Stock market seasonalities at the Nairobi Stock Exchange

Abstract

Investors are interested in the stock returns as these determine how much they can expect to receive from their investment. But growth in the firm's earnings power alone does not guarantee good returns to the investor.· This is mainly because the stock returns are also influenced by time. It is therefore important for investors to understand the behaviour of the stock market in order to gain an insight on their expected returns from stocks. The objective of this study was to establish if the Nairobi Stock Exchange (NSE) exhibits the monthly and quarterly seasonalities. A sample of 42 equity stocks traded at NSE was tested for equality (or difference) between the sample mean returns. The results of this study showed.that NSE mean stock returns are equal over the months and quarters tested. Hence time does not appear to be a good indicator of stock returns at NSE. These results are attributed mainly to the short period of five years covered in the study. A longer period of at least ten years would probably produce different results.