Impact of the 2007 - 2009 World Financial Crisis on Share Price Behaviour at the Nairobi Stock Exchange

Abstract

Numerous studies have been carried out to examine how stock prices respond to various occurances and events. The financial turmoil originating in the developed world in August 2007 spilled over to developing countries, and Sub Saharan Africa was not immune to the secondary effects of the global financial crisis. Private capital inflows to Sub Saharan Africa were relatively robust up to the first half of 2008, but dropped sharply from the third quarter of 2008, owing to a reduced capability and propensity to invest on the part of foreign investors. The purpose of the study is to examine the effects the 2007 - 2009 global financial crisis on share price behaviour at NSE. Secondary data from the Nairobi Stock exchange database for all listed companies was utilised. The population and sample of interest in this study comprised of all companies quoted on the Nairobi stock exchange. The period studied was January 2005 to December 2009.The sample consists of monthly mean share prices of all companies listed at NSE and monthly NSE share indices. A trend analysis of share price performance and NSE share indices was carried out. The study noted a negative trend characterised by plunging stock market activity between August 2008 and February 2009.The study concludes that the global financial crisis had negative effects on the share price behaviour.