Abstract:

The empirical evidence in the developed equity markets such as United States, United Kingdom, Germany, Japan and emerging markets had pronounced that there are institutional and individual investors’ cognitive psychology and mental biases in favour of the Growth Stocks, that is,  the Growth Stocks are always preferred to the Value Stocks by the investors. The investors most times prefer the Growth Stocks to the Value Stocks irrespective of the behaviour of the stock fundamentals in the equity market. The paper investigated whether Cognitive Psychology and Mental biases affect Portfolio Selection strategies using the Growth or the Value Stocks investment styles in the Nigerian Stock Market. In the study, the summary of the primary data were described and Multinomial Logistic Regression (MLR) models were adopted to make inferential decisions. The paper collected primary data through questionnaire administered to individual and institutional investors on the floor of Nigeria Stock Exchange (NSE). The findings from the analyses conducted confirmed a strong existence of Cognitive Psychology and mental biases in favour of the Growth Stocks in the Nigerian Equity Market. Investors had more belief in Growth Stocks than the Value Stocks notwithstanding the behaviour of the market fundamentals. The study recommended that investors should seriously consider occurrences and performance fundamentals in Portfolio Selection in the Nigerian Equity Market.