| dc.description.abstract | Investors expect stock prices to react to some special event. They are however uncertain about
timing and magnitude of that reaction. If financial markets pick up information about an
impending event, that event can change stock prices days or weeks before it occurs and continue
to influence stock prices for some time thereafter. The economic and political changes like
budget announcement occurring locally and globally also influences the share prices of the stock
market. The study adopted event study methodology. Event studies examine stock returns for
some specific firms (or for an industry) before and after the announcement of a special event.
The target population for this study included companies listed at the Nairobi Securities
Exchange. Data was obtained from the NSE covering the period from 2010 to 2014. The study
entailed collecting data on share price for all companies in each sector. The event period was 10
days prior and post budget announcement. The study sought to compare sector returns and
market returns prior to and subsequent to the budget to assess how abnormal returns vary with
the event. The study found that national budget reading had an impact on the cross-sectional
average sector returns. The impact was observed over the event period with different sectors
reacting uniquely to the budget on different days within the event period. It was observed that
opportunities to make abnormal gains existed just before, on and during the event period in some
sectors dependent on the budget. Significant positive CARs were noted in the automobile sector,
construction and manufacturing sectors over the 2013 budget period. However, statistical tests
did not indicate significant differences between pre budget and post budget sector returns over
the event periods studied. This indicates that investors had on average, anticipated the effects of
the event days before the budget reading. | en_US |
