Turn of the month and January effects on Stock prices at Nairobi stock exchange

Abstract

This paper examined the turn-of-the-month and January effects at Nairobi Stock Exchange (NSE) during the period July 1995 through June 2003. Using the NSE daily closing prices, average daily returns were computed by applying the Holding Period Return method. Geometric average rate of return method was then applied to arrive at the required means of the two-week periods and monthly basis. Mean returns for the last and first weeks were compared with the second and third weeks of the month and no evidence was found in favor of the turn-of the- month effect. Likewise, the mean returns for the February to December compared with the mean returns for January of the following year, indicated absence of January effect at NSE. Since no capital gains tax exists in Kenya, these findings may support a tax-related interpretation of abnormal January returns on many stock markets.