| dc.description.abstract | The Stock Exchange is a market that deals in the exchange of securities issued by publicly quoted companies and the Government. The major role that the stock exchange has played, and continues to play in many economies is that it promotes a culture of thrift. or saving. An initial public offering involves four groups - the issuing finn. the underwriter/investment bank, the initial buyers and the larger set of investors in the secondary market. These groups have varying amounts of infonnation regarding the issuing finn. It may be the case that the issuer bas better infonnation on the value of the security than do the investors or underwriters This research was on the event study methodology to study the relationship between the price movements for securities of companies quoted in the NSE and new IPO's.
The study sought to establish if there exists a relationship between stock prices as may be influenced by the news of an initial public offerings in the Nairobi stock exchange. The event defined for these studies are issues of IPO's. The population of this study composed of all companies listed in the Nairobi stock Exchange (NSE). A portfolio of all the companies in the stock market was taken and a equal weighting assumed in the calculation of the mean portfolio daily return within the window period. The study time period was between 2004-2009.The secondary data was being obtained from the NSE infonnational database for the period 2004-2009. Data analysis was carried out using the comparison period return approach (CPRA) by Wooldridge (1983).
The mean portfolio daily return was calculated for the IPO and comparison periods. For each day, t-statistics and test of significance was done using SPSS statistics analysis. The study found that issuing of IPO's at NSE has both positive and negative effects on daily mean returns, negative effects are on the days nearing the IPO's event days which are as result of buyer and seller expectation in the market, while positive effects are in the days far from the IPO's event day which are result of buyer seller initiated trading | en_US |
