Exploring herding behaviour in mutual fund investor in Ghana
Date
2020-05
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Abstract
According to the classical economic theory, it is assumed that human beings make rational
decisions by evaluating available information and evidence before making choices which will
result in maximization of utility. This theory builds on the Efficient Market Hypothesis that
suggests that stock prices are a true and fair reflection of market information. However, in
practicality, studies have shown that humans do not make rational decisions instead, make
decisions based on some behavioural influences like herding, anchoring and known as
behavioural biases. The aim of this study is to investigate the impact of herding behaviour on
investment decisions of individual investors of mutual funds in Ghana. In recent history, Ghana
has experienced and suffered a series of large-scale financial scam. The study collected primary
data through a structured questionnaire among 70 mutual fund investors. Evidence of herding
amongst mutual fund investors was tested using the chi-square test and the t-test. The results
of the study show that there is the presence of herding behaviour when mutual fund investors
are making investment choices. The study also concluded that gender does not influence the
propensity of an investor to herd when investing. The results of this study will help investors
understand how cognitive biases come to play in investor decision making.
Description
Undergraduate thesis submitted to the Department of Business Administration, Ashesi University, in partial fulfillment of Bachelor of Science degree in Business Administration, May 2020
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Undergraduate thesis
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Keywords
behavioural finance, traditional finance, herding behaviour, investment decisions, market information