Macroeconomic factors and the predictability of stock returns in Kenya
Mwangi, Ebenezer Gachugu
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The stock market is an anchor to the financial l sector, providing a platform for user s and suppliers of financial instruments for investment purposes in the stocks of companies. In a well-functioning market investors prefer the successful companies with high performing stocks more than those with lower margins. The shares of a high performing company have been seen to be related to the other companies listed in the same stock market where the expected dividend growth and the prices of the shares are well reflected in the stock market. (Ross, 1976) In his study Fama (1965) realizes that one of the characteristics of investors in an efficient market is that they are rational and seek to maximize their profits. As a result of this nature, they actively compete to predict future stock prices. However, this prediction is only based on publicly available information.