The Effect of the Day of the Week on Volatility of Stock Returns of the Commercial Banks Listed in the Nairobi Securities Exchange
Abstract
The day of the week effect purports that there is the existence of a pattern on the part of stock
returns, whereby these returns are linked to a particular day of the week. The objective of the
study was to establish the existence of day of the week effect in the banking segment at Nairobi
Securities Exchange and to determine the volatility of the stock price return relative to the
specific days of the week. This study was descriptive research design. The data used in this
study constituted of daily stock returns of 11 listed commercial banks at the NSE from 1st Jan
2013 to 31st December 2014.The data included daily prices for the specific banking segment
stock prices and the average price for the whole banking segment from the Nairobi Securities
Exchange was computed. The daily return for the banking segment was determined by taking
the average banking closing price for that day and the average banking opening price for the
previous day. The daily segment returns and the banking returns standard deviation being the
dependent variables and the day of the week being the independent variable. The finding
indicates that there is existence of day of the week effect in the Nairobi Securities Exchange
and the highest returns are experienced on Tuesdays and lowest returns experienced on
Thursday. The highest volatility was also observed on Wednesdays with the lowest volatility
observed on Monday.
Publisher
University of Nairobi