The traditional theory of finance assumes that investors act rationally on the quest of wealth
maximization, and that they follow the basic tenets of risk and return in determining which
ventures to spend money on. However, various authors who have examined investors’ behaviour
avow that heuristic driven biases and emotions cloud the investors’ judgment, and often negate
the rules of rational economic decision making. According to these studies, investors are in fact
irrational, and are largely influenced by behavioural factors that introduce biases in their
decisions. Behavioural finance is the phenomena where psychology and economics are combined
in explaining the irrational decision making processes of economic agents. Psychology explores
various facets of human behaviour, and explains how human behaviour deviates from traditional
economic assumptions about human behaviour. Proponents of the behavioural finance ideology
state that investment decisions are characterized by emotional factors such as endowment, loss
aversion, regret aversion and mental accounting, herding behaviour and cognitive factors
including overconfidence, gamblers fallacy, hindsight biases and over confidence. This study
aimed to determine the investor behavior and investment decision among individual investors at
the NSE, which was also the overriding objective of the study. The following theories were
employed in the study, Modern Portfolio, Heuristic and Prospect theory. Descriptive research
design was used to provide insight on the research problem by describing the behavioural factors
that influence individual investment decisions. The target population for this study was the 1,000
individuals’ investor who trade at the NSE and had permanent residential address in Nairobi.
Primary data was obtained through closed and open-ended questionnaires that were selfadministered.
Some questionnaires were emailed to the respondents, depending on the agreed
media with the respondent. The investors were reached through judgmental sampling technique.
Multiple regression analysis method of data analysis was adopted. Descriptive statistical
measures such as the mean, mode and standard deviation were calculated using SPSS. It was
presented in form of frequencies, percentages, tables, pie charts and bar graphs. Qualitative data
was analyzed by means of content analysis. The study findings from model summary revealed
that R squared was 0.802 which implies that 80.2% of changes on individual investors at NSE,
Kenya are explained by the independent variables of the study. The findings revealed that there is
a significant relationship between the investor behavior and investment decision since the Pvalue
is less than 0.05. According to the regression equation established, taking all factors
(Herding effects, Risk aversion, Anchoring effect and Loss aversion) constant at zero, the
investment decisions will be 4.212. The study provided a P-Value of 0.003 which is lower than
the significance level of 0.05, thus investor behaviour significant influence investment decisions
among individual investors at the NSE, Kenya. The study concluded that investors’ behaviour
influence individual investors on investment decision making of individual investors at NSE,
Kenya. The study recommended that Nairobi Stock Securities should continuously share
information which is geared towards positively influencing investment decision. Through this
information investor will be in a position to make wise investment decisions.
MONICAH, C (2021). Investor Behavior And Common Stock Investment Decisions Among Individual Investors At Nairobi Securities Exchange, Kenya. Afribary. Retrieved from https://afribary.com/works/investor-behavior-and-common-stock-investment-decisions-among-individual-investors-at-nairobi-securities-exchange-kenya
MONICAH, CHEROTICH "Investor Behavior And Common Stock Investment Decisions Among Individual Investors At Nairobi Securities Exchange, Kenya" Afribary. Afribary, 31 May. 2021, https://afribary.com/works/investor-behavior-and-common-stock-investment-decisions-among-individual-investors-at-nairobi-securities-exchange-kenya. Accessed 31 Mar. 2023.
MONICAH, CHEROTICH . "Investor Behavior And Common Stock Investment Decisions Among Individual Investors At Nairobi Securities Exchange, Kenya". Afribary, Afribary, 31 May. 2021. Web. 31 Mar. 2023. < https://afribary.com/works/investor-behavior-and-common-stock-investment-decisions-among-individual-investors-at-nairobi-securities-exchange-kenya >.
MONICAH, CHEROTICH . "Investor Behavior And Common Stock Investment Decisions Among Individual Investors At Nairobi Securities Exchange, Kenya" Afribary (2021). Accessed March 31, 2023. https://afribary.com/works/investor-behavior-and-common-stock-investment-decisions-among-individual-investors-at-nairobi-securities-exchange-kenya