EFFECT OF INVESTMENT PORTFOLIO CHOICE ON THE FINANCIAL PERFORMANCE OF INVESTMENT COMPANIES LISTED AT THE NAIROBI SECURITIES EXCHANGE

Abstract

Investment is a fundamental financial decision that both businesses and the general public ought to be aware of. Nonetheless, it is imperative to reminisce that every decision has consequences. The effect of investment portfolio choice on the financial performance of investment companies listed at the Nairobi Securities Exchange was investigated in this research study. Specifically, the study endeavored to investigate the effect of investment in bonds, investment in equities, and investment in real estate on the financial performance of investment companies listed at the Nairobi Securities Exchange. The modern portfolio theory, the efficient market hypothesis, the behavioral finance theory, the liquidity preference theory and financial intermediation theory informed this research study. Secondary data was used in this research. The study adopted a descriptive research design in analyzing the effects of the study variables. Several diagnostic and correlations tests were conducted before ultimately running the multiple linear regression model used in modeling the results of this study. The correlation results indicated a strong positive relationship between investment in bonds, equities and real estate with financial performance. Hypothesis testing at 5% level of significance established a significant effect on investment in bonds and investment in real estate, thus leading to the rejection of H01 and H03, while H02 was accepted. It was concluded that investment in bonds and real estate significantly affect the financial performance of investment companies listed at the Nairobi Securities Exchange. Thus, close monitoring and awareness creation to investors, governments and the general public around these variables is paramount for informed investment decision making.