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Title: Effect of Stock Liquidity on Investment Returns of The Sectors At The Nairobi Stock Exchange During The Period 200-2006
Authors: Mbiti, Shavulimo Paul
Keywords: Stock liquidity
Issue Date: Mar-2006
Publisher: Egerton University
Abstract: Stock liquidity refers to the ability to move or sell large volumes of shares quickly at a low cost Knowledge onhow dififerent levels of liquidity affect the returns from stocks is important to investors and companies. Shareholders and potential investors are interested in lcnowing how much growth and returns their investments will yield. This information regarding share activity may enable investors to make sound investment decisions regarding the best sectors to be used to form portfolios .The main objective of this study was to determine how stock liquidity could affect investment returns of sectors at the Nairobi stock exchange. A sample of 29 companies was developed to from the target population Secondary data on stock voltunes, prices and dividends from the Nairobi Stock Exchange was used for the analysis; s. An analysis of variance (ANOVA) and a regression model were used to test the hypotheses. The results showed a negative relationship between the share liquidity and returns, and this was deemed significant. This means that investors would always hold to shares from sectors that have a high return The findings of this study are consistent with other findings in advanced stock markets. The relationship between stock liquidity and its returns should be able to ofier investors information on how trade volumes afiect their investments. This finding will help in creating an investment model that will provide the investors with information that will help them make investment decisions. This is because the most common models of the CAPM and APT do not consider the element of the traded volume in determining sector investment returns.
Appears in Collections:Faculty of Commerce

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