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2021 | OriginalPaper | Chapter

Factors Influencing Individual Investor Participation in Stock Market

Author : Dorika Jeremiah Mwamtambulo

Published in: Contemporary Trends and Challenges in Finance

Publisher: Springer International Publishing

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Abstract

Modern Portfolio Theory requires individual investors to hold some risky assets in their portfolio. Many of these risky assets are traded in capital markets; hence the expectation for significant participation by individual investors. Evidence has shown this not to be the case; many individual investors around the world are opting to invest in less risky assets. Tanzania, like many countries around the world, is facing the problem of low individual investors’ participation in its capital market. This study aimed at determining the factors behind the low individual investors’ participation in the Dar es Salaam Stock Exchange. Using data collected from 1600 individuals in the country, it is observed that demographic factors of gender, age and education to have insignificant influence on the participation decision of an individual investor. Only those individuals with a risk-taking attitude are willing to participate in capital markets. The properties of companies offering financial products in these markets have a significant influence on the participation decision. Friends, relatives and brokers advice plays a substantial role in the level of participation of individual investors. To increase individual investors’ participation in Tanzania’s capital market, factors of household income, information availability and capital market awareness should be addressed.

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This includes mutual funds, exchange-traded funds, institutional accounts and private investors tracking on the index.

This includes the actively managed hedge funds, mutual funds and institutional accounts.

This is an increase from 12.6 reported by Statistics UK (2017).

The data was collected from a Survey of Health, Ageing and Retirement in Europe (SHARE) and it included the following countries Austria, Belgium, Czech, Denmark, Estonia, France, Germany, Italy, Israel, Luxembourg, Netherlands, Slovenia, Spain, Sweden and Switzerland.

Bond investment include both investment in government and corporate bonds.

Two strata are formed for the population of individuals participating and not participating in the capital market.

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Title: Factors Influencing Individual Investor Participation in Stock Market
Author: Dorika Jeremiah Mwamtambulo
Publisher: Springer International Publishing
Book: Contemporary Trends and Challenges in Finance
Print ISBN: 978-3-030-73666-8

Electronic ISBN: 978-3-030-73667-5

Copyright Year: 2021
DOI: https://doi.org/10.1007/978-3-030-73667-5_4