BBSF Research Projects (2015)
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- ItemCommodity diversification: How Kenya can exploit commodities for diversification.(Strathmore University, 2015) Kuhunya, Lisa WangariInvestment in commodities dates back to the age of barter trade and has continually evolved to form an investmentwith substantial diversification benefits to investors · {Vrugt, Bauer, Steenkamp, & Molenaar, 2004). Commodity markets have become an attractive investment, as they offer returns not easily accessible through the traditional equity and bond investments {Schneeweis, Karavas, & Georgiev, Updated 2002). Defining characteristics of the return on commodity investment include relatively high performance and low volatility as opposed to those of equities and bonds. Inclusion of these commodities in an equity or fixed income portfolio would therefore be important to improve the risk adjusted return of the latter portfolios.
- ItemEffects of interim dividend announcement on the value of a firm - a case of the Nairobi Securities Exchange(Strathmore University, 2015-11) Jepkoech, Kipkoskei PurityThis research focuses on the impact of interim dividend announcement on the value of a firm. The purpose of this research is to empirically investigate whether the magnitude of stock market reactions to interim dividend is greater than final dividend announcements for companies listed under the Nairobi Securities Exchange 20-Share Index. Out of the 20 companies in the Index, 7 companies paid interim dividends under the period of study. The event study methodology was employed to analyze effects of both dividend announcements. The findings of this research show that the reaction by market participants to final dividend announcements in the Kenyan stock market is stronger than interim dividend announcements. This contradicts previous research that indicate interim dividend announcements lead to a stronger market reaction. The limitation of this study is small simple size due to the limited number of companies that pay interim dividends. The findings of this research will be useful to dividend policy makers of publicly traded companies that pay interim dividends and investors with vested interest in publicly traded companies for proper decision making. The study's originality stems from the fact that it focuses on the effects of Both interim and final dividend announcement on Kenyan stocks.
- ItemIntertemporal equity asset pricing with stochastic volatility at the NSE and the JSE(Strathmore University, 2016) Chelimo, John KThis paper explores the implementation of an intertemporal asset pricing model with stochastic volatility. This model is applied to equity asset pricing at the Nairobi Securities Exchange (NSE) and the Johannesburg Stock Exchange (JSE). The return on the aggregate stock market is modelled using a vector auto regression (VAR) model and the volatility of all shocks to the VAR is modelled using GARCH and EGARCH models. It is shown that the reduced form of the ICAPM with stochastic volatility is inadequate in the context of equity asset pricing at the NSE and JSE. However, the variables indicate the existence of a significant relationship between asset returns and realized market variance and PE ratios to motivate further research.
- ItemStock price behavior in the NSE- a test of the predictability and seasonality of stock prices movements(Strathmore University, 2015) MURIITHI, JEAN MUTHONIThis study incorporates a_ predictive regression approach and a centered moving average analysis to test the predictability and seasonality respectively of the stocks on the Nairobi Securities Exchange (NSE) 20 Share Index. The findings reveal that most of the stock prices do not exhibit seasonality with the exception of a few such as Kenya Power, Centum, Bamburi which exhibit repetitive cycles. The t-test of significance portrays the shortcomings of the past stock prices in predicting future stock prices with Sasini showing the closest element of predictability (t-test value of 0.000290608) which is still very low.
- ItemTesting trade - off theory vs pecking order theory - evidence from Kenyan listed firms(Strathmore University, 2015-12) Ruto, Kelvin KibetThis study seeks to test both the pecking order theory and the trade-off theory theories using evidence from companies listed in the Nairobi securities exchange and examine which theory best explains capital structures of listed firms in Kenya. This research follows an investigative research design as it seeks to test the application of pecking order theory vs the trade-off theory is the context of listed firms in Kenya. Through random sampling, 30 listed companies were randomly selected for study representing 50% of the listed companies in Kenya. Listed firms are found to make a considerable adjustment towards the optimal debt ratio. However, there was an average negative speed of adjustment suggesting that some listed firms they are moving further away from the optimal debt ratio. Based on the sampled listed companies, using the LSDVC dynamic estimator as method of estimation, this study has clearly shown that the listed firms make an adjustment of their actual debt towards the optimal level of debt and age of the firms contribute to increase firm debt. More profitable and older companies have tended to use the pecking order theory. Limitations and disadvantages faced in this study is the fact that it only focused on determinants of general debt. Debt can be separated as long term and short term debt and may imply different levels of adjustment. Therefore recommend future studies and research to analyze how these determinants of debt may affect long term debt and short term and if there is difference in their adjustment rates
- ItemThe trading volume - stock returns dynamic: a case study of the NSE(Strathmore University, 2015) Muheria, Grace WalthiraThis paper exammes the contemporaneous and dynamic relationships between stock returns and trading volume for the Kenyan Stock Market. The sample under stud y was the stocks constituting the NSE-20 index for a period extending from September, 1997 through to March, 2014. After time trend tests and unit-root tests to ensure stat ionarity of data , the empirical methods employed include bivariate simultaneous equat ions regression analysis and Granger causality tests to examine the. contemporaneous and causal relationships respectively. There was evidence to SUPP011 existence of a contemporaneous relationship between stock returns and trading volume with most stocks exhibiting a positive relationship. There was no evidence to support the causal relationship between stock returns and trading volume for most stocks. Out of20 stocks, 4 of them indicated that return causes volume, 4 stocks indicated that volume causes return and I stock indicated bi-directional causation. This implie s that forecast s of one of the variables (return or volume) cannot be impro ved by knowledge of the other for many of the Nairobi Securities Exchange counters. More could be done to asse ss the economic significance of the statistical predictability detected in this study for the 8 stocks and as a result make conclusions about market efficiency.
- ItemViability of an Exchange Traded Commodity Derivatives market in sustaining price stability of Agricultural products in Kenya(Strathmore University, 2015-12) Angwenyi, Theodore OmaribaSimulations are used to analyze the effects of introduction of an Exchange Traded Commodities Derivative market. These effects are both to the consumer and producer of Tea in developing countries. Application to the tea market shows that futures availability can lead to sizeable market- and farm-level effects. Futures availability enhances consumer welfare, and yields important welfare gains for adopters when their market share is small. In order to fix the current inefficiencies in the market, developing countries should thus not only employ market based schemes but also improve both infrastructure and policy consequently leading to a positive impact since market solutions i.e., introduction of Futures do not result in expected welfare gains, price stability and improved production and quality.
- ItemThe viability of long term care insurance in Kenya(Strathmore University, 2014-11) Wanja, Njau LilianKenya's population aged 60 and above is rapidly ageing. The available facilities catered towards meeting the health care needs of Kenya's ageing population are inadequate and may not be able to manage this growing population.2 additionally, the public facilities available have only the basic outpatient and inpatient facilities which are not sufficient to accommodate the health needs of the population aged 60 and above. On the other hand, the private facilities available in Kenya cover these needs by providing nursing care as well as residential care. However these facilities prove to be overly expensive and can cause a financial burden on the party taking out these services. This research assesses Long Term Care Insurance as an affordable solution to providing the needed health care services for Kenya's ageing population as well as considers the viability of such a scheme in Kenya. This has been done by determining the factors that affect the sustainability of such a product in the Kenyan market. Besides this, an appropriate contribution rate for a suitable LTC! Policy was determined. This was done by using the Markov process through the multi-state model in the pricing of the scheme. This research shows that a long term care insurance scheme is sustainable in Kenya as it can be both affordable and comprehensive in terms of what the benefits can afford the policyholder. Different contribution rates were established for males and females due to their different inherent risk set and needs.