The Determinants of Stock Market Participation: Evidence from Individual Investors in Zimbabwe

The participation of individual investors at the Zimbabwe Stock Exchange (ZSE) is very low. The reasons for the low participation rate are not well known. It is from this background that this study sought to understand the impact of selected factors namely trust, awareness, transaction costs, perceptions, cognitive skills, and access to internet on individual participation at the stock market. The study also sought to establish if there are statistical differences of opinion among respondents of different age and educational backgrounds about the effect of the stated factors on stock market participation. Using data collected from stock broking managers, asset managers, fund/investment managers, regulators, and investment/research analysts, the regression analysis results show that with the exception of trust the remaining five factors are significant predictors of stock market participation by individual investors. The results further reveal that no significant differences are found among male and female respondents’ views that trust, transaction costs, cognitive skills and perceptions are important factors in influencing their stock market participation but for awareness and access to internet a significant difference is found in their perceptions. Further analysis finds that there are no statistical differences in the effect of awareness, transaction costs and cognitive skills whatever the educational background of a respondent but respondents perceive that trust, access to internet and perceptions differ in their effects on respondents with different academic qualifications. The study adds to the literature of stock market participation in developing countries. It provides useful insights to stock market practitioners to devise strategies that enforce an improved participation.