Effect of weather conditions in global financial hubs on the performance of the Kenyan equities markets

Abstract

This study investigates the effect of weather conditions in global financial hubs on the performance of the Kenyan equities market. The study's main objective is to assess the effects of rain, temperature and wind speed in these global financial hubs on the Kenyan equities market performance. Employing a causal research design, the study analyzes monthly weather data from New York and London alongside the NSE 20 Share Index performance over an 8-year period from 2015 to 2023. The control variables include Inflation, Interbank Rates and Foreign Exchange Rates of Kenya. The study was based on the hypotheses that the weather variables in these global financial hubs have no significant effect on the performance of the Kenya Equity market. Data was collected from meteorological databases and official NSE records. To cater for both stationary and non-stationary variables that were present in the model the research uses Autoregressive Distributed lag model that caters for both types of variables. This model was able to show the significance of the weather variables at level and lag 1. The study shows that, while meteorological variables in New York and London have modest direct effects on the NSE 20 Index, they may influence market performance indirectly via global investor mood and interconnected financial institutions. Local macroeconomic factors, notably exchange rates, emerged as major predictors, emphasizing the role of currency stability in driving market performance. These findings highlight the importance of flexible investment strategies and more research into the global-local dynamics influencing emerging countries such as Kenya.