Ndiege Factors Influencing Investment Decision In Equity Stocks At The Nairobi Securities Exchange Among Teachers In Kisumu Municipality Kenya

Topics: Risk aversion, Stock market, Utility Pages: 71 (12760 words) Published: March 24, 2015
FACTORS INFLUENCING INVESTMENT DECISION IN EQUITY STOCKS AT
THE NAIROBI SECURITIES EXCHANGE AMONG TEACHERS IN KISUMU
MUNICIPALITY, KENYA

NDIEGE CLEMENT O.

A Management Research Project Submitted in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Business Administration, School of Business, of the University of Nairobi

November, 2012

1

DECLARATION
This research project paper is my original work and has not been presented for the award of any degree in any university.

Signature ………………………………….. Date ………………………..

NDIEGE CLEMENT O.
D61/73265/2009

This research project paper has been submitted for examination with my approval as the university supervisor

Signature ……………………………………….

DR. JOSHUA WANJARE
Lecturer School of Business, University of Nairobi

i

Date …………………………

ACKNOWLEDGEMENT

I wish to acknowledge with profound appreciation all the assistance accorded to me by Dr. Wanjare, my research project supervisor who has ably guided me throughout the study. I am also greatly indebted to all my friends, lecturers and those Head Teachers and Principals of schools in Kisumu municipality, who enabled me to gather the requisite data for this project in a short time.

Finally I am very grateful to Winfrida and Vane for typesetting this work.

ii

DEDICATION

This work is dedicated to my wife Antonine and children Edel, Catherine, Stephanie and Aaron whose love and patience gave me the drive while pursuing this course.

iii

ABSTRACT
This study focused on the factors influencing investment decision in equity stocks at the Nairobi stock exchange among teachers in Kisumu Municipality. The study employed a descriptive survey design. The target population was two thousand five hundred and thirty teachers. A sample of two hundred and fifty three (representing ten percent)of the target population was selected. Data was collected using questionnaires and subsequently analyzed using descriptive statistics and factor analysis techniques. The study revealed that teachers in Kisumu Municipality have a low financial literacy. Although many of them rate equity stocks as an investment just like others, a majority of them would prefer investing in other asset classes such as real estate. Only a small percentage (28%) of the target population had invested in the stock market.

The results indicated that decisions to invest in equity stocks are influenced by economic and behavioral factors. The key economic factors influencing decisions to invest in equity stocks were found to be expected dividends, capital appreciation and affordability of shares. Among behavioral factors were herd behavior, depicted by decision to invest based on popular opinion or shares in high demand and friends and co-workers recommendation, and overconfidence depicted in the respondents belief that they are better than others; forming the basis of self attribution bias.

iv

TABLE OF CONTENTS
Declaration ……………………………………………………………………….

i

Acknowledgement ……………………………………………………………….

ii

Dedication ………………………………………………………………………..

iii

Abstract …………………………………………………………………………..

iv

List of tables ……………………………………………………………………… vii List of figures …………………………………………………………………….. viii Acronyms and abbreviations ……………………………………………………… ix

CHAPTER ONE: INTRODUCTION
1.1 Background of the study ……………………………………………………

1

1.1.1 Investment decision ………………………………………………..

4

1.1.2 The stock exchange market in Kenya ……………………………..

5

1.1.3 Teachers in Kisumu Municipality …………………………………

7

1.2 Research Problem …………………………………………………………..

8

1.3 Research Objectives …………………………………………………………

10

1.4 Value of the Study…………………………………………………………… 10

CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction……………………………………………………………………

11

2.2 Investment Theories…………………………………………………………… 11 2.2.1 Portfolio Theory……………………………………………………..

11

2.2.2 The Efficient Market...

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