EFFECT OF BEHAVIOURAL FACTORS ON INVESTOR DECISIONS IN INVESTMENT BANKS AND STOCK BROKERAGE FIRMS AT THE NAIROBI SECURITIES EXCHANGE
Wanjohi Sally Wanjiru - Master of Business Administration, Jomo Kenyatta University of Agriculture and Technology, Kenya
Dr. Maurice Mwita - Lecturer, Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
The Kenyan market has recently witnessed tremendous rise in the number of companies applying to be included in stock markets listing. Investors on the other hand have responded positively as it is evidenced through repeated oversubscriptions of shares. The general objective of the study is to determine the role of behavioural factors on investor decisions in the investment banks and brokerage firms at the Nairobi Securities Exchange. The study sought to establish the effect of herding effect on investor decisions in the investment banks and brokerage firms at the Nairobi securities exchange, to determine the effect of loss aversion on investor decisions in the investment banks and brokerage firms at the Nairobi securities exchange, to establish the effect of over confidence on investor decisions in the investment banks and brokerage firms at the Nairobi securities exchange and to assess the effect of anchoring on investor decisions in the investment banks and brokerage firms at the Nairobi securities exchange. The study adopted a descriptive research design. The study targeted investors who trade in the investment banks and brokerage firms at the Nairobi Securities Exchange. The sample size was 384 respondents. Descriptive and inferential analysis was used to analyze the data. The study found that herding effect influences investor’s decisions. The investors usually react quickly to the changes of other investors’ decisions and follow their reactions to the stock market. Over confidence influences investor’s decisions. Investors believe their skills and knowledge of stock market can help them to outperform the market. Loss aversion has an influence on investor’s decisions. Checking a portfolio’s performance more frequently increases the likelihood of seeing a loss, which produces more mental agony than comparable gains satisfy. Anchoring has an influence on investor decisions. The investors forecast the changes in stock prices in the future based on the recent stock prices. The investment banks and stock brokerage firms should give their investors the relevant information to ensure that they are well versed with the prevailing market and economic situations. Investors at the NSE should only be overconfident at an acceptable level to utilize their skills and knowledge to improve the investment results. The relevant investment banks and stock brokerage firms to ensure that their investments in the stock market are well chosen to ensure the interests of the investors are well taken care of.
