AJIBM  Vol.6 No.4 , April 2016
Investment Market Environment and Decision Making for Equity Portfolio Selection
Abstract: Decision making for portfolio selection is based on financial theory of modern portfolio and capital asset pricing model that have shaped way in which academics and practitioners analyze investment performance. Most of investors act rationally and consider all available information in the decision making process for efficiency reflecting all available information for security prices. This study aimed to examine the relationship between equity investment market environment and its portfolio selection decision-making in Arusha. This study employed descriptive and correlation research design. Purposive sampling method was applied to select 48 participants. A questionnaire was administered to collect data. Findings revealed that there was very high chance of the investors to make income out of their investments. Majority of respondents reported that market equity investment was very adequate to guarantee income from investment (mean = 3.63), predict investment income for all the periods of investment (mean = 3.25), short term investment that was within 5 years (mean = 3.75), access to equity investment information (mean = 4), making proper decision on equity investment information (mean = 3.29) and was with adequate managerial skills (mean = 3.13). Results show that high return on investment (mean = 4.25) was extremely adequate for equity investment portfolio selection, diversification (mean = 3.33) and imitation and following (mean = 3.88) were very adequate for equity investment portfolio selection, investment flexibility (mean = 3.04) and investment status and prestige (mean = 3.13) were adequate for equity investment portfolio selection. There was significant relationship between market equtiy investment environment and diversified investment portfolio selection decision. This study may serve as an eye opener to investors and mangers of companies to plan for business projects and equity investments in Arusha. There is a need to provide investors with information flow from the Bank of Tanzania and other financial institutions on investments.
Cite this paper: Kazimoto, P. (2016) Investment Market Environment and Decision Making for Equity Portfolio Selection. American Journal of Industrial and Business Management, 6, 508-515. doi: 10.4236/ajibm.2016.64046.

[1]   Picket Alternative Advisors SA (2104) An Introduction to Private Equity.

[2]   Association of British Insurers (2013) Encouraging Equity Investment: Facilitation of efficient Equity Capital Raising in the UK Market.

[3]   Bank of Tanzania (2014) Directors report and Financial Statements for the Year Ended 20 June 2014. Tanzania.

[4]   Sharpe, W. (2003) Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance, 91, 425-442.

[5]   Markowitz, H. (2005) Portfolio Selection. Journal of Finance, 7, 77-91.

[6]   Shiller, R.J. and Karl, E.C. (2004) Is There a Bubble in the Housing Market. Cowles Foundation for Research in Economics Yale University, New Haven.

[7]   Lusht, K.M. (2008) The Real Estate Pricing Puzzle. Real Estate Economics, 16, 95-104.

[8]   Barber, B.M. and Odean, T. (2006) All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors. The Review of Financial Studies.

[9]   Pompian, M.M. (2006) Behavioral Finance and Wealth Management: How to Build Optimal Portfolio that account for Invest Biases. John Willey & Sons Inc., Canada.

[10]   Hirshleifer, D.A. and Shumway, T. (2001) Good Day Sunshine: Stock Returns and the Weather (March 28, 2001). Dice Center Working Paper No. 2001-3.

[11]   Athely, S., Bagwel, K. and Sanchirico, C. (2004) Collusion and Price Rigidity. Review of Economic Studies, 71, 317-349.

[12]   Dong, M., Hirshleifer, D., Richardson, S. and Teoh, H.S. (2006) Does Investor Misvaluation Drive the Takeover Market? The Journal of Finance, 61, 725-762.

[13]   Kumar, A. and Lee, C.M.C. (2006) Retail Investor Sentiment and Return Comovements. The Journal of Finance, 61, 2451-2486.

[14]   Hvidkjaer, S. (2006) A Trade-Based Analysis of Momentum. Review of Financial Studies, 19, 457-491.

[15]   Kaustia, M. (2004) Market-Wide Impact of the Disposition Effect: Evidence from IPO Trading Volume. Journal of Financial Markets, 7, 207-235.

[16]   Goetzmann, W.N. and Kumar, A. (2003) Diversification Decisions of Individual Investors and Assets Prices.

[17]   Huberman, G. (2001) Familiarity Breeds Investments. Oxford Journals Social Sciences Review of Financial Studies, 14, 659-668.

[18]   Coval, J.D. and Shumway, T. (2000) Expected Option Returns.

[19]   Barber, B.M. and Odean, T. (2002) Online Investors: Do the Slow Die First? Review of Financial Studies, 15, 455-488.

[20]   Barber, B., Odean, T. and Zhu, N. (2003) Systematic Noise. Working Paper, University of California, Davis.

[21]   Barberis, N., Shleifer, A. and Vishny, R.A. (2006) Model of Investor Sentiment. Journal of Financial Economics, 49, 307-343.

[22]   Chan, L.K.C., Lakonishok, J. and Sougiannis, T. (2001) The Stock Market Valuation of Research and Development of Expenditures. The Journal of Finance, 56, 2431-2456.

[23]   Koerten, K.T. (2013) Comparing Portfolio Diversification Strategies in Different Market Environments. University of Tennessee Honors Thesis Projects.

[24]   Shleifer, A. and Vishny, R. (1997) The Limits of Arbitrage. Journal of Finance, 52, 35-55.