dc.description.abstract | The purpose of the study was to establish the relationship between extreme risk and
the performance of firms listed at the Nairobi Securities Exchange. Extreme risk is a
potential risk that is very unlikely to occur but that could have a significant impact on
economic growth and assets returns, should it happen. During the period 2004 to
2015, Kenya experienced a spate of extreme events including the post-election
violence which paralyzed operations at the NSE, effect of financial crisis experienced
in Europe leading to mass exodus of foreign investors, several terrorism attacks
among others. The study adopted a descriptive research design. The population
comprised of the 62 firms listed at the NSE as at 31 December 2014. GEV and GDP
distributions were used to model the extreme risk. The key finding of the study is that
there is a positive and significant correlation between extreme risk and firm
performance. However some counters, for instance Nation Media Group, are more
prone to extreme risk than others. Such findings are critical to investors at the NSE
since a carefully selected portfolio can minimize unsystematic risk. The study
recommends further study as to why some counters are more adversely affected than
others during the period of same extreme risk. | en_US |