Macroeconomic Variables and Stock Market Performance at Nairobi Securities Exchange, Kenya
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Date
2023-11
Authors
Kilonzo, Marcs Ngele
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Stock markets are important to the economy of a country for they facilitate investment opportunities for individual and corporate investors, capital formation avenues, liquidity options, transparency, and accountable ownership for individuals. The stock market measures the economic well-being of a country’s economy. An index is used to evaluate the performance of an economy. The reliable Index in the Kenya economy is the NSE 20 Share Index, due to its consistent application and stability in predicting accurately the Kenyan stock market since its inception. The Nairobi Securities Exchange 20Share Index has been recording a declining trend for the period studied. This decline was of concern to various stakeholders, including individual and corporate investors, local and foreign regulators, as well as potential researchers and scholars. The NSE20 Share Index serves as a tool for evaluating market performance, enabling the tracking of individual securities and the overall market. The study’s purpose was to look at how macroeconomic variable influences the NSE, Kenya’s stock Market Performance. The anchor theory assisting in the evaluation of the performance of the NSE 20 Share Index is the Arbitrage Pricing Theory, which will be valuable in assisting in demonstrating the interrelationship between the independent variable; stock market performance, and the dependent variables; exchange rate changes, money supply changes, and ninety-one-day treasury bill rate changes. The research was conducted from January 2013 to December 2021, using an exploratory research design and employing the cointegration analysis method. Secondary information was collected from the Kenya National Bureau of Statistics (KNBS) Central Bank of Kenya (CBK), and the Nairobi Securities Exchange (NSE), utilizing an information collection frame. The information was analyzed expressively utilizing the SPSS form 22 program, and different direct relapse investigations and the ANOVA helped to determine the effect of each independent variable on the dependent variable. The discoveries were displayed utilizing graphical representations, tables, and rates to demonstrate how macroeconomic variables influence the performance of the Nairobi Securities Exchange. The analysis of variance uncovered a converse correlation between money supply and Stock Market Performance, showing that an increment in the money supply would diminish the stock Market Performance by 0.541 units, although this relationship was factually inconsequential. On the other hand, the investigation showed a measurably critical affiliation between the exchange rate and the stock Market Performance, where an increment within the exchange rate drove to a diminish in stock Market Performance by -0.11 units. Nevertheless, for the Treasury bill rate, an increment within the exchange rate would increment stock Performance by 0.139 units, and Treasury bills show a factually critical affiliation with the Stock Market Performance. The study prescribed that the government reinforce its observation of fiscal and financial approaches to screen macroeconomic components. Furthermore, it suggests further research on the topic, exploring the use of macroeconomic variables in mitigating the adverse effects they have on stock market exchange performances.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfilment for the Award of the Master’s Degree in Business Administration (Finance Option) at Kenyatta University November, 2023
Keywords
Macroeconomic Variables, Stock Market Performance, Nairobi Securities Exchange, Kenya