DAILY EFFECT AND THE RETURNS OF STOCKS LISTED AT THE NAIROBI SECURITIES EXCHANGE IN KENYA
DAILY EFFECT AND THE RETURNS OF STOCKS LISTED AT THE NAIROBI SECURITIES EXCHANGE IN KENYA
Duncan Ombullu Nalwenge - Department of Accounting and Finance, Kenyatta University, Kenya
Ambrose Jagongo - Department of Accounting and Finance, Kenyatta University, Kenya
Gerald Atheru - Department of Accounting and Finance, Kenyatta University, Kenya
ABSTRACT
One of the major components of the financial markets are the securities markets of theworld. An efficient market is an indicator of market prices reflecting available information about the fundamental values of a company. A conventional distribution of returns to a financial asset indicates that anticipated returns for all days of theweek, known as the day of theweek, are the same. And investor at the NSE looks to getting a return on their investments. The studies moderating variable is the change in price of the daily volumes traded. A return is thegain orlossofthevalue of a share inaparticular period usually quoted as apercentage. This study sought to find out if there was significant deviations in the conclusions arrived at on the days that had highest positive returns at the NSE for the period starting January 1st 2012 and ending December 31st 2018. If the deviation in daily return are in accordance to observations made in past studies as no studies were done within the aforementioned period. The general objective of this study was the day of the week effect and the returns of stocks listed at the Nairobi SecuritiesExchange (NSE) in Kenya. The study was guided by the following specific objectives of the study: to establish the Mondays Effect and the returns of stocks listed on the Nairobi SecuritiesExchange; to establishthe Tuesdays Effect and the returns of stocks listed on the NairobiSecuritiesExchange; to determine Wednesdays Effect and the returns of stocks listed on the NairobiSecuritiesExchange; todetermine Thursdays Effect and the returns of stocks listed on the NairobiSecuritiesExchangeandto establish Fridays Effect exists and the returns of stocks listed on the NairobiSecuritiesExchange. This study adopts the positivity philosophy. This study used a longitudinal descriptive research design. The population of this study comprised of the firms listed in the 20 Share Index at the NSE for the period January 2012 to December2018. Out of the 20 listed companies at the 20 Share Index at the NSE, the study sampled, by use of purposive sampling, 10 companies. The data required was collected fromNSE. Data for the seven-year period 1st January 2012 to 31st December 2018 was sourced from the NSE website and NSE trading data vendors. The data series comprised of daily stock market prices of the 10 firms thin the 20 Share Index at the NSE as at 31st December, 2018. The VWAP data was adjusted for dividend payment, any share splits and share bonus. The study used both descriptive statistics and inferential statistics. According to the day of the week thedata gathered has been categorized. The t-tests for a test of the week-day hypothesis were based on the empirical model. Initially, the stuffy variable regression was used in the research to determine the influence day-by-week on NSE. A linear regression occurred when a dummy variable equivalent to one each day is represented when the return is equal to zero for the day when the return is equal to the day. The t-test was performed in order to assess whether stock returns differed significantly throughout the five days of theweek. The researchalso tested how different the departures from these daily inventory returns are. Both test were at a 0.05% Confidence Level. The moderating variable and its effect on the other variables was analyzed using multiple regression analysis. The study found that Returns for Monday 2012 had the lowest mean of 101.99 while those for Monday 2014 had the highest mean of 158.28. Returns for Tuesday 2012 had the lowest mean of 101.16 while those for Tuesday 2014 had the highest mean of 162.029. Returns for Wednesday 2012 had the lowest mean of 100.398 while those for Wednesday 2014 had the highest mean of 162.32. Returns for Thursday 2012 had the lowest mean of 100.661 while those for Thursday 2014 had the highest mean of 162.25 and Returns for Friday 2012 had the lowest mean of 102.82 while those for Friday 2018 had the highest mean of 122.229. Finally, with the return of the Nairobi Securities Exchange in Kenya the day of the week-end effect will be present. On Monday and Thursday, investors can gain an uneven return by purchasing stocks, while on Wednesday, Thursday and Friday they can sell stocks. Investors in trading on the Nairobi securities exchange should not take the days of the week into account in the research. To discover the major variables affecting stock returns in the NSE, investors need do a fundamental and comprehensive market study.
