Investors’ Behavioral Biases and the Nigerian Stock Market Returns (2002 – 2012)

The paper was intended to find other reasons, based on investors’ behavior that may impact on the performance of the Nigerian stock market. The objectives were in three-fold: to examine the extent of behavioral biases among stock market investors in Nigeria; to determine the level of returns in the period using the Nigerian Stock Exchange All share index; and to examine the effects of behavioral biases on stock market return in Nigeria. This study was motivated by the fundamental explanations given for the causes of the 2008 collapse of the Nigerian Stock Market. This paper adopted a primary data approach based on survey research design to investigate the effects of behavioral biases on stock market return in Nigeria. The paper also used secondary data from the Nigerian Stock Exchange and employed questionnaire as instrument and the technique of correlation with Pearson Product Moment Coefficient to analyze a survey of 110 randomly selected investors in Nigeria stock market. The study found strong evidence that behavioral biases existed but not very dominant in the Nigeria stock market because a weak negative relationship existed between behavioral biases and stock market returns in Nigeria. The paper concluded that being aware of behavioral biases in the Nigerian stock market was a crucial first step in ensuring that investment decisions were properly controlled to avoid any negative impacts on the individual investors and on the stock market; again, behavioral biases might be of relevant consideration in portfolio construction in order to moderate these biases. Key words: Behavioral, Biases, Investors, Portfolios, Stock Market, Return, All Share Index