Effect of Investment Portfolio Selection on Investors’ Wealth Maximization

Abstract

The aim of this study is to analyze the behavior of investment portfolio and how it affects the wealth/returns of investors in Nigeria. In order to achieve this objective, the study is reduced to two null testable hypothesis, which centers on the relationship that exists between Investment Portfolio and shareholders wealth. In particular the study has evaluated how investors’ wealth could rise or fall as a result of the types of investment held in the portfolio. The researcher has made use of judgmental sampling in the selection of Individual/Corporate Investors and Institutional Investors. Investors were thus categorized into two major group; ‘Diversified Investment Portfolio’ and ‘Undiversified Investment Portfolio’. The study made use of descriptive statistics and is based on secondary and panel data model.. The Hausman test was also formulated to assist in making a choice between the fixed effects and random effects approaches. The panel data, made the appropriate choice between the fixed effects and the random effects and investigates whether the regressors are correlated with the individual effect. Jarque-Bera test was employed and used to test for the normal distribution of the data. The analysis was also furnished by the value of the skewness and kurtosis of all the variables involved in the model. The Pearson Product Moment Correlation Co-efficient has also been used to test the relationship that exists between Investment Portfolio and Shareholders’ Wealth. The major finding of the study is that, there is a strong and positive relationship between a well-diversified investment portfolio and Shareholders wealth. Another major finding of the study is that there is a weak and insignificant relationship between investment portfolio and investors’ wealth for a Portfolio that is not properly diversified. It is also worthy to note that Investors also construct and hold portfolios majorly because of the returns that come to them to increase their wealth. It is therefore strongly recommended that investors pay particular attention to the type of investments they hold in a portfolio, as this could further increase/decrease their wealth.