Determinants of the Nairobi Securities Exchange Market Performance

Abstract

AbstractThis paper examines and analyses Kenya’s financial system, specifically the financial market. The Kenyan financial market is an important contributor to economy, as it provides a platform for investors to make decisions and act on investment opportunities. The research looks at the performance of the Nairobi Stock Exchange (NSE) in equity securities and the various financial institutions, as part of financial markets. The financial institutions offer not only opportunities for buyers and sellers but play a role as major employer of finance professionals. The study was guided by the objective; to examine the effect of the selected macro-economic determinants of the stock market performance in Kenya. The selected macro-economic variables included inflation rate, interest rate and real GDP per capita. The study followed descriptive research design and used secondary data. The data spanned the period between 2007 and 2017. This study uses the regression model and is concluded to be statistically insignificant. The data was analyzed using GRETL. The results show that there is a weak positive relationship between the selected macro-economic variables and the NSE 20-Share Index as determined by the coefficient of determination (R) of 0.618, and Correlation Coefficient (R-Square) should be > than 0.3 the best value is 1, from the finding the value is 0.382 meaning that there exists a weak positive relationship between macro-economic variables and NSE 20 Share Index. The contribution of this paper is that the success in investing requires understanding of the financial markets and the products that are available for investing. These products include stocks, bonds, mutual funds, and international securities. Investors must weigh the risks and rewards of the financial securities. Participation in financial markets and working with financial institutions requires understanding on how the market works and the process of investing in it.KeywordsNairobi Securities Exchange (NSE)Financial securitiesStock market performance