Long run portfolio returns on bonds and stocks in the Kenyan market

Abstract

This study seeks to investigate long-run real returns on stocks and bonds in the Kenyan market. Empirical evidence suggests that long-run real return on stocks is higher than long-run real return on bonds. In this project we examine returns on bonds and stocks at the NSE for the period 1999 to 2006. To be able to compute real returns we incorporate inflation for the same period of time. To able to achieve results we perform correlation between the real returns on stocks and bonds. Furthermore we regress real returns on stocks against returns on bonds, inflation and real returns on bonds. This gives us a regression model relating the given variables. We also test the significance level at 95% Confidence Interval.