Determinants of local retail investors behavior for companies quoted in the stock exchange

Abstract

The study sought to answer the following research questions, what are the behavioral finance tendencies in the Nairobi Stock Exchange and its investor‟s decisions? How do different education levels influence the investor‟s decisions? How investors of different gender, social background select their investments? The research design that was employed in this study was a descriptive research design inform of a survey. The population of interest of this study was the local retail investors in the Nairobi stock exchange. The study sample was 100 investors in the Nairobi stock exchange simple random sampling techniques was used when sampling, thus the sample size of this study was 100 investors.Questionnaire was designed to determine the behavioural finance among investors in the Nairobi stock exchanges. This made it easier to get adequate and accurate information necessary for the research.A content analysis and descriptive analysis was employed. From the findings the study found that the sources of information that influence investment decision in the NSE are advice from stock brokers and advice from knowledgeable friends and personal assessment of stock market movement which were influenced by stock markets index, speculation, media information and company profile. The biggest challenge in making an investment decision in the NSE on how to allocate resources were; lack of proper understanding of stock market, lack of sufficient information and fear of the past. The study further found that the kind of information required for investment decision making were on company profitability , divided pay out ration and company command in the market. From the findings on the various considered factors in their investment in NSE, the study found that factors considered were percentage subscriptions, future prediction or forecast, financial summary, indebtness, in what will funds invested be used for and financial position of the firm.