IDEAS home Printed from https://ideas.repec.org/a/spt/fininv/v7y2018i4f7_4_3.html
   My bibliography  Save this article

Effect of financial literacy on portfolio diversification at the Nairobi securities exchange market, Kenya

Author

Listed:
  • Eveline Mwangi
  • Zipporah Onsomu

Abstract

This study sought to establish the effect of financial literacy on portfolio diversification at the Nairobi Securities Exchange. The study adopted a cross sectional survey research design. The population of the study constituted all individual investors who traded in stocks at the Nairobi Securities Exchange between June and July 2017. Primary data was used and a sample of 200 investors was considered for the study. Data was analyzed using regression analysis. The findings depicted that there was a significant effect of financial literacy on portfolio diversification among investors at the Nairobi securities exchange. However, age, education and income level which were control variables had insignificant influence on portfolio diversification. The study further recommends the need for the relevant government agencies to facilitate formulation of policies and programs to educate and train people on financial literacy. JEL classification numbers: G11Keywords: Financial literacy, portfolio diversification, demographics

Suggested Citation

  • Eveline Mwangi & Zipporah Onsomu, 2018. "Effect of financial literacy on portfolio diversification at the Nairobi securities exchange market, Kenya," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 7(4), pages 1-3.
    • Handle: RePEc:spt:fininv:v:7:y:2018:i:4:f:7_4_3
    as

    Download full text from publisher

    File URL: http://www.scienpress.com/Upload/JFIA%2fVol%207_4_3.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
    2. Diana J. Beal & Sarath B. Delpachitra, 2003. "Financial Literacy Among Australian University Students," Economic Papers, The Economic Society of Australia, vol. 22(1), pages 65-78, March.
    3. Ivković, Zoran & Sialm, Clemens & Weisbenner, Scott, 2008. "Portfolio Concentration and the Performance of Individual Investors," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(3), pages 613-655, September.
    4. William N. Goetzmann & Alok Kumar, 2008. "Equity Portfolio Diversification," Review of Finance, European Finance Association, vol. 12(3), pages 433-463.
    5. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
    6. repec:use:tkiwps:2323 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zaheer Ahmed & Umara Noreen & Suresh A.L. Ramakrishnan & Dewi Fariha Binti Abdullah, 2021. "What explains the investment decision-making behaviour? The role of financial literacy and financial risk tolerance," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 11(1), pages 1-19.
    2. Guiso, Luigi & Sodini, Paolo, 2013. "Household Finance: An Emerging Field," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1397-1532, Elsevier.
    3. Laurent E. Calvet & John Y. Campbell & Paolo Sodini, 2009. "Measuring the Financial Sophistication of Households," American Economic Review, American Economic Association, vol. 99(2), pages 393-398, May.
    4. Alexander Kempf & Christoph Merkle & Alexandra Niessen†Ruenzi, 2014. "Low Risk and High Return – Affective Attitudes and Stock Market Expectations," European Financial Management, European Financial Management Association, vol. 20(5), pages 995-1030, November.
    5. Phan, Thuy Chung & Rieger, Marc Oliver & Wang, Mei, 2018. "What leads to overtrading and under-diversification? Survey evidence from retail investors in an emerging market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 19(C), pages 39-55.
    6. Daniel Hoechle & Stefan Ruenzi & Nic Schaub & Markus Schmid, 2017. "The Impact of Financial Advice on Trade Performance and Behavioral Biases," Review of Finance, European Finance Association, vol. 21(2), pages 871-910.
    7. Raslan Alzuabi & Sarah Brown & Mark N. Harris & Karl Taylor, 2024. "Modelling the composition of household portfolios: A latent class approach," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(1), pages 243-275, February.
    8. Giofré, Maela, 2017. "Financial education, investor protection and international portfolio diversification," Journal of International Money and Finance, Elsevier, vol. 71(C), pages 111-139.
    9. Lu, Xiaomeng & Zhang, Yong & Zhang, Yixing & Wang, Lin, 2020. "Can investment advisors promote rational investment? Evidence from micro-data in China," Economic Modelling, Elsevier, vol. 86(C), pages 251-263.
    10. Lereko Rasoaisi & Kalebe M. Kalebe, 2015. "Determinants of Financial Literacy among the National University of Lesotho Students," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(9), pages 1050-1060, September.
    11. Tullio Jappelli, 2010. "Economic Literacy: An International Comparison," Economic Journal, Royal Economic Society, vol. 120(548), pages 429-451, November.
    12. Alisdair McKay, 2011. "Household Saving Behavior and Social Security Privatization," Boston University - Department of Economics - Working Papers Series WP2011-027, Boston University - Department of Economics.
    13. Dr Samamba, Lennox Trivedi, PhD—Law, 2023. "Legal Aspects of Promoting the Participation of Collective Investment Schemes in Eastern and Southern African Frontier Securities Markets," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(4), pages 121-141, April.
    14. Morten Balling, 2011. "Asymmetries in Financial Information, Risk and Know-how: The Roles of Disclosure Rules, Financial Safety Nets and Market Discipline," Chapters, in: Christopher J. Green & Eric J. Pentecost & Tom Weyman-Jones (ed.), The Financial Crisis and the Regulation of Finance, chapter 13, Edward Elgar Publishing.
    15. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Financial literacy and retirement planning: New evidence from the Rand American Life Panel," CFS Working Paper Series 2007/33, Center for Financial Studies (CFS).
    16. Bellofatto, Anthony & Broihanne, Marie-Hélène & D'Hondt, Catherine, 2019. "Appetite for information and trading behavior," LIDAM Discussion Papers LFIN 2019002, Université catholique de Louvain, Louvain Finance (LFIN).
    17. Chen, Fuzhong & Hsu, Chien-Lung & Lin, Arthur J. & Li, Haifeng, 2020. "Holding risky financial assets and subjective wellbeing: Empirical evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    18. Gangwar, Rachna & Singh, Ritvik, 2018. "Analyzing Factors Affecting Financial Literacy and its Impact on Investment Behavior among Adults in India," MPRA Paper 89452, University Library of Munich, Germany.
    19. Roche, Hervé & Tompaidis, Stathis & Yang, Chunyu, 2013. "Why does junior put all his eggs in one basket? A potential rational explanation for holding concentrated portfolios," Journal of Financial Economics, Elsevier, vol. 109(3), pages 775-796.
    20. van Rooij, Maarten C.J. & Lusardi, Annamaria & Alessie, Rob J.M., 2011. "Financial literacy and retirement planning in the Netherlands," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 593-608, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spt:fininv:v:7:y:2018:i:4:f:7_4_3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Eleftherios Spyromitros-Xioufis (email available below). General contact details of provider: http://www.scienpress.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.