Empirical Analysis of Macroeconomic Factors and Stock Return in Nairobi Securities Exchange, Kenya

Abstract

.Studies about macroeconomic factors and stock return have revealed varied results despite interest and importance in this area of study. Many studies reviewed focused on macro-economic factors and stock return at firm level; none of the studies reviewed however focused on macroeconomic factors and stock return at industry level, which this study sought to analyze. The study therefore analyzed the effect of macroeconomic factors on stock return of Nairobi Securities Exchange in Kenya. This study is anchored on stock return theories, Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT). The study employed quantitative research paradigm a long side longitudinal time series analysis; quarterly secondary data spanning 2009 to 2018 was used. Data was sourced from Kenya National Bureau of Statistics (KNBS), Nairobi Securities Exchange (NSE) and the Central Bank of Kenya (CBK). Results revealed that macroeconomic factors have a significant relationship with stock return (p=0.0035, R2= 31.85%); implying that trend of macroeconomic factors can assist in making investment decisions in Nairobi Securities Exchange in Kenya. This study is important to scholars, policy makers and investors.