Determinants of Individual Short-Term Investment Decisions: The Moderating Effect of Investors’ Personal Quality in Nairobi Securities Exchange
Author(s)
Kabete,Paul Muturi , Kipkirong, Daniel Tarus ,
Download Full PDF Pages: 20-27 | Views: 1127 | Downloads: 262 | DOI: 10.5281/zenodo.3455976
Abstract
Purpose
This study aimed at identifying the determinants of individual short-term investment decisions and the moderating effect of investor characteristics in the Nairobi Securities Exchange (NSE)
Design/Methodology/Approach
The questionnaire was used to obtain data pertaining to the model's constructs. A multiple regression equation models tested the hypotheses. The study employed an explanatory research design to identify the determinants of individual short term investment decisions and the moderating effect of investor characteristics. Behavioral Finance Theory guided the study. The target population was individual investors in the member firms of the NSE. Stratified random sampling and systematic random sampling techniques were used to select firms and the respondents respectively. Questionnaires were used to collect data from the respondents. A multiple regression equation models tested the hypotheses.
Findings
Findings indicated that accounting information and personal financial needs had a positive effect on individual short-term investment decisions. Moderated regression model indicated that under higher education, accounting information positively determined individual short-term investment decision. Under high investor experiences, accounting information negatively affects individual short-term investment decision. In addition, the higher the investor’s age, the more personal financial needs will determine individual short-term investment decision, while accounting information negatively affect individual short-term investment decision.
Research Limitations/Implications
The study was only limited to determinants of investment behavior and their relative importance in shaping the behavior of individual investors. Thus, other studies should be carried out to determine other factors that affect investment such as expected return from investments, the cost of capital in terms of interest rate, the taxation of returns and the availability of savings to meet investments.
Practical Implications
The growth of the related financial services sector has extensively contributed towards the deepening of the stock market. It should be appreciated that in as much as an economy can have savings, there is usually a lack of established mechanisms for channeling those savings into activities that create wealth. The establishment of an efficient securities market is therefore indispensable for any economy that is keen on using scarce capital resources to achieve economic growth
Social Implications
The very fact that institutions exist where savers can safely invest their money and in addition earn a return is an incentive to investors to consume less and save more. Education, age, and experience of the investors are the areas which can improve these intentions.
Keywords
Individual Short-Term Investment Decisions, Investor Personal Characteristics, Nairobi Securities Exchange in Kenya this
References
i. Al-Tamimi, et.al. (2005). Factors Influencing Individual Investors Behaviour: An Empirical study of the UAE Financial Markets, IBRC Athens, Aryan Hellas Limited. Retrieved on 17/04/2011 from: www. aryanhellas.com/107/ha.pdf
ii. Al-Tamimi, H.A.H., &Kalli A.A.B (2009). Financial Literacy and Investment Decisions of UAE Investors, Journal of Risk Finance, 10(5): 500-516: Retrieved on 20/08/2013 from: www.emeraldinsight.com/bibliographic_databases.htm?id=1823233&show=abstract
iii. Azam, M., & Kumar, D. (2011). Factors Influencing the Individual Investor and Stock Price Variation: Evidence from Karachi Stock Exchange. Australian Journal of Basic and Applied Sciences,5 (12): 3040-3043
iv. Baik Bok, Jun-Koo Kang, Jin-Mo Kim (2010). Local institutional investors, information asymmetries and equity returns. Journal of Financial Economics, 97, 81-106.
v. Bernstein P. L. (1996), Against the Gods: The Remarkable Story of Risk. New York: John Wiley and Sons.
vi. Chandra, A. & Kumar, R. (2011). Determinants of individual investor behaviuor: An orthogonal linear transformation approach.
vii. DeBondt, W.F.M. and Thaler, R.M. (1995). Financial decision-making in markets and firms: a behavioural perspective.
viii. Epstein, M. J, (1994).Social disclosure and the individual investor.Accounting, Auditing & Accountability Journal, 4(199), 94-109
ix. Evans, D. A. (2006).Subject perception of confidence and predictive validity in financial cues.Journal of Business Finance, 6(1)
x. Fares, A. R. F. &Khamis, F. G. (2011).Individual Investors’ Stock Trading Behavior at Amman Stock Exchange.International Journal of Economics and Finance, 3(6), 128 – 134.
xi. Fogel, O. and Berry, T. (2006). The disposition effect and individual investor decisions: the roles of regret and counterfactual alternatives. Journal of Behavioural Finance, 7(2)
xii. Geetha, N., & Ramesh, M. (2012).A Study on Relevance of Demographic Factors in Investment Decisions.International Journal of Financial Management, 1(1), 39-56.
xiii. Gichohi (2011), How to invest in Kenyan Stocks. Retrieved on 07/07/2013 from: http://www.inestinginAfrica.net/2011/08/hoe-to-invest-in-kenyan-stocks
xiv. Hassan A. Al-Tamimi (2006). Factors influencing individual investor behaviour: An Empirical study of the UAE Financial Markets. The Business Review, 50(2)
xv. Hodge, F. (2003).Investors’ Perception of Earnings Quality, Auditor Independence, and the Usefulness of Audited Financial Information.Accounting Horizons, 37-48.
xvi. Hossain, M. F., &Nasrin, S. (2012). Factors Affecting Selection of Equity Shares: A case of retail investors in Bangladesh.European Journal of Business and Management, 4(20), 110 - 124.
xvii. Ivković, Z. Sialm, C. and Weisbenner, S. (2008). Portfolio Concentration and the Performance of Individual Investors.Journal of Financialand Quantitative Analysis, 43 (3), 613-656.
