The Effect of Macroeconomic Variables on Stock Returns of Companies Listed in the Nairobi Securities Exchange, Kenya

Julia Waruguru Kibara ,Fredrick Kalui

doi:10.7176/rjfa/12-10-04

Abstract

This study sought to determine the effect of macroeconomic variables on the stock returns for the companies listed in Nairobi securities exchange. The macroeconomic variables used in this study were money supply, oil prices, gross domestic product and interest rates. The target population for this study was 20 companies Listed in Nairobi securities exchange used in the computation of the NSE 20 share index. This study used secondary data and the data was collected using data collection sheet. The sample data covering a period of 5 years from 2014 - 2018 was collected from various sources.. The descriptive analysis was done using frequencies, percentages, means and standard deviations for all the variables for this study while inferential statistics used in this study were Pearson correlation and both simple and multiple regression analysis. The study found out that Money Supply, Gross Domestic Product, Oil Prices and Interest rates contributed to 71.4% variation in the stock returns meaning that other factors not included in this study accounted for 28.6%. The study concluded that money supply, oil prices, gross domestic product and interest rate positively affected the stock returns of companies listed in Nairobi Securities Exchange. This study recommends that the macroeconomic environment should be closely monitored in order to ensure stability in the stock market. Keywords: Macroeconomic Variables, Stock Returns, Nairobi Securities Exchange. DOI: 10.7176/RJFA/12-10-04 Publication date: May 31 st 2021

Highlights

A stock market is a facility that helps in the buying and selling of stocks of the public listed companies by the buyers and sellers that gather to trade (Monther & Kaothar, 2010)
Descriptive research design was suitable for this study since it helped in achieving the main objective of this study and which involved description of macroeconomic variables and stock returns and the data obtained was for a given period
Dependent Variable: Stock Returns The study sought to determine the effect of money supply, oil prices, gross domestic product and interest rates on stock returns of the companies listed in the Nairobi Securities Exchange .Multiple regression was used in this study to test the fifth hypotheses which is states that there is no significant joint effect of money supply, oil prices gross domestic product and interest rates on stock returns of the companies listed in the Nairobi Securities Exchange

Summary

Introduction

A stock market is a facility that helps in the buying and selling of stocks of the public listed companies by the buyers and sellers that gather to trade (Monther & Kaothar, 2010). Stock market attracts so many investors through the availability of various opportunities that give them returns. Nairobi securities exchange is a very important institution to the growth of the Kenyan economy as it helps in the creation of wealth and helps the investors with an avenue for investing their resources (Junkin, 2012). Private companies and the government are beneficiaries of stock market in acquiring funds to support their projects and to meet their daily operational costs (Ndegwa, 2015)

Objectives

Results

Conclusion