The effects of financial crisis on the performance of the Nairobi Stock Exchange

Abstract

The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly loose a large part of their value. Many economists have offered theories about how financial crises develop and how they could be prevented. There is little consensus, however, and financial crises are still a regular occurrence.

The objective of this study was to investigate whether global financial crisis has any impact on the performance of the Nairobi Stock Exchange. The performance indicator was the NSE 20 share index. Data on the NSE 20 Share Index was collected from the NSE for the period 1991- 2010. The month end indices for the period obtained from the NSE were analyzed using means and variances with the assistance of the SPSS statistical package.

The research results were presented using tables, graphs and charts. The study results indicate that there is a significant difference in the performance of the market on the year after the crisis hits the major exchanges though the effects are not very strong to warrant any panics. The market performance is low during the financial crises period but immediately after the crises market performance improves