An Investigation of the Existence of Weekend Effect in Stock Returns at the Nairobi Securities Exchange

Abstract

The stock market movements are constantly monitored and persuaded in the global, regional and local context. Particularly the movement and fluctuations of standard indices which represent a tool to measure performance and outcomes of the market in term of growth are closely evaluated. The indices show registered share prices in the market. Again, they are used as comparable performance indices which investors can use to measure the performance of their portfolios compared to that of the whole market. Indices have played an important role in performance measurement as well as in investment decision making. The study sought to investigate the existence of the weekend effect in stock returns at the Nairobi Securities Exchange. The study specific objectives were to find out whether Monday returns are lower than Friday returns. Also the study was to establish if the market returns followed a particular trend depending on the trading day. The sample of the study included all the firms that form the NASI. The index included companies in the NSE from all sectors namely Agricultural, Automobiles and Accessories, Banking, Commercial and Services, Construction and Allied, Energy and Petroleum, Insurance, Investment, Manufacturing and allied and Telecommunication and Technology. The study required data on NASI index for the period January 2011December 2013. The study relied on secondary data to collect relevant information. Correlation for the trading days returns shows that there is a weak correlation between trading day and market returns. Monday mean returns were however negative unlike for the other days of the week supporting the existence of the weekend effect in the NSE.