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.