An investigation of the evolving stock market efficiency in the Nairobi Stock Exchange for the period 2001-2010
Date
2012
Authors
Wainaina, Eva
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
This paper conducts a number of statistical tests to investigate the weak form efficiency of the Nairobi Stock Exchange (NSE) and analyze for any change in its pricing efficiency after the introduction of several capital market reforms
The study makes use both parametric and non parametric tests to investigate weak form efficiency. It is convenient to test the weak form efficiency of the market rather than the semi- strong and strong form.
The analysis on the market takes two forms; tests are carried out on the daily market index and secondly on the listed stocks which comprise this index.
An analysis of the market (NSE) index over the period January 2, 2001 to December 31, 2010 is done. This period is then subdivided into two contrasting periods so as to examine any changes in efficiency which may have occurred with a structural break in force, that is, 2001-2005 and 2006 -2010, and this acts as an investigation into evolution in efficiency.
To ensure robustness of the results, the study also considers the efficiency trends of daily market returns of the individual companies comprising the NSE 20 share index.
The analysis on the entire period (2001 to 2010) rejects the null hypothesis of randomness implying the NSE is not weak form efficient.
There is also no tendency towards efficiency throughout time in the rates of return series in the period after the reforms (2006-2010). More importantly, the study reveals there is no predilection towards elimination of inefficiency thorough out the years and it is probable that in the NSE the effects of the reforms are too recent to show any clear response pattern.
Description
Partial fulfillment for the degree of Masters of Business Administration
Keywords
Stock Exchanges--Kenya, Stocks--Prices--Kenya, Efficiency Market Theory, Securities Fraud
Citation
HG5732.W35 2012