Stock price dynamics for Prices in Nairobi security Exchange

Abstract

In this study we analyze the stock prices movement in the Nairobi Security Exchange. The Nairobi Stock Exchange (N.S.E) was founded in 1954 as a voluntary organization of the stock brokers and is now one of the most active capital markets in Africa where market players buy and sell shares and other securities. The stock prices usually vary with time and this can be attributed to factors such as economic growth, climatic changes, government polices and political atmosphere. The trend of prices remains a challenge econometricians and statisticians. The objective of the study was to verify whether the price dynamics follow a. random walk process or mean reversion. We used Dickey-Fuller Test for unit root in a simple regression model of prices return and the parameters were estimated by the method of ordinary least squares (O.L.S) estimates. This may help market players understand the dynamics of prices so that they can make meaningful decision.