Relationship Between Financial Literacy of Individual Investors and Stock Market Participation Decision Among Secondary School Teachers from Nakuru County, Kenya

Abstract

The market for stocks plays a crucial role in the lives of many individual households. They stand to gain from higher returns that they earn from participating in the stock market. In reality, few individual households participate in the stock market. Many researches have tried to provide explanation for the limited individual investor participation in the stock market. This study sought to explain whether financial literacy could also provide explanation for the stock holding puzzle by assessing the relationship between financial wealth and individual investor stock market participation decision among secondary school teachers in Nakuru County. Cross sectional survey research design was employed for the study. Stratified proportionate random sampling was applied and data was collected from 231 secondary school teachers using structured questionnaires. Data was analyzed using inferential statistics with the aid of SPSS. The research findings indicate that financial literacy has a significant positive relationship with stock market participation of secondary school teachers in Nakuru County. The study concludes that that financial literacy of individual investors has a significant relationship with stock market participation among secondary school teachers from Nakuru County. The study recommends that the Capital Markets Authority which is tasked with supervision, licensing and monitoring the activities of financial markets should implement comprehensive awareness and public education programs that targets the wider non-stock market participating public. This will increase participation which is an indicator of well-functioning financial market in any country.