Abstract: Loss aversion behavior indicates that people are more sensitive to losses than to gains. Loss aversion behavior can causes stock prices to deviate from its fundamental value leading to stock market reaction resulting from abnormal stock returns. The objective of the study was to determine the effect that loss aversion behavior has on stock market reaction in Kenya. The target population was 67 listed companies at the Nairobi Securities Exchange. A sample of 48 listed companies was used for analysis. Secondary data extracted from Nairobi Stock Exchange historical data of listed companies for the period 2004 to 2016 was used for analysis. The study adopted quantitative research design. Unit root results showed that all the variable were stationary. Panel data regression was used to analyze data. Panel Pooled Least Squares estimation model was used in the analysis. The results indicate that loss aversion behavior has a negative significant effect on stock market reaction in Kenya.
Keywords: Loss aversion behavior, Stock Market Reaction, Behavioral Finance and Efficient Market Hypothesis.
Title: Effect of Loss Aversion Behavior on Stock Market Reaction in Kenya
Author: Irene Cherono, Tabitha Nasieku, Tobias Olweny
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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