tailieunhanh - Investor behavior biases and stock market reaction in Kenya

A challenge to EMH is that individuals often overreact and underreact to news causing stock markets to react according to investor behaviour in their investment decision making. Generally, the study determined the effect of investor behaviour on stock market reaction of listed companies in Kenya. Specifically, the study determined the effect of investor herd behaviour on stock market reactions of listed companies in Kenya; determined the effect of investor loss aversion on stock market reactions of listed companies in Kenya; determined the effect of investor mental accounting on stock market reactions of listed companies in Kenya; and determined the effect of investor overconfidence on stock market reactions of listed companies in Kenya. The target population was 67 listed companies at the Nairobi Securities Exchange. A sample of 48 listed companies was used for analysis. Secondary data extracted from NSE historical data of listed companies for the period 2004 to 2016 was used for analysis. The study adopted quantitative research design. Panel data regression analysis model was used. The results indicated that herd behaviour did not have a significant effect on stock market reaction. However, loss aversion, mental accounting and overconfidence had significant effect on stock market reaction in Kenya. | Journal of Applied Finance Banking vol. 9 no. 1 2019 147-180 ISSN 1792-6580 print version 1792-6599 online Scienpress Ltd 2019 Investor Behavior Biases and Stock Market Reaction in Kenya Irene Cherono1 Tobias Olweny1 and Tabitha Nasieku1 Abstract A challenge to EMH is that individuals often overreact and underreact to news causing stock markets to react according to investor behaviour in their investment decision making. Generally the study determined the effect of investor behaviour on stock market reaction of listed companies in Kenya. Specifically the study determined the effect of investor herd behaviour on stock market reactions of listed companies in Kenya determined the effect of investor loss aversion on stock market reactions of listed companies in Kenya determined the effect of investor mental accounting on stock market reactions of listed companies in Kenya and determined the effect of investor overconfidence on stock market reactions of listed companies in Kenya. The target population was 67 listed companies at the Nairobi Securities Exchange. A sample of 48 listed companies was used for analysis. Secondary data extracted from NSE historical data of listed companies for the period 2004 to 2016 was used for analysis. The study adopted quantitative research design. Panel data regression analysis model was used. The results indicated that herd behaviour did not have a significant effect on stock market reaction. However loss aversion mental accounting and overconfidence had significant effect on stock market reaction in Kenya. JEL classification numbers C91 D03 D84 Keywords Herding Behaviour Loss Aversion Overconfidence Mental Accounting Overreaction Stock Market Reaction Under-reaction. 1 Department of Economics Accounting and Finance Jomo Kenyatta University of Agriculture and Technology Kenya Article Info Received September 9 2018. Revised September 23 2018 Published online January 1 2019 148 Irene Cherono et al. 1 Introduction Behavioural models have .