The Effect of individual Behaviour on investment decisions of investors at the Nairobi Security Exchange

Abstract

Individual behavior on investment decision is a branch of behavioral finance. Behavioral finance is important to investors as it captures the psychological and emotional biases that influences individual investors’ behavior in regard to their investment choices. The objective of this study was to find out the effect of individual behavior of investors at the NSE. The study was conducted on 77 investors out of 96 that was the sample size. A descriptive survey was used and a structured questionnaire was administered to the respondents who were individual investors selected from the 24 approved stock brokers in Kenya as at 31st July 2019. The questionnaire had 30 items which were to be responded to. The data was analyzed using frequencies, mean scores, Standard deviation and percentages and processed using SPSS. Cronbach alpha was used to test reliability and validity of the data. Correlation analysis and Regression analysis was also used in summarizing research findings. The findings of the study came out with a conclusion that there is a significant correlation between investment decision and individual behavior with heuristic bias of overconfidence coming out prominently. The other behaviors characterized by framing errors were also found to influence investors’ behavior. The findings from this study will be instrumental to security and investment firms for future predictions of security prices and provide understanding to investors on various decisions to be made on different circumstances.