Portfolio Diversification and Capital Accumulation of Rwanda Stock Exchange of Listed Financial Companies: A Case of Selected Financial Companies Listed on Rwanda Stock Exchange

Abstract

The fluctuation in stock markets disturbs the genuine investors and they build the mind of that it is not there for the new investors to be more creative due to price fluctuation. Despite the encouragement of investors in Rwanda, the problem existing is that the capital market is no longer growing at the pace expected and there are still few listed financial institutions in stock exchange and this slow the capital accumulation of stock exchange among listed financial institutions. The purpose of this study was to assess effects of Portfolio diversification on capital accumulation of Rwanda stock exchange of listed financial companies and to assess the role of market efficiency on capital accumulation of Rwanda stock exchange of listed companies. The study used three theories such as Model portfolio theory, risk aversion theory and Markowtz portfolio theory. The study used a descriptive research design with two mixed methods such as qualitative and quantitative. A descriptive statistic such as mean, standard deviation was determined while inferential statistics such as regression analysis and correlation analysis established. Therefore, data were analyzed through SPSS version 21 and the presentation was done using frequency tables, pie charts and bar charts. Research findings showed that the relationship between the study variables is significant with p-value 0.000 < 0.05). Therefore, the p-value for portfolio diversification is 0. 025. All these components are statistical significant since p=values <0.05. Based on the problems arising at capital market in that the capital invested in stock exchange market is raised on market situation and in fact that an increase in capital in almost firms do not stimulate enough capital accumulation for listed financial companies, researcher advice the management of I&M Bank Rwanda and Bank of Kigali to apply capital price model to achieve capital accumulation in Rwanda stock exchange operations. There is need to implement strategies regulating and encouraging investment decision in stock exchange operations Keywords: Portfolio Diversification, Capital Accumulation, Stock Exchange Listed Financial Companies