MCOM Theses and Dissertations (2017)

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Browsing MCOM Theses and Dissertations (2017) by Author "Kahuthu, Lilian Wangechi"

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    The Effect of stock market liquidity on stock returns of companies listed on Nairobi Securities Exchange
    (Strathmore University, 2017) Kahuthu, Lilian Wangechi
    The main objective of this study was to determine whether stock market liquidity has an effect on stock returns of companies listed at the Nairobi Securities Exchange from 2012 - 2016. This study looks at both the width and depth aspects of liquidity measured by bid-ask spread and turnover rate respectively. The study adopted a quantitative research design with the population of the study consisting of all the 64 firms currently listed at the Nairobi Securities Exchange and the 23 trading participants registered by the CMA. Purposive sampling was adopted and panel regression model was used to analyze data from 50 companies listed on the NSE selected. Descriptive analysis was used to analyze data on perception of market participants on liquidity collected through questionnaires. Empirical findings show that market depth was found to be insignificant to stock returns while market width was found significant. On the other hand, most market participants perceived both market width and depth to be significant to stock returns but only to a moderate extent. Generally, from the inferential analysis liquidity was found to be significant but not the main predictor of stock returns. These findings were further supported by the descriptive analysis on market participants’ perception. These findings should be of interest to investment managers and policy makers on decisions regarding stock investments on the NSE.