Impact of general elections on stock market returns: a case of the Nairobi Securities Exchange

Abstract

This study investigated the Impact of General Elections on Stock Market Returns: A Case of the Nairobi Securities Exchange (NSE). The study investigated historical data to identify and analyse patterns in stock market returns during and around general election periods in Kenya. It also examined how different economic sectors represented on the NSE respond to general elections. Twenty-seven (27) companies and nine (9) sectors in the NSE were analysed. The companies were selected based on their market capitalization and sectors for sampling. Event study methodology approach was used and a comprehensive analysis of historical stock market return data from the Nairobi Securities Exchange, spanning 2012- 2022 covering three (3) election cycles was done. The study concluded that the Kenyan market was still sensitive to the elections though the statistical significance declined from 2013 to 2022. The stocks exhibited heterogeneity in their reaction during the elections while the Investment and Banking sectors were the most and least affected respectively during all three elections.

Keywords: General Elections, Stock Market Returns, Nairobi Securities Exchange, Political Events, Event Study Methodology, Kenya.