INFLUENCE OF BEHAVIOURAL FINANCE THEORIES ON INDIVIDUALSâ€™ INVESTMENT PERFORMANCE: EVIDENCE FROM THE NIGERIAN STOCK MARKET
Empirical evidence from developed countries have established that behavioural finance theories do have significant influence on individuals’ investment performance in stock market, but there is very limited number of studies conducted in less developed countries especially in Sub- Saharan Africa and Nigeria in particular. In view of this, this paper attempts to bridge the gap by examining the influence of the behavioural finance theories on individuals’ investment performance based on the Nigerian stock market context. The data collected were analysed by method of structural equation modelling using AMOS Software. The findings revealed that only heuristics theory was found to have significant negative impact on the individuals’ investment performance. The prospect, market, and herding theories were found to have positive but insignificant impacts on investment performance. The paper concludes that behavioural finance theories are highly prevalent among individual investors, but have less influence on investment performance at the Nigerian stock market. The result is consistent with the argument proposed by the proponents of behavioural finance that the investment performance of individual investors are influenced by cognitive and affective biases, which result in irrational decision and poor investment performance in stock market. This study, proposed that investors need to be aware of this bias and its resultant implication on their investment performance. The security market operators need to intensify efforts in increasing awareness about these behavioural biases, financial literacy, and basic principles of stock market operations among the investors so as to enable them make an informed decision about the stock investment.
KEYWORDS: Behavioural finance theories, Investment performance, Nigerian stock market.