An investigation of the existence of turn of the month effect at the Nairobi Stock Exchange
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A central challenge to Efficient Market Hypothesis(EMH) is the existence of the stock market anomalies. The current study tries to examine the existence of the turn of the month effect at the Nairobi stock Exchange. This allows us to examine whether the seasonal patterns usually found in the developed markets data like the US is also present in the Kenyan data and to what extent. According to the results the everage return for stocks listed at the Nairobi Stock Exchange is higher for the last day of the calendar month and the second day of the following calender month. The monthly effect is independent of other known calendar anomalies such as the January and the holiday effect documented by others, and also the results are consistent with the US results. The study adopted a descriptive survey; descriptive research portrays an accurate profile of persons, transactions /events, or situations and allows for the collection of large amount of data from a sizable population in a highly economical way. The data was analyzed using regression and correlation analysis. Regression analysis was also used to come up with the model expressing the relationship while correlation analysis was used to test for the overall significance of the models as well as the individual significance of the predictor variables. The study found that there exist Tum-of-the-month effect at the Nairobi Stock, that is, the coefficient of determinations for all the companies listed at NSE was greater than 90%. Further the study identified Dl (the first day before the end of the month), D4 (the first day after the end of the month) and D, (the second day after the end of the month), were significantly related with market return at time (Turn of the Month Effect).