| dc.description.abstract | The study had the objective of establishing the level of volatility of stock
prices in Kenya and identifying the determinants of stock price volatility. A
sample of 16 companies in Nairobi Stock Exchange is examined for a period
from 1998 to 2002.
The empirical estimation is based on a cross-sectional multiple regression
analysis of the relationship between stock price volatility as the dependent
variable and earning volatility, payout ratio, long-term debt, size and growth in
assets as the independent variable. The methodology adopted dictated the
use of secondary data. Daily stock prices and annual financial reports were
used in the study and analyzed using descriptive statistics and SPSS
computer package.
The results showed that all the five factors have influence on stock price
volatility. Specifically, Stock price volatility was inversely related to payout
ratio, earning volatility and growth in assets whereas it was positively related
to long-term debt and size.
Regression results confirmed that stock price volatility does exist at NSE and
that it is not only a function of factors considered but also many more factors.
This is because the explanatory power of the factors considered was low and
that, the explanatory power of the model improved as the number of factor
increase. We therefore conclude that the level of stock price volatility at NSE
is high and that earning volatility, payout ratio, long-term debt size and growth
in assets are not the only determinant of stock price volatility.
Although the results are not robust enough as in the case of developed
markets but are consistent with the behavior of emerging markets | en |
