Determining the Accuracy of The Nairobi Stock Exchange 20-Share Index

Abstract

The study set out to determine the accuracy of the Nairobi Stock Exchange (NSF) 20- Share index Then ·ed forth study emanated from the apparent weakness of the NSE 20- Share index to effectively report on the market performance as it is calculated using unadjusted share prices and a geometric averaging method that has been statistically proven to have a downward hias in the long run . In addition. there is need for an alternative . performance measure to have a balanced view ~ value movements in the NSE. The derived indices were four in number: a Composite All-Share index, a 20-Share index (Laspeyres method), a 20- Share index (Paasche method) and a 20-Share index (Fisher's ideal method) The. all used 1996 \\eek 14 as the base period and the base value was set at 3007 .39.the value of the , E 20-Share indece in the same period. This figure was selected to provide for uniformity and enable comparison among the indices.