Beta Co-efficient As A Measure Of Risk Of The Common Shares Listed At The Nairobi Stock Exchange
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Date
2000-11Author
Sawaya, Anthony N.
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
The Markowitz portfolio model (1952) derives the expected rate of return for the
portfolio of assets and a measure of its expected risk.
This expected risk may be divided into systematic risk (market risk) and unsystematic
risk (individual risk)
Market risk has been a controversial area in the financial management doctrine. This
paper examines to what extent market risk as measured by relating returns of individual
securities to returns of the market is a useful indicator in analyzing risk characteristics of
firms quoted at the NSE.
From all the companies quoted at the stock market for the period between 22nd March
1996 and 31st December 1999, data on share price, bonus issues and dividends was
collected from published report and figures from the Nairobi Stock Exchange database.
This secondary data was analyzed using regression analysis (Minitab Statistical Package).
The information is in two categories: Market return weighted using market capitalization
(the product of number of shares in issue and asset return) and Market return not
weighted.
Statistical tests were applied on the information using the t-test for a population of fifty, a
5% level of significance and two degrees of freedom. The test accepted companies with a
value over 1.8. This helped to attain the objective of th-e .study, which was whether the beta coefficients of securities traded at the NSE have information content, and also
systematic risk is a major factor in this market.
The results of the analysis indicated that 74% of the companies (using market return not
weighted) have a beta that is statistically significant and only KPLC has a statistically
significant alpha. When the market return is weighted 56% of the companies have a tratio
(beta) greater than 1.8 thus being statistically significant.
The study will have value particularly to investor in the Nairobi stock Exchange that are
concerned with the degree of market risk involved in the stock of any quoted company.
Citation
Masters thesis University of Nairobi (2000)Publisher
University of Nairobi. Faculty of Commerce
Description
degree of Masters of Business Administration (MBA) at the University of Nairobi