Analysing The Effect Of Treasury Bill Rates On Stock Market Returns Using Garch
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Date
2006-11Author
Mutoko, Regina K
Type
ThesisLanguage
enMetadata
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This paper examines the relationship between the returns of assets on the Nairobi Stock
Exchange (NSE) and the Treasury Bills Rate using GARCH Analysis. Existing studies in
Kenya on the relationship of factors affecting the returns of assets in the NSE have used
various methods, mostly Ordinary Least Squares (OLS) Regression and have yielded
inconclusive results. This study recognizes the unique characteristic of financial series
data that makes common analysis techniques like OLS regression unsuitable for
generating effective forecast models. The study systematically examines the returns of
the various market segment returns within the NSE for these characteristics so as to build
a basis for using GARCH analysis. Finally, it compares the results obtained using OLS
regression with the results obtained using GARCH analysis techniques.
The study concluded that in keeping with theory, Treasury Bill Rates have a significant
impact on the asset returns of the various market segments, the NSE - 20 Share Price
Index and All market returns as a whole. The behaviour of the returns of assets on the
NSE can be better explained by considering the volatility of previous periods. The study
found that GARCH analysis gives a better explanation for the relationship between
Treasury Bill Rates and asset returns than OLS regression in every market segment.
Furthermore, the explanatory power becomes stronger as we consider the effect of
previous variances on the current observations.
Citation
Masters thesis University of Nairobi (2006)Publisher
University of Nairobi. School of Business Studies
Description
Degree of Masters in Business Administration (MBA)