Return volatility and the pricing of equities at the Nairobi Securities Exchange
| dc.creator | Chege, Theuri | |
| dc.creator | Othieno, Ferdinand | |
| dc.creator | Kodongo, Odongo | |
| dc.date | 03/02/2015 | |
| dc.date | Mon, 2 Mar 2015 | |
| dc.date | Mon, 2 Mar 2015 14:19:40 | |
| dc.date | Mon, 2 Mar 2015 14:19:40 | |
| dc.date.accessioned | 2015-03-18T11:29:16Z | |
| dc.date.available | 2015-03-18T11:29:16Z | |
| dc.description | Paper presented at the 11th Africa Finance Journal Conference, Durban, South Africa. | |
| dc.description | The study is an empirical test of asset pricing theory, which postulates that volatility is priced if a positive relationship exists between asset returns and their volatility. The asset under study is the Nairobi Securities Exchange 20-Share Index (NSE-20), which is assumed to be a welldiversified portfolio. Data from daily values of the NSE-20 were collected over a 15 year period from January 1999 to December 2013, and from these data, monthly returns were computed. Two models of the Auto-Regressive Conditional Heteroscedasticity-in-Mean (ARCH-M) family allowed the study to specify volatility conditionally. The study finds that monthly NSE-20 returns are not normally distributed and exhibit volatility clustering. A positive and significant relationship between risk and returns is found; indicating that volatility is priced. The study hopes to be useful to portfolio managers when carrying out a forward-looking valuation of a well-diversified portfolio of Kenyan stocks as well as other similar stocks based on market characteristics. | |
| dc.description.abstract | The study is an empirical test of asset pricing theory, which postulates that volatility is priced if a positive relationship exists between asset returns and their volatility. The asset under study is the Nairobi Securities Exchange 20-Share Index (NSE-20), which is assumed to be a welldiversified portfolio. Data from daily values of the NSE-20 were collected over a 15 year period from January 1999 to December 2013, and from these data, monthly returns were computed. Two models of the Auto-Regressive Conditional Heteroscedasticity-in-Mean (ARCH-M) family allowed the study to specify volatility conditionally. The study finds that monthly NSE-20 returns are not normally distributed and exhibit volatility clustering. A positive and significant relationship between risk and returns is found; indicating that volatility is priced. The study hopes to be useful to portfolio managers when carrying out a forward-looking valuation of a well-diversified portfolio of Kenyan stocks as well as other similar stocks based on market characteristics. | |
| dc.identifier.uri | http://hdl.handle.net/11071/3843 | |
| dc.language | eng | |
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| dc.subject | Nairobi Securities Exchange | |
| dc.subject | markets | |
| dc.subject | pricing | |
| dc.subject | volatility | |
| dc.title | Return volatility and the pricing of equities at the Nairobi Securities Exchange | |
| dc.type | Conference Paper |