Systematic Risk and Performance of Stock Market in Kenya
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Date
2021-05-27
Authors
Mutwiri, Nathan Mwenda
Omagwa, Job
Wamugo, Lucy
Journal Title
Journal ISSN
Volume Title
Publisher
IJRBS
Abstract
Stock prices in Kenya have been experiencing drastic volatility over the years. In the year 2015 alone,
the value of the listed companies shrunk by about 2.5 billion USD, representing about 25% of the
national government annual budget. The performance of the stock market is an important proxy of a
country’s economic environment. Rational investors constantly value and revise their portfolio
composition so as to maximize their wealth. Whereas effectively diversified portfolio minimizes the
unsystematic risk, systematic risks cannot be managed by simple diversification. Investors, therefore,
need to understand the effect of these systematic risks on the stock performance. The study sought to
determine the relationship between systematic risk factors using Inflation and interest rates and the
performance of the stock market in Kenya. The study adopted a positivist philosophy and employed a
correlation research design. The study targeted all the stock listed in the Nairobi Securities exchange.
The study was underpinned by the Efficient Market Hypothesis, Arbitrage Pricing theory, and used
integration analysis to establish the relationships between the variables of the study. The study found
a significant long-run positive relationship between interest rate, inflation, and performance of the
stock market in Kenya. Investment firms, the financial analyst should use past data on 91 Treasury
bills rate and Inflation, to predict the future performance of stock exchange for the benefit of investors.
Description
A Research Article in the International Journal of Research in Business & Social Science
Keywords
91 treasury bills rate, Inflation, Systematic risk, Stock performance
Citation
Mutwiri, N. M., Omagwa, J., & Wamugo, L. (2021). Systematic risk and performance of stock market in Kenya. International Journal of Research in Business and Social Science (2147-4478), 10(4), 204-214.