January effect on stock returns
Abstract
The presence of the seasonal or January effect in stock returns has been reported in
several developed and emerging stock markets. Over the last couple of decades, there
has been a steadily growing interest in new and different forms of investment. The
objective of this study was to investigate the existence of January effect on stock
returns: evidence from Nairobi Securities Exchange. The target population for this
study included 50 companies listed in the Nairobi Securities Exchange as at 31
December 2011. The study was carried out focusing on a period of ten years up to
2011. This study utilized secondary data. Data on the market share prices was
obtained from the share prices as reported by N.S.E. Data collected was analyzed
using simple linear regression and correlation analysis.
The study concluded that January effect has no significant relationship with the stock
returns at NSE. In particular the study established that although other studies find that
volatility tends to be higher in January, this study finds it to be period-specific and
mostly in value-weighted return series, but not in equal-weighted return series. This is
true for both the unconditional and conditional return volatility.
The study findings indicate that there is no significant relationship between the mean
monthly January Effect on stock returns and the mean monthly stock returns of
February through December. Comparisons between our economy and other
economies and stock exchanges to find out the reasons why the fluctuations are either
positive or negative need to be done. A research on the macro-economic and other
factors to find out the other causes of these fluctuations should also be done to shed
more light on why there are these fluctuations.
Citation
MBA ThesisSponsorhip
University of NairobiPublisher
School of Business, University of Nairobi
Description
January effect on stock returns