The impact of inflation on stock market returns and volatility: Evidence from Nairobi securitiesExchange
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Date
2012Author
Murungi, Clinton M
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
The linkage between stock prices and inflation has been subjected to extensive
research in the past decades and has aroused the interests of academics, researchers,
practitioners and policy makers globally. This study examined the impact of inflation
on stock market return and volatility in the Nairobi Securities Exchange (NSE).
Previous research findings have established the existence of a negative relationship
between a stock prices and inflation. These findings contradict the hypothesis by
Fisher (1930) who argued that stock prices should be positively related with expected
inflation, providing a hedge against inflation. A correlational research design was
employed to establish whether inflation is associated with stock market return and
volatility. Specifically, it sought to answer the question on the effect of inflation on
the stock return and volatility in the NSE. Monthly time series data on NSE 20 share
index and Consumer Price Index, for the period July 2000 to August 2012 was used
in this research. The OLS estimation technique was employed to estimate a single
equation relationship with the stock return as the dependent variable and explanatory
variable as inflation.
Citation
Masters in Business AdministrationSponsorhip
The University of NairobiPublisher
School of Business