Stock market performance before and after the promulgation of the new constitution

Abstract

This study was carried out to investigate the stock market performance before and after the promulgation of the new constitution (2010) at the Nairobi Securities Exchange. The study focused on the NSE performance 6 months before and 6 months after the promulgation of the new constitution. The NASI indices for the period February 2010 to February 2011 were obtained from the NSE and analyzed using line graphs. All the 10 market segments were considered whereas out of the total 58 stocks only 35 stocks passed the selection criteria and as such considered in this study. This study employed the market model to estimate the quoted firms’ returns on their shares while regression analysis was used to analyze stocks returns against the market returns.The performance of the stock market is influenced by a number of factors namely Demand and Supply of shares in the market, News related to a firm, Market capitalization of the company, Earnings report and dividend announcement, Inflation and Interest rates and political factors. This study concentrated more on political factors and held other factors constant. Various studies have been carried out in America and Britain examining the performance of stock markets in these countries before and after general elections. These studies indicate that the stock market react differently based on the party of the President elected in America while there was no difference in Britain