Factors influencing investment decisions in equity stock among retail investors in Kenya.

Abstract

Investment decisions need to be analyzed on the basis of a number of factors given the prevailing situations. This study sought to examine factors that influence investment decisions in equity stock among Kenyan retail stock investors and had four specific objectives. The first objective sought to determine the effect of stocks' affordability on investment decisions in equity among Kenyan retail stock investors. The second objective assessed the effect of information on investment decisions while the third was in regard to the effect of third parties' opinion on investment decisions. The fourth objective sought to determine the effect of herding behavior on investment decisions in equity among Kenyan retail stock investors. To achieve the objectives of the study, correlational research design was adopted where secondary data was mainly used supplemented by some primary data. The research target population was the retail investors of the sixteen Stock Brokerage firms in Kenya. Purpose random sampling was used to select 5 retail investors from each firm meaning the study had 80 respondents as its sample size. The data was collected using questionnaires and analyzed through descriptive and inferential approaches with the help of Statistical Package for Social Sciences (SPSS). Quantitative data was presented using tables, charts and graphs while qualitative data was presented in narrative form. The regression results show that stock affordability (B = 0.327, p < 0.007) and third parties’ opinion (B = 0.327, p = 0.042) had significant positive effect on the investment decisions among the retail investors. It also emerged that information (B = 0.-.070; p < 0.395) had a negative but insignificant role on retail investments’ decisions while herding behavior (B = 0.043, p = 0.702) had a positive but insignificant role towards decisions among retail investors at the NSE. The study recommends the need for improved information on the stock markets dynamics to support the decision making abilities of the retail investors for the NSE to play its rightful role in economy.