Effect Of Herding Behaviour On Market Performance Of Insurance Companies Listed On Nairobi Securities Exchange

Abstract

The aim of the study was to establish whether herding behavior influence the market performance of listed insurance companies in the Kenyan securities markets. The research design adopted was descriptive. Research study involved all NSE listed insurance companies thus it was population study. Data on prices, market capitalization and volumes of shares traded for daily equities from January 2007 to December 2017 as obtained from the database from the NSE was used. Statistical package for social scientists was used to generate inferential statistics as well as measures of central tendency. A multiple regression analysis was then used to determine the effect of herding behavior on market performance of listed insurance firms in the Kenyan stock markets. The study found out that 48.6% of variations in market performance was caused by herding behavior and risk factors as given by the adjusted R square (adjusted R2 = 0.486). The F-test found out that the model was significant implying that herding behaviour and risk factors reliably predict market performance of the insurance companies listed while the regression coefficients established that herding behaviour and risk have a significant effect on market performance of the listed insurance companies at the NSE. The study therefore concluded that there is herding behaviour among investors in the listed insurance companies and that herding behaviour affect market performance of listed insurance firms. Therefore there is a need for keener scrutiny on trading behavior of investors at the NSE with a view to mitigate against probable effects of herding on stock returns if the phenomenon was to occur.