Effect of Retail Investor Profile on Individual Portfolio Choice at the Nairobi Securities Exchange, Kenya

Abstract

The retail investor profile plays a major role in determining the choice of an investment portfolio composed of one or more assets that an investor receives over a certain period of time. Although there are numerous controversial arguments about the factors that determine the level of individual portfolio choice, the multidimensional perspectives on investors' characteristics have received little attention. The general objective of this study was to establish the effect of retail investor profile on individual portfolio choice at the Nairobi Securities Exchange (NSE). The specific objectives to guide this study was to determine the effect of investor’s attitude towards risk on individual portfolio choice at the NSE; to establish the effect of lifestyle characteristics on individual portfolio choice at the NSE; to examine the effect of investor’s specific needs on individual portfolio choice at the NSE; to assess the effect on investor’s investment avenues on individual portfolio choice at the NSE and to investigate the moderating effect of investor’s age on the correlation between retail investor profile and individual portfolio choice at the NSE. The study is anchored on four theories, namely, modern portfolio theory, prospect theory, expected utility theory and risk aversion theory. The population consisted of individual investors estimated at 2.4 million as of 30

th September 2025, based on Central Depository and Settlement Corporation Limited (CDSC). A target population of 873,980 active retail investors who also form the accessible population at the NSE was used to draw a sample size of 385 active individual retail investors, out of which 320 participated. Both stratified and convenience sampling were used to select the required number of respondents. A structured questionnaire was used to collect the data, whereby a drop-and-pick approach was used by the researcher and research assistants. Pilot testing of the instruments was performed to assess their reliability. The descriptive research design was used in descriptive analysis for the variables under study up to a period of five years from January, 2021 to December, 2025, using frequency, percentages, means and standard deviation Tables. Further, correlational and multiple regression analyses were used to analyze the data obtained, which was presented using Pearson correlation, model summary, ANOVA, moderated regression and hypothesis analysis tables. The study findings revealed that attitude towards risk and investors’ specific needs are positively correlated and significant on individual portfolio choice, while lifestyle characteristics and investment avenues were negatively correlated. As such, a unit increase in a predictor variable lead to an increase in investment in stocks, bonds and treasury bills. Further, the results of the study indicated that investors’ ages are positively correlated but do not moderate the relationship between retail investor profile and individual portfolio choice. When the independent variables interacted with the moderator, the results indicated that some were positively correlated, others were negatively correlated, some were significant, yet some were not significant. The study would benefit investors to better understand their investment goals, the regulator the Capital Markets Authority to improve regulatory policies and make the market more attractive to both the existing and potential traders, and Nairobi Securities Exchange to assist individual investors in their portfolio choices and also to the academicians to advance the conceptual arguments of the lack of moderating effect of age on the relationship between retail investor profile and individual portfolio choice.