Risk and industrial classification in the Nairobi Stock Exchange

Abstract

The objective of the research paper was to determine the association between the risk and the theory of market segmentation in the NSE specifically the Industrial Classification of MIMS. Risk considerations are critical in all investor's decisions at both individual and corporate levels. In order to achieve the above objective, the study set out to investigate whether the returns from the industrial classes of MIMS were significantly different from the market returns given the prevailing conditions during the period of study. The results from the study indicated that industrial classification at the NSE may have not taken risk into consideration while subdividing the market given the fact that all the industrial classes were not significantly different from the market. The research noted that the conclusions drawn from the study were subject to limitations such as unique factors affecting risk, change in management, strikes, expansions and the sample size which were not empirically tested.