Determinants of individual investors’ behaviour in the Nairobi Securities Exchange

Abstract

The study of individual investors‟ behaviour, anchored on the behavioural finance theory, is of interest and a relatively new phenomenon in Kenya. Behavioural finance theories are based on psychological attempts aimed at comprehending how sentiments and cognitive errors influence the individual investors‟ behaviours, especially in regard to the investment decision making process. The objective of this study is to identify the determinants of individual investors‟ behavior in the NSE. In cognizance that there are few studies relating to the individual investors‟ behaviour at the NSE, it is expected that this study will contribute significantly to this area of study in Kenya. This research examines some of the existing theories relevant to the investors‟ behaviour and behavioural finance under the theoretical literature review. Subsequently, a review of some of the behavioural studies is covered under the empirical studies section. Data for the study is primary data collected by the use of interviews and questionnaires administered to individual investors at the NSE via identified investment brokerage firms, per a pre-determined judgemental sampling. The results of the study establish factors that determine the individual investors‟ behaviour at the NSE. The degree of influence of these factors is established to be varied, with Market emerging as the most significant factor determining the individual investors‟ behaviour. Future studies are recommended to confirm the findings of this research as well as on behavioural finance related to individual investors‟ decision making processes.