The Effect of Macroeconomic Variables on Stock Returns of Companies Listed in the Nairobi Securities Exchange, Kenya

Abstract

This study sought to determine the effect of macroeconomic variables on the stock returns for the companies listed in Nairobi securities exchange. The macroeconomic variables used in this study were money supply, oil prices, gross domestic product and interest rates.  The target population for this study was 20 companies Listed in Nairobi securities exchange used in the computation of the NSE 20 share index. This study used secondary data and the data was collected using data collection sheet. The sample data covering a period of 5 years from 2014 - 2018 was collected from various sources.. The descriptive analysis was done using frequencies, percentages, means and standard deviations for all the variables for this study while inferential statistics used in this study were Pearson correlation and both simple and multiple regression analysis. The study found out that Money Supply, Gross Domestic Product, Oil Prices and Interest rates contributed to 71.4% variation in the stock returns meaning that other factors not included in this study accounted for 28.6%. The study concluded that money supply, oil prices, gross domestic product and interest rate positively affected the stock returns of companies listed in Nairobi Securities Exchange. This study recommends that the macroeconomic environment should be closely monitored in order to ensure stability in the stock market.

Keywords: Macroeconomic Variables, Stock Returns, Nairobi Securities Exchange.

DOI: 10.7176/RJFA/12-10-04

Publication date:May 31^st 2021