The January Effect as Evidenced by Foreign Investor Trading at the Nairobi Securities Exchange (Nse)

Abstract

This study aimed at determining January Effect in NSE as evidenced by trading patterns of foreign investors. The study was based on the Efficient Market Hypothesis, the Random Walk Theory and the Behavioral Finance Theory. A descriptive research design was adopted. The population was 63 companies that were listed at the NSE as at the end of the year 2018. Out of this population, 60 companies qualified as they provided the full set of data on prices of stock. The secondary data was sought from the NSE data vendors. The stock prices were then utilized to compute the January mean returns and also rest of the year mean returns. A paired t-test was utilized to establish if there might have been a difference of a significant amount in mean returns. From the paired t-test, there was of significant difference in January mean returns and the rest of the year for the banking, energy and petroleum and the insurance sectors. However, the automobiles and accessories, commercial and services, construction and allied, investment, investment services, manufacturing and allied, telecommunication and technology and real estate investment trust sectors had no significant difference in January mean returns and the rest of the year. The study also concludes that both purchases and sales a strong positive and significant effect on stock prices in NSE. As there is existence of calendar anomalies at the NSE for the three sectors, the study recommends that the Capital Markets Authority need to come up with policies and regulations that will aim at improving efficiency at the NSE.