EFFECT OF MACRO ECONOMIC VARIABLES ON MARKET CAPIATLIZATION OF FIRMS LISTED IN NAIROBI STOCK EXCHANGE
Journal Title: European Journal of Business and Social Sciences - Year 2017, Vol 6, Issue 6
Abstract
There is a growing literature on how macro-economic variables can have effects on market capitalization in both developed and emerging stock markets. Nairobi Securities Exchange has an important part in the Kenyan Economy as it provides a platform for companies and individuals to invest. This study sought to determine the effect of macro-economic variables on market capitalization of registered firms in Nairobi stock exchange. The study was guided by the following specific objectives; to determine the effect of exchange rate on the market capitalization of firms listed in Nairobi stock exchange, to determine the effect of interest rate on the market capitalization of firms listed in Nairobi stock exchange, to determine the effect of inflation rate on the market capitalization of firms listed on Nairobi stock exchange and to determine the effect of Fuel price on the market capitalization of firms listed on Nairobi stock exchange. The target population of this study comprised of Sixty-five (65) listed companies at the Nairobi Securities Exchange and whose data is available for the period from January 2010 to November 2015. The study used secondary data covering a five-year period from 2010 to 2015. The study used mixed research design encompassing both descriptive and correlational research techniques. Under the descriptive statistics, important metrics including the mean, standard deviation and variance of each of the key variables was obtained and analyzed across the listed companies in Nairobi security exchange. The study found that Exchange rate had a positive influence on the market capitalization in Agricultural, Industrial allied sectors and a negative influence on Finance and investment sectors and commercial and services sectors. Inflation had a positive influence on the stock market Performance in investment sector and a negative influence on all the other sectors. Interest rate had a positive influence on the market capitalization in Agricultural and Commercial, sectors and a negative influence on Investment sectors. The study also found that fuel prices had a negative influence on the market capitalization in the Automobile sectors while having a positive influence on the market capitalization in all the other sectors. The findings showed that the type of sector characteristics had a moderating effect on the relationship between macroeconomic variables of exchange rate, Interest rate, Inflation, fuel prices and the market capitalization at the NSE.
Authors and Affiliations
PETER MUCHORI GATHOGO| Jomo Kenyatta University of Agriculture and Technology, Kigali, Rwanda, Dr. JOSEPH KYALO MUNGATU (PhD)| Jomo Kenyatta University of Agriculture and Technology, Kigali, Rwanda, Dr. PATRICK MULYUNGI (PhD)| Jomo Kenyatta University of Agriculture and Technology, Kigali, Rwanda
Keywords
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