Title: The effects of behavioural factors in investment decision-making: a survey of institutional investors operating at the Nairobi Stock Exchange

Authors: Nelson Maina Waweru, Evelyne Munyoki, Enrico Uliana

Addresses: School of Administrative Studies, York University, 4700 Keele Street, Toronto, ON, M3J 1P3, Canada. ' School of Business and Management, United States International University, P.O. Box 14634-00800, Nairobi, Kenya. ' Department of Accounting, University of Cape Town, Private Bag, Rondebosch, 7700, South Africa

Abstract: This study investigated the role of behavioural finance and investor psychology in investment decision-making at the Nairobi Stock Exchange with special reference to institutional investors. Using a sample of 23 institutional investors, the study established that behavioural factors such as representativeness, overconfidence, anchoring, gambler|s fallacy, availability bias, loss aversion, regret aversion and mental accounting affected the decisions of the institutional investors operating at the NSE. Moreover, these investors made reference to the trading activity of the other institutional investors and often exhibited an institutional-herding behaviour in their investment decision-making.

Keywords: behavioural finance; institutional investors; Nairobi Stock Exchange; prospect theory; heuristic theory; decision making; investment decisions; emerging markets.

DOI: 10.1504/IJBEM.2008.019243

International Journal of Business and Emerging Markets, 2008 Vol.1 No.1, pp.24 - 41

Published online: 03 Jul 2008 *

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