Behavioral finance techniques examine how irrationality and bias impact investor decisions. This study aims to examine the impact of confirmation bias, overconfidence bias, familiarity bias and information processing bias on equity investors at the Nairobi Securities Exchange (NSE), focusing on how these biases influence investor behavior and decision-making among NSE equity stockholders.
A descriptive research design was used, with respondents including the fund manager and trustee from each firm. A structured survey was administered to gather quantitative data. The sample size consisted of 102 participants, including 51 trustees and 51 fund managers. Data analysis was conducted using SPSS version 26, employing both descriptive and inferential statistics.
The findings revealed a significant relationship between behavioral finance biases and the investment decisions of equity investors at NSE. This study concludes that there is a strong correlation between behavioral finance biases (confirmation bias, overconfidence bias, familiarity bias and information processing bias) and investment decisions. Information processing bias has the greatest influence on investors’ decisions. To avoid being misled by external forces, it is recommended that investors possess financial literacy before making any investment decisions.
This study assesses how behavioral finance biases impact equity investors’ choices on the NSE. It examines four biases: confirmation bias, overconfidence bias, familiarity bias and information processing bias. These biases were identified, and their influence on investment was quantified. The findings are most accurate when combined with a descriptive study design and a complex analysis framework that integrates both descriptive and inferential methods.
