BEHAVIOURAL BIASES IN INVESTMENT DECISIONS: COMPONENT FACTORS EXTRACTION
This paper seeks to explore the component factors of the behavioural biases that prevail among individual investors at the Nigerian stock market. This is an important input in developing the structural model that could be used to ascertain the influence of these biases on individuals’ investment performance. It adopts a survey strategy in an exploratory manner through exploratory factor analysis (EFA) using the maximum likelihood estimation approach. The paper finds that four major factors, represented by the theories of heuristics, prospect, market and herding, are indicated by the factor structure matrix. The four factors extracted explain 73.94% of the total variance of all the measurement items in the model. The factors were further validated via the Cronbach’s Alpha reliability statistic. The paper, therefore, concludes that the factors extracted are reliable and could be used as the exogenous variables in determining the influence of behavioural factors on individual investors’ performance at the Nigerian stock market. It further recommends that these factors should be subjected to convergent and discriminant validity tests to ascertain their uniqueness.
KEYWORDS: Behavioural bias, exploratory factor analysis, component factors, Nigerian Stock Market.