The Effect of Macroeconomic Factors on Performance of the Nairobi Securities Exchange
Abstract
The main purpose of the research was to find out the effect of macroeconomic factors
on the performance of the Nairobi Security Exchange. More specifically, the researcher
sought to determine how inflation rate (Measured by Consumer Price Index), Money
Supply Growth (Measured by Change in Money Supply) and interest rate (Measured
by Lending Rates) affected performance of NSE. The study adopted descriptive
research design targeting all firms making up the 20 share index. Data was collected
from secondary sources using data collection sheet. The collected data was analyzed
using SPSS software. The results were analysed in Tables and graphs. The study
established that Pearson coefficient r for inflation was -0.376, showing that it is
inversely related with performance of NSE; inflation significantly affected performance
of NSE at 5% i.e. 0.000<0.05, money supply growth in the economy indicated an
r=0.237 and interest rate had Pearson correlation r=-0.032. The study found out that
there was an inverse moderate and significant connection between inflation and
performance of NSE, inflation had significant influence on performance of NSE, there
exist a weak unswerving connection between money supply and performance of NSE,
there was an inverse weak relationship between interest rate and performance of NSE,
interest rates had significant influence on progress of NSE. The research endorses that
the Central Bank of Kenya CBK should strengthen its monetary policies to regulate and
control inflation to sustainable levels. There is need to balance the supply and demand
for money in the economy. The management of NSE and the Capital Market Authority
CMA should create awareness among investors to invest more in equities when level
of interest rates in an economy are favorable.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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