Descriptive statistics of the variables 
 
Variable Mean Std Dev min Max Skewness Kurtosis 
Inflation 0.007 0.013 -0.030 0.045 0.231 4.398 
Money demand 362677.7 52771.15 304342.7 474849.6 0.548 1.898 
Interest rate 0.187 0.059 0.052 0.262 -0.984 2.627 
Exchange Rate 77.449 2.039 71.607 81.204 -0.598 3.001 
       
DEPENDENT 
VARIABLES 
      
NIC 0.0041 0.0553 -0.1013 0.1602 0.6845 3.7230 
Stanchart 0.0055 0.0490 -0.1512 0.1419 -0.4008 2.9494 
BBK 0.0060 0.0432 -0.1243 0.1635 0.4007 3.5362 
KenAir 0.0146 0.0483 -0.0905 0.1756 0.8670 4.7764 
NMG 0.0044 0.0524 -0.1833 0.1693 0.0066 1.4982 
BAT 0.0063 0.0475 -0.1652 0.1542 -0.0617 3.3028 
Total -0.0025 0.1390 -0.4386 0.4353 -0.0711 3.0197 
NOTE: The dependent variables are the returns from different companies from the different sectors. NIC, stanchart 
(Standard Chartered) and BBK (Barclays Bank of Kenya) are all companies from the finance and investment sector. 
Kenair (Kenya Airways) and NMG (Nation Media Group) from the commercial and services sector whereas BAT 
(British American Tobacco) and Total are from the industrial and allied sectors. 
 
Summary of the correlation Results  
 
Variables Inflation  
 
Money demand  Interest rate 
 
Exchange rate  
NIC -0.108 0.080 -0.177  
Stanchart -0.013 -0.011 -0.130  
BBK -0.015 0.062 -0.151  
Kenair 0.025 0.388 -0.151  
NMG -0.139 0.069 -0.199  
BAT -0.089 0.032 -0.244  
Total 0.070 0.109 -0.129 -0.109 
Inflation 1.000 0.077 -0.043 -0.137 
Money demand  1.000 -0.455 -0.218 
Interest rate   1.000 0.003 
Exchange rate    1.000 
NOTE: The names of the companies represent the dependent variables which are the returns from different 
companies from the different sectors. NIC, stanchart (Standard Chartered) and BBK (Barclays Bank of Kenya) are 
all companies from the finance and investment sector. Kenair (Kenya Airways) and NMG (Nation Media Group) 
from the commercial and services sector whereas BAT (British American Tobacco) and Total are from the industrial 
and allied sectors.  
 
 Unit root results 
 
Independent Variables ADF Order of integration 
Inflation -5.2277 I(0) 
Money demand -8.0961 I(1) 
Interest rate -5.3589 I(1) 
Exchange rate -7.0889 I(1) 
Risk Premium -6.3191 I(0) 
Dependent Variables (Stock Returns)   
NIC -9.8879 I(0) 
Stanchart -9.5643 I(0) 
BBK -8.6022 I(0) 
Kenair -7.3272 I(0) 
NMG -7.5711 I(0) 
BAT -7.5674 I(0) 
Total -8.0547 I(0) 
Critical Values: 5% -2.9029  
                          1% -3.5253  
NOTE: The names of the companies represent the dependent variables which are the returns from different 
companies from the different sectors. NIC, stanchart (Standard Chartered) and BBK (Barclays Bank of Kenya) are 
all companies from the finance and investment sector. Kenair (Kenya Airways) and NMG (Nation Media Group) 
from the commercial and services sector whereas BAT (British American Tobacco) and Total are from the industrial 
and allied sectors. 
  Summary of the regression results 
 
Variable NIC Stanchart BBK Kenair NMG BAT Total 
Constant 0.102 
(0.000) 
0.093 
(0.000) 
0.084 
(0.000) 
0.096 
(0.000) 
0.098 
(0.000) 
0.092 
(0.000) 
0.166 
(0.000) 
Inflation -0.434 
(0.219) 
-0.203 
(0.532) 
-0.233 
(0.437) 
-0.152 
(0.645) 
-0.486 
(0.152) 
-0.339 
(0.262) 
-0.314 
(0.529) 
Money 
demand 
-2.31 
(0.040) 
-3.45 
(0.001) 
-2.87 
(0.003) 
-2.45 
(0.020) 
-2.100 
(0.042) 
-2.770 
(0.004) 
-3.860 
(0.015) 
Interest 
rate 
0.191 
(0.541) 
0.012 
(0.966) 
0.297 
(266) 
0.331 
(0.259) 
0.164 
(0.583) 
-0.044 
(0.869) 
0.002 
(0.996) 
Exchange 
rate 
      -0.827 
(0.046) 
Risk 
premium 
0.488 
(0.000) 
0.429 
(0.000) 
0.383 
(0.000) 
0.430 
(0.000) 
0.465 
(0.000) 
0.427 
(0.000) 
0.828 
(0.000) 
R-
squared 
0.596 0.562 0.520 0.537 0.587 0.598 0.878 
Adjusted 
R-
Squared 
0.571 0.536 0.491 0.509 0.561 0.573 0.869 
F- 
statistic 
24.297 21.215 17.906 19.132 23.405 24.518 93.500 
Prob > f 0.000 0.000 0.000 0.000 0.000 0.000 0.000 
NOTE: The names of the companies represent the dependent variables 
which are the returns from different companies from the different sectors. 
NIC, stanchart (Standard Chartered) and BBK (Barclays Bank of Kenya) 
are all companies from the finance and investment sector. Kenair (Kenya 
Airways) and NMG (Nation Media Group) from the commercial and 
services sector whereas BAT (British American Tobacco) and Total are 
from the industrial and allied sectors. 
 
 Table 1: Summary of the neutrality test results 
 
Company 2R  m fR R  
Constant 
 
NIC 0.7600 1.0865 
(0.0000) 
0.0167 
(0.2533) 
Stanchart 0.7400 0.9955 
(0.0000) 
0.0014 
(0.9234) 
BBK 0.8238 1.0093 
(0.0000) 
0.0042 
(0.7029) 
Kenair 0.7180 0.9840 
(0.0000) 
0.0083 
(0.5699) 
NMG 0.6950 1.0232 
(0.0000) 
0.0053 
(0.7426) 
BAT 0.7717 1.0522 
(0.0000) 
0.0126 
(0.3571) 
Total 0.3947 1.4071 
(0.0000) 
0.0691 
(0.0989) 
NOTE: The dependent variables are the excess returns from different companies from the different sectors. NIC, 
stanchart (Standard Chartered) and BBK (Barclays Bank of Kenya) are all companies from the finance and 
investment sector. Kenair (Kenya Airways) and NMG (Nation Media Group) from the commercial and services 
sector whereas BAT (British American Tobacco) and Total are from the industrial and allied sectors.