as a combination of perceived expectations from relevant individuals or groups along with intentions to comply with these expectations. In other words, â€Å"the persons perception that most people who are important to him or her think he should or should not perform the behavior in question” (Azjen & Fishbein, 1980). The TRA is popular in utilise to explain use or adoption behavior.Research by Buttle and Bok (1996) on hotel marketing strategy reveals the two predictor constructs contained in the surmisal, attitude-towards-the act and subjective norm, jointly explain about 65 per cent of the variance in the criterion variable intention to stay in the hotel on the next business trip. Other example of research is function of alcohol free beer (Thomson & Thomson, 1996). In his r esearch, it was found that the main determinant of behavior was Attitude followed by the subjective norm. Control factors failed to improve the basic model. The basic framework of TRA is shown in Figure 2. . 23 Figure 2. 1. Theory of Reasoned Action One shortcoming of the scheme of reasoned action is the consideration of behaviors over which people do not have complete control. therein lies the notion of perceived behavioral control, or â€Å"the perceived ease or difficulty of performing the behavior” (Ajzen, 1991). As Hagger et al. (2001) note, this concept â€Å"reflects the person’s estimate of the capacities (e. g. , skills and abilities) and the limiting or facilitating factors (e. g. , barriers and access to facilities) regarding behavioral appointment”.Theory would predict that perceived behavioral control influences both intentions (Ajzen, 1991) and actual behavior (Ajzen & Madden, 1986). Another limitation of the theory is that the theory stem s from the assumption that behavior is under volitional control. It means that this theory could only be applied if the person can decide at will to perform or not to perform a certain behavior (Ajzen, 1991). The limitations of TRA lead to the development of Theory of Planned Behavior (TPB). TPB is an extension of TRA to include the transaction of behaviors when people do not 24\r\n'