The effect of investment strategies on stock returns at the Nairobi securities exchange

Abstract

The study examines the effect of investment strategies on stock returns at the Nairobi Securities Exchange by determining if there was significant difference between the mean return from different strategies employed by investors from January 2007 to December 2013. A descriptive study on closing prices of twenty (20) companies listed at the NSE was undertaken by computing the monthly mean returns for five (5) technical analysis strategies and testing if the returns where significant from the monthly mean return of Buy and Hold strategy. The five (5) technical analysis used were Variable Moving Averages (VMA) 1,50; 1,150; 1,200; 2,200 and 5,150,where, 1, 2, 5 and 50, 150 ,200 represented the short and long moving averages respectively and were used to generate buy and sell signals The study conclude there was no significant difference between the mean returns generated by the technical analysis (VMA) and the mean returns derived from the B-H strategy at 5% significant level and therefore the investment strategy used by an investor did not have significant effect on returns. The study recommends focus on long term investment as no amount of time spent on research on best performing strategy will earn the investor excess return.