Common stock rates of returns for speculators and investors on the Nairobi Stock Exchange, Kenya
Omurwa, John Kebaso
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The research project provided a comparative analysis of the rates of returns for investors who hold shares in companies for a long period of time for the dividend motive and have limited speculative ventures, with those investors who are primarily concerned with the capital gains from the sale of stock (speculators). The analysis was done for a sample of ten companies picked at random using stratified random sampling technique from the companies listed at the Nairobi Stock Exchange (NSE) for the period 1994 to 2003. The stratification was based on the NSE standard industry classification. The data collected included the company annual dividend, monthly traded volume of shares and monthly turnover, the minimum and maximum price of stock for the month. Using the monthly traded volumes and the monthly turnovers, monthly average share prices were calculated for the period under study. Price differentials were worked out between consecutive months for the period under study to obtain a series of capital gains/losses. By using geometric mean method the monthly capital gains/losses were converted to a series of annual capital gains/losses or rates of return to the speculators. A time series comparison .of the dividend and stock rates of returns was done and stock returns were found to be more volatile than dividend returns for the period under study. Further the geometric mean period rates of returns for speculators and investors were calculated. The study found no discernable statistical difference between the rates of returns to the two groups of investors for the period under study.