Effect of Behavioural Biases On Market Performance of Shares of Firms Listed at The Nairobi Securities Exchange
Hezekiah Adwar Ouma & Dr. Oluoch Oluoch, Jomo, Kenya
Abstract: The study sought to evaluate the effect of behavioral biases on market performance of shares of firms listed at the NSE which is also the overriding objective of the study. The study was guided by three objectives; to determine the effect of herd behavior, to establish the effect of mental accounting on market performance of shares of firms listed at the NSE. It is in line with four review theories which are efficient market hypothesis (EMH) and prospect theory. Longitudinal research design was used to enhance data collection from the same target population at different points in time in order to study changes over time for a period of time and to allow for the analysis of the relationship between the independent and the dependent variables over a period of time. Dependent variable was measured by use of share returns based on share price. Independent variables are herd behavior, overconfidence and mental accounting and were respectively measured by use of returns dispersion, trade volume and price-dividend ratio. The study targeted sixty-six firms listed in the NSE. Census survey was used to draw samples from target population. Document analysis and checklist were used for collecting secondary data from print and electronic media. Data collected were analyzed using quantitative and qualitative means. Quantitative data was analyzed using descriptive statistics such as measures of central tendencies. The study covered a period of one year (twelve months) from September 2018 through September 2019. The study found that behavioural biases are significant predictors in modeling market performance in bivariate analysis. Furthermore, mental accounting was negatively correlated with market performance.