The Relationship Between the Nairobi Stock Exchange Index and Major Economic Variables: Inflation Rate, Money Supply,treasury Bill's Rate and Exchange Rate

Abstract

This study sought to analyse whether or not macroeconomic factors affect the performance of the Nairobi Stock Exchange. The macroeconomic variables taken into account were inflation rate, money supply, interest rates and exchange rates. The performance of the stock exchange was represented by the movement in the stock price index. Secondary data was collected from published reports and figures from the Nairobi Stock exchange, the Central Bank of Kenya and the Central Bureau of Statistics. This data was analysed by use of multiple regression modelling. The results of the analysis indicate that macroeconomic variables do indeed impact on the performance of the stock prices. However, the four macroeconomic variables used in this study may not be the only ones that affect stock prices. Hence the study recommends that further research need to be carried out with more variables entered into the model.