Exploring herding behaviour in mutual fund investor in Ghana

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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.
Undergraduate thesis submitted to the Department of Business Administration, Ashesi University, in partial fulfillment of Bachelor of Science degree in Business Administration, May 2020
behavioural finance, traditional finance, herding behaviour, investment decisions, market information