Effect of Economic Reopening Announcement on Nairobi Security Exchange Market Performance

Abstract

Since the strike of Covid-19 around the global economies, many stock markets were found to be adversely affected with some of the markets going into a full closure. Different governments were seen to adopt different measures in the attempt to address the spread of the pandemic in their states. Among the common approaches were the market closures that were associated with lockdowns whether the full restriction of movement or closures of most non-essential sectors in the economy. The objective of the current study was to establish the effect of the announcement of economic reopening on the share performance of stocks listed in the NSE. In addressing the research objectives, a number of theories informed the researcher including efficient market hypothesis and the greater fool theory selected for their relevance in the establishment of indications of stock market performances. The research adopted a quantitative research design obtaining secondary data from the 63 listed firms in the NSE. The study employed an event study focusing on a single day of announcement of the first phase of the economic reopening that was made on 5th July 2020 with an estimation window period of 21 days before the announcement and a post-event period of 21 days after the announcement. The research findings were presented using statistical aids of tables. The research findings indicated that the general model of the study employed explained 16.52% of the factors influencing stock performance in NSE even though the model was established not to be statistically significant at the 95% confidence level. The study indicated some differences in the actual returns in the NSE market and the predicted returns on the same market. With 13 points indicating a positive abnormal return that shows location above the regression line was an indication of good economic performance than the targeted results. The t value confirmed the existence of some influence of the announcement on the performance of NSE even though statistically insignificant. The study recommended that policymakers should consider a cautioned economic reopening to allow full economic recovery based on the results indicated herein.