Inferring market expectations from stock prices at the Nairobi Securities Exchange

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dc.contributor.authorWachira, Warutumo Johnson
dc.date.accessioned2016-03-18T15:59:35Z
dc.date.available2016-03-18T15:59:35Z
dc.date.issued2015-11
dc.descriptionSubmitted in partial fulfillment of the requirements for the Degree of Bachelor of Business Science in Financial Economics at Strathmore Universityen_US
dc.description.abstractindex returns, dividend growth and the Kenyan Treasury bill rate. Univariate and multivariate time series analysis is employed to examine the relationship. The study finds that there is no long run relationship between the index and dividends using the Johansen Cointegration test. The Vector Auto Regressive model shows that most lagged values of returns are significant in explaining movements in the index returns and past movements of the NSE 20 returns are important in inferring the future movements in the index/stock prices. Unidirectional causality from the dividend growth to the weekly returns was found which shows that movements in the dividend growth appear to lead those of the returns of the NSE 20 index. Fundamentals guide returns, but with a lag of more than seven periods. In weekly analysis, investors are driven by dividend growth after seven periods, which is the average time (in weeks) it takes between dividend announcement and dividend payout. In the monthly analysis, previous four months data is found to be useful in inferring future movements of the index especially during period of shocks. Relating this findings to the Campbell Shiller stock price decomposition, stock prices in the NSE are mainly determined by future expectations of excess returns. The study expects market expectations to be effected on the stock price, seven weeks after dividends are announced. The movements in the prices depends on the magnitude and sign of the dividend change.en_US
dc.identifier.urihttp://hdl.handle.net/11071/4329
dc.language.isoenen_US
dc.publisherStrathmore Universityen_US
dc.subjectReturnsen_US
dc.subjectDividend growthen_US
dc.subjectMarket expectations.en_US
dc.titleInferring market expectations from stock prices at the Nairobi Securities Exchangeen_US
dc.typeOtheren_US
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