The rate of return of investable assets and economic growth rate in Kenya, 2001 - 2020 .
Date
2021
Authors
Wachira, Stephen Mathenge
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
What is the rate of return of a portfolio .)f investable assets in Kenya and how does it
compare with the economic 'growth rate in Kenya? What can we learn about wealth inequality
given the rate of return of investable assets and the economic growth rate in Kenya? Which
investable assets have yielded the highest risk-adjusted rate of return in Kenya over time? What
can we learn about the excess returns of different investable assets and the risk premium in
Kenya? These are the key questions answered from a constructed dataset ofthe rate of returns of
the investable assets in Kenya for a 20-year period, starting 200 I to 2020. The findings indicate
the rate of return of investable assets in Kenya have always been higher than the economic
growth, with a spread of as high as 8% on average, which justifies the high wealth inequality
measured by the Gini coefficient of around 42%. Treasury bonds, with a Sharpe Ratio of 1.52,
have consistently outperformed real estate with a Sharpe Ratio of 0.62 and stocks with a Sharpe
Ratio or 0.13, respectively in terms of the risk-adjusted rate of return. Lastly, the risk premium
has been low at around 2.23% on average mainly due to the low spread between the rate of
returns of a possible basket of risky assets and basket of safe assets in Kenya.
Description
Submitted in pruiial fulfillment of the requirements for the Degree of Bachelor of Business Science in Finru1cial Economics at Strathmore University