EFFECT OF LIQUIDITY RISK ON UNIT TRUST PRICE VOLATILITY AMONG CAPITAL MARKET AUTHORITY LISTED FIRMS IN KENYA
Joseph Kimani Mwangi - PhD Scholar, Department of Economics Accounting and Finance, Jomo Kenyatta University of Agriculture and Technology, Kenya
Prof. Willy Mwangi Muturi - Department of Economics Accounting and Finance, Jomo Kenyatta University of Agriculture and Technology, Kenya
Dr. Patrick Kibati - School of Business and Economics, Kabarak University, Kenya
ABSTRACT
The purpose of the study was to evaluate the effect of liquidity risk on unit trust price volatility among CMA listed firms in Kenya. The objective that guided the research was to evaluate the effect of liquidity risk on unit trust price volatility. A record survey sheet was used to collect secondary data using longitudinal research design. The statistical population of the study consisted of 19 Unit trusts registered by CMA 2016 and offering money market. Census was taken to collect annual data for a period of 9 years from 2009 to 2017. Data presentation was done using panel plots, trend lines and distribution tables. The statistical techniques used are descriptive statistics such as Mean, median and Standard deviation. Diagnostics test was done. Correlation tests, analysis of variance and regression analysis were also done for Inferential statistics. The model was tested using the F-test at 5% level of significance which resulted to the value of F (0.05,1,84) = 3.96 ≤ F (1,83) =18.210, p-value =0.000 ≤ 0.05 indicating that the model fits well. The results of the study analysis revealed that the independent variable had a statistical significant effect on unit trust price volatility among CMA listed firms in Kenya for the money market fund. The results (r= O.4242, p- value= 0.029≤0.05) of the study indicated that the effect of Investment risk on unit trust price volatility was positive and statistically significant relationship at 5% levels The coefficient of determination (R2 ) = 0.1800 and standard error of estimate of 0.3502 for the regression model. The model PV = 0.248 + 0.225 LR can be used for unit trust price volatility prediction though weak. The study made the following recommendations; CMA regulate and inspect the financial stability policies governing unit trusts, unit trust firms to pay the investors in time and improve on financial stability in terms of liquidity. On policy implication, the government should review the CMA act to give the authority the inspection mandate on the unit trust to make them efficient and conform to financial international standards to be in line with the economic pillar of vision 2030. The unit trust should employ qualified personnel in financial matters.
