Individual investor dynamics and stock market participation decision among secondary school teachers from selected sub counties in Nakuru county, Kenya

Abstract

Stock market makes significant contribution to the general financial well-being of a country and individual investors. Despite the numerous benefits of stockholding, few individuals participate in the stock market. The purpose of this study was to investigate the relationship between individual investor dynamics and stock market participation decision among secondary school teachers from selected sub counties in Nakuru County, Kenya. Specifically, the study investigated the relationship between financial wealth, social interaction, risk aversion, financial literacy and individual investor stock market participation decision among secondary school teachers. The study also sought to establish the moderating effect of investment culture on the relationship between individual investor dynamics and stock market participation decision of secondary school teachers. The study was guided by the Modern Portfolio Theory. The study employed cross-sectional survey research design. The target population comprised of 1,609 secondary school teachers from selected sub counties in Nakuru County. Data was collected using structured questionnaires. A sample of 320 secondary school teachers was selected using stratified proportionate random sampling technique. Data was analyzed using descriptive and inferential statistics with the aid of SPSS version 25. Research hypotheses were tested at 0.05 significant levels. Correlation coefficient was used to establish the nature of correlation between dependent and independent variables. Regression analysis was used to establish the relationship between explanatory variables and the dependent variable. The study found that there exists positive significant relationship between financial wealth of individual investors and stock market participation decision (r = 0.419, p < 0.05); positive significant non-causal relationship between social interaction of individual investors and stock market participation decision (r = 0.331, p < 0.05); risk aversion of individual investors and stock market participation decision was positive and statistically significant (r = 0.325, p < 0.05) and that there exists a positive significant non- causal relationship between financial literacy of individual investors and stock market participation decision (r = 0.313, p < 0.05). The study established that jointly the independent variables included in the study could explain 51.4% (R2 =0.514) of variation in the stock market participation decision. The study concludes that individual investor dynamics of financial wealth, social interaction, risk aversion and financial literacy are important since the study found that they significantly explain stock market participation decision. The study also concludes that investment culture has a positive significant moderating effect on the relationship between social interaction and stock market participation decision (R 2 changed from 0.126 to 0.166, p<0.05). The study further concludes that investment culture has insignificant moderating effect on the effect of individual investor dynamics of financial wealth, risk aversion and financial literacy and stock market participation decision among secondary school teachers. The study recommends that the Nairobi Securities Exchange should sensitize Kenyans on the benefits of investing in the stock market in a bid to enhance the participation of individual investors excluded from the investment scene and that the Capital Markets Authority should implement awareness and public education in order to encourage individual investor participation in the stock market. There is need for vii similar study to be carried out on a broader scale in Kenya. The study also recommends that further research should be carried out to test and validate the research findings using a quantitative approach. The study makes a contribution to the limited existing body of knowledge on individual dynamics that could explain the limited individual investor stock market participation. The study is expected to benefit the Policy makers both the national and county government and capital markets authority that can use the research findings in policy formulation and implementation regarding individual investor participation in the stock market.