Effect of Behavioural Biases on Tactical Asset Allocation in Insurance Companies in Mombasa Town, Kenya

Abstract

This study sought to establish the effect of behavioural biases on tactical asset allocation in insurance companies in Mombasa town, Kenya. Descriptive cross-sectional survey research design was used. The target population of this study was 102 employees of 34 insurance companies in Mombasa town, Kenya. A census survey was conducted. Data was collected using self-administered structured questionnaires. Descriptive statistical tools included frequencies, percentages, means and standard deviations. Inferential statistical tools were correlation and multiple regression analysis. It was found out that increased overconfidence bias, representativeness bias and regret aversion biasare associated with decreased tactical asset allocation while increased self-attribution bias is associated with enhanced tactical asset allocation and vice-versa, though insignificantly. It was concluded that tactical asset allocation decisions in insurance companies are subject to behavioural biases. It was also concluded that that financial regulations does not significantly moderate the relationship between the behavioural biases and tactical asset allocation in insurance companies in Mombasa town, Kenya.