Determinants of Investment Decisions: A Study of Individual Investors on the Zimbabwe Stock Exchange

Abstract

This study investigated factors that inform individual investors in their decision-making on the Zimbabwe Stock Exchange. The main objective was to identify and assess the effect of the behavioural factors on investment decisions of individual investors. A quantitative survey of 291 randomly selected individual Zimbabwe Stock Exchange investors was conducted. Multiple regression analysis was used to calculate the correlation coefficient of behavioural factors and investment decision while correlation analysis was used to measure the strength of the relationship between the independent variables. The findings of the study established that the predictor variables had a strong positive association between them and individual investor decision at a significant level of 0.01 and 0.005. The findings of the study revealed that individual investor decisions are influenced by the behavioural factors which are; anchoring, availability, gambler’s fallacy, overconfidence, herding, loss aversion, mental accounting, regret aversion and representativeness. The study recommends the need for improved information on the stock markets dynamics as well as training on investor awareness programmes to support the decision-making abilities of the individual investors on the ZSE to fully play its rightful role in the development of the economy.

Over Confidence, Mental Accounting, and Loss Aversion In Investment Decision

“…Referring to the prospect theory, this is possible because investors think that the investment made is more like a choice between the gain and loss of investment. The results of this study support the research conducted by Aziz & Khan (2016), but does not support the results of research conducted by Cherono et al, (2019); Hunguru et al (2020); Isidore R & Christie (2019); Jain et al, (2019);S Hallale & Gadekar (2019). This difference is possible due to cultural differences, differences in the age of respondents, and differences in existing technological developments so that technological advances have an important role in disseminating information to investors.…”

“…In the related analysis, Samuelson & Zeckhauser (1988) introduced the term "status quo bias" after documenting the tendency to maintain the status quo in decision making. Previous research examining the relationship of loss aversion to investment decisions has had various results such as Cherono et al (2019); Hunguru et al (2020); Isidore R & Christie (2019) shows a significant relationship of loss aversion to investment decisions, and S Hallale & Gadekar (2019) indicates a weak relationship, meanwhile Aziz & Khan (2016); and Jain et al (2019) results that there is no relationship between loss aversion and investment decisions. Furthermore, in this study will discuss these financial behaviors towards community investment decisions, especially investments in capital market.…”

“…Several studies have shown inconsistent results regarding the effect of overconfidence on investment decisions. Research Cherono et al (2019); Hunguru et al (2020); S Hallale & Gadekar (2019) shows a significant result overconfidence affects investment decisions, even Aziz & Khan (2016); Jain et al (2019); and Pikulina et al (2017) shows the results of a robust, while Isidore R & Christie (2019); Wulandari & Iramani (2014) shows that there is no effect of overconfidence on Journal of Auditing, Finance, and Forensic Accounting, Vol. 9, No.…”

Financial Literacy's Moderating Effect on Project Selection with Heuristic-Driven Biases: SMEs’ Entrepreneurial Market Development in Pakistan

“…According to the research conducted in the Zimbabwe stock market, the following psychological biases have a role in investment decisions: anchoring, availability, gambler's fallacy, overconfidence, herding, loss aversion, mental accounting, regret aversion, and representativeness (Hunguru et al, 2020). The study in Nepal indicated that heuristics (such as anchoring, representative, overconfidence, and availability bias) have little bearing on investment returns (Pokharel, 2020); according to the research, anchoring and adjustment bias impact project selection directly or indirectly.…”

REVIEW FAKTOR PENENTU KEPUTUSAN INVESTASI PADA GENERASI Z & MILLENIAL

“…Dalam mengambil keputusan investasi, Generasi Z tentu dipengaruhi oleh beberapa faktor [16]. Faktor tersebut diantaranya ialah faktor demografi, literasi keuangan, bias perilaku, persepsi risiko dan persepsi toleransi [17].…”