xviii. Jain, D, &Mandot, N. (2012).Impact of Demographic Factors on Investment Decision of Investors in Rajasthan.Journal of Arts, Science & Commerce, 3(2, 3), 81 -92.
xix. Kadiyala, P. and Rau, P.R. (2004). Investor reaction to corporate event announcements: Under reaction or overreaction? The Journal of Business, 77(2): 357-386
xx. Kahneman, D. and Tversky, A. (1979). Prospect theory: an analysis of decision-making under risk. Econometrica, 47 (2)
xxi. Lebaron,D.(1999) Investor Psychology Retrieved on 25/2/2011from: http://www..deanlebaron.com/book/ultimate/chapters/invpsy.html
xxii. Lehenkari, M. and Perttunen, J. (2004). Holding onto the losers: finish evidence. Journal of Behavioural Finance, 5 (2)
xxiii. Lewellen, W.G. Lease, R.C. and Schlarbaum, G.G. (1977), Patterns of investment strategy and behavior among individual investors, Journal of Business, 50 (3), 296-333.
xxiv. Malmendier, and Shanthikumar, D. (2003), Are small investors naive? Stanford University Working Paper, 2003.
xxv. Masomi, S. R., &Ghayekhloo, S. (2011). Consequences of human behaviors’ in Economic: the Effects of Behavioral Factors in Investment decision making at Tehran Stock Exchange. International Conference on Business and Economics Research, 1,234-237.
xxvi. Merikas A.A., Merikas A.G., Vozikis G.S., & Prasad D. (2008). Economic factors and individual investor behavior:a case of the Greek stock exchange. Journal of Applied Business Research, 20(4), 93-98.
xxvii. Merikas et.al, (2003) adopted a modified questionnaire to analyze factors influencing Greek investor behavior on the Athens Stock Exchange.
xxviii. Mirshekary S, Saudagaran SM (2005). Perceptions and characteristics of financial statement users in developing countries: Evidence from Iran.InternationalJournal of Accounting, Audit and Taxation. 14(1):33-54
xxix. Muga D.N. (1974), The Nairobi Stock Exchange; it's History, Organization and Role in the Kenyan Economy. Unpublished MBA Dissertation University of Nairobi.Retrieved on 25/ 11/2012 from: http://www.aibuma.org/proceedings/downloads/Angela%20Kithinji,%20Kenya.pdf
xxx. Nagy, R.A., & Obenberger, R.W. (1994).Factors influencing investor behaviour.Financial Analysts Journal, 50(40), 63-68.
xxxi. Njaga, D. M., (2007).Investing in Shares & Other Securities Nairobi: Queenex Holding Ltd.
xxxii. Nwezeaku, NC and Okpara, G.C. (2010). Stock market volatility and information asymmetry: Lessons from Nigeria. Interdisciplinary Journal of Contemporary Research, 2, 67-79.
xxxiii. NSE (2014), FAQs – Frequently Asked Questions. Retrieved on 03/11/2013 from: https://www.nse.co.ke/public-education/faqs.html.
xxxiv. Shaikh, A. R. H., & Kalkundrikar, A. B. (2011). Impact of demographic factors on retail investors’ investment decisions- an exploratory study. Indian Journal of Finance, 5(9), 35 – 44.
xxxv. Shanmugsundaram, V.&Balakrishnan, V. (2011). Investment decisions – influence of behavioural factors. Indian Journal of Finance, 5(9), 25 – 34.
xxxvi. Shanthikumar,D. and Malmendier, (2003), Are small investors naive?, Stanford University Working Paper, 2003.
xxxvii. Sharma, M., & Gupta, S. (2011).Role of subjective norm in investment decision making of casual investors.Indian Journal of Finance, 5(11), 39 - 46.
xxxviii. Shefrin, H. (2000). Beyond Greed and Fear. Boston, MA: Harvard Business School Press
xxxix. Shleifer, A. (2000). Inefficient Markets: An Introduction to Behavioral Finance. Oxford : Oxford University Press.
xl. Statman, M. (1999).Behaviour Finance: past battles and future engagements Financial Analysts Journal, Vol.55, No.6
xli. TohTsu Wei, Govindan Marthandan, Alain Yee-Loong Chong, Keng-Boon Ooi, Seetharam Arumugam, (2009) "What drives Malaysian m-commerce adoption? An empirical analysis", Industrial Management & Data Systems, Vol. 109 Iss: 3, pp.370 – 388
xlii. Touliatos, J. & Compton, N.H. (1988). Research methods in human ecology/home economics. (1sted.). Iowa: Iowa State Publisher
xliii. Tversky and Kahneman (1974).Judgment under Uncertainty: Heuristics and Biases. Science, New Series, 185 (4157), 1124-1131.
xliv. Tversky, A. (1990), The psychology of risk, Conference Proceedings of the Quantifying the Market Risk Premium Phenomenon for Investment Decision-Making Conference, Conducted by AIMR, Charlottesville.
xlv. Wahome N.A. (2011), A survey of factors influencing individual investor behaviour during Initial Public Offers (IPOs) in Kenya. Retrieved on 31/08/2013 from: http://erepository.uonbi.ac.ke:8080/handle/123456789/3623
xlvi. Warneryd, K. E. (2001), Stock-market Psychology: How people value and trade stocks. Cheltenham: Edward Elgar
xlvii. Waweru, N.M., Munyoki, E. and Uliana, E. (2008). The effects of behavioural factors in investment decision making: a survey of institutional investors operating at the Nairobi Stock Exchange. International Journal of Business and Emerging Markets, 1(1), 24-41
xlviii. Weisbenner et al, S. (2008).Portfolio Concentration and the Performance of Individual Investors.Journal of Financialand Quantitative Analysis, 43 (3), 613-656.
Cite this Article: