The Turn Of The Month Effect On Listed Stocks At The Nairobi Securities Exchange

Abstract

The Turn-of-the-Month (TOM) effect is the transitory rise in prices of listed shares throughout the initial three days and the last trading day of the month. Most dependable market experts and policy makers attribute this monthly effect to flows of cash and liquid assets under management towards the end of the month. Accordingly, this study seeks to answer the question if indeed this monthly effect occurs on listed securities forming the NASI index at the bourse or it has disappeared given the recent market developments where information is available. The study used equities securities data that traded from October 2015 to October 2019. The study adopted the model used by Boudreaux (1995) in studying TOM in the Pacific basin market where it employed an OLS (Ordinary Least Squares) regression and conducted both parametric and non-parametric tests to run the models of this monthly equities markets effect. The outcome of the paper confirms the existence of TOM at the NSE. The study thereby makes commendations to the various market stakeholders and participants at the bourse to objectively and considerately study the bourse for any movements in prices before making any buy, sell or hold decisions on any listed securities. Evaluation should be done on a monthly basis to ensure there is enough information for the investors to avoid risks.