| dc.description.abstract | The stock market is a very critical ingredient to the economic development of a
country as it facilitates the flow of funds for business and provides an investment
opportunity for the investor. The massive contribution done by the insurance and
financial sectors to the growth of the Kenyan economy is one that cannot be ignored.
However, rising cases of terrorism attacks seems to threaten the stability and
performance of these sectors either directly or indirectly. Since late 2011, Kenya has
seen an upsurge of violence both in form of terrorist attacks and internal intercommunity
violence. The objective of the study is to establish the effect of terrorist
attacks to the stock performance of insurance companies listed at the Nairobi
Securities Exchange. The study was conducted using the event study methodology
and data analysed using excel. The results were presented in tables, figures and
appendices. The study suggests that a more robust research on terrorism and the
insurance sector performance especially in emerging markets is necessary in order to
draw a conclusion. The results showed that Abnormal Returns (AR) increased slightly
for the three events under study. Significance tests on these results showed that that
they were significant at 5%. An analysis of the CAR for the three events showed that
there existed a positive relationship between terrorist attacks and insurance company
stock performance. One day after the event, the CAR for events 2 and 3 increase
steadily to 4.23% and 5.2% respectively at the 10th day. From the study, it can be
observed that contrary to the general assumption that terrorist attacks affect the stock
market negatively, investors in the insurance sector may not loose as well. The study
also recommends the inclusion of insurance stocks in portfolio management strategies
as well as the increased marketing activities by insurance companies especially on
terrorism insurance. | en_US |
