The Behaviour and Financial Performance of Individual Investors in the Trading Shares of Companies Listed At the Nairobi Stock Exchange, Kenya
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Date
2012Author
Aduda, Josiah
Oduor,Odera Eric
Onwonga, Mactosh
Type
ArticleLanguage
enMetadata
Show full item recordAbstract
While conventional academic finance emphasizes theories such as Modern
Portfolio Theory (MPT) and the Efficient Market Hypothesis (EMH), the
emerging field of behavioral finance investigates the cognitive factors and
emotional issues that impact the decision-making process of individuals, groups,
and organizations. This paper presents some general principles of behavioral
finance including: overconfidence, cognitive dissonance, regret theory, and
prospect theory. The paper seeks to identify such behaviors from individual
investors as they set out to make their investment decisions. The paper uses both a
questionnaire survey and secondary data from the NSE and CMA to identify the
individual investor behaviors and determine their financial performance
respectively. In conclusion, it was found out that there were varied behaviours and
financial performance of individual investors in trading shares of companies listed
at the Nairobi Stock Exchange, Kenya. Some investors exhibited rational
behaviour in making their investment decisions. On the contrary, there were investors who were poised to realize negative results due to irrationality and
herding behaviour. The paper will contribute to literature which will form the
basis of future more advanced research work on the field of behavioral finance.
Citation
Journal of Finance and Investment Analysis, vol.1, no.3, 2012, 33-60Publisher
Department of Finance and Accounting, University of Nairobi, Nairobi, Kenya, Department of Business & Management, Kisii University College, Kisii, Kenya,