dc.description.abstract | In an efficient market, securities prices fully indicates all the available information at
any time and therefore investors cannot beat the market using past stock price behavior
to predict future prices. Those who oppose this hypothesis have argued that security
market anomalies do exist in the market. The objective of this study was to investigate
the existence of the holiday effect at the Nairobi Securities Exchange (NSE). The study
modeled as an event study focuses on abnormal returns and cumulative abnormal
returns at the NSE over seven public holidays namely: New year, Easter, Labour day,
Madaraka day, Mashujaa day, Jamhuri day and Christmas holiday using companies
listed at the NSE over a five year period. Stock market returns as measured by NASI
was the dependent variable. The event was the specific holiday in this case and the
event day represents the day of the holiday and was symbolized as t=0. The event
window was 11 days broken as 5 days before the event date and 5 days after the event
date i.e (+5, -5) days. The estimation period for the study was 5 days ahead of the
occasion window as well as 5 days post-event period to avoid overlapping of data.
Normal returns, abnormal returns and cumulative abnormal returns were computed
while non-parametric tests were used to establish significance of the returns. The study
finds that most stock returns generated at the NSE after the holiday are positive when
compared with the negative post-holiday returns. Non parametric tests show that
positive post-holiday returns proportion are more than the negative post-holiday returns
which confirms existence of the post-holiday effect. T-tests conducted on the returns
confirm that none of the holidays has greater effects than the other. Further, T-tests on
pre-holiday and post-holiday abnormal returns establish that there are no significant
disparities amongst the pre and the post-holiday abnormal returns. The study
recommends that the market microstructure should be aligned to enhance market price
discovery and market efficiency. At the same time, further investigations should be
modeled on other corporate events and national or international events that influence
security returns in financial markets. | en_US |