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Turn of the Calendar Effect on Stock Returns of Firms Listed at Nairobi Securities Exchange TURN OF THE CALENDAR EFFECT ON STOCK RETURNS OF FIRMS LISTED AT NAIROBI SECURITIES EXCHANGE BY ORIKU NICODEMUS OSORO D61/77388/2015 A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF DEGREE OF MASTER OF BUSINESS ADMINISTRATION, SCHOOL OF BUSINESS OF THE UNIVERSITY OF NAIROBI. 2016 DECLARATION This Research Project report is my original work and has not been presented in any other University for examination purposes. SIGN: ___________________________DATE: _______________ ORIKU NICODEMUS OSORO D61/ 77388 / 2015. This Research Project report has been submitted for examination with my approval as University Supervisor. SIGN: ___________________________DATE: _______________ DR. JOSHUA WANJARE. Senior Lecturer, Department of Accounting and Finance, University of Nairobi ii ACKNOWLEDGEMENTS I would like to give thanks to the provider of life that is God for the protection through his gracious mercies. I thank the Nairobi Securities Exchange for the data provided which made this study a success. I wish to record my appreciation for the guidance and encouragement received from my Supervisor, Dr. Joshua Wanjare as he spared time to guide and read through my manuscript and made necessary corrections which assisted in writing of this project report. Also I wish to appreciate the University of Nairobi fraternity, lecturers, students and staff for their co-operation and encouragement during my studies. Lastly I acknowledge the support provided by my parents and siblings for providing a conducive atmosphere for the final write up of the project report. iii DEDICATION My special dedication of this Research project goes to my friends and family. I appreciate my Parents Mr. Thomas Oriku Oira and Mrs. Philomena Barongo Oriku with love and respect, my lovely wife Fenny Kwamboka and my greatest princess Philomariane Bonareri for their kindness and moral support. iv TABLE OF CONTENT Page Declaration ........................................................................................................................ ii Acknowledgements ........................................................................................................... iii Dedication ......................................................................................................................... iv List of Tables .................................................................................................................... viii List of figures .................................................................................................................... ix Abbreviations and acronyms............................................................................................. x Abstract ............................................................................................................................. xi CHAPTER ONE: INTRODUCTION ....................................................... 1 1.1. Background of the study ............................................................................................ 1 1.1.1. Turn of the calendar effect .......................................................................... 2 1.1.2. Stock returns ............................................................................................... 3 1.1.3 Relationship between turn of the calendar effect & stock returns ............... 3 1.1.4 The Nairobi Securities exchange ................................................................. 3 1.2. Research Problem ...................................................................................................... 4 1.3. Research objectives .................................................................................................... 5 1.4. Value of the study ...................................................................................................... 5 CHAPTER TWO: LITERATURE REVIEW .......................................... 6 2.1. Introduction ................................................................................................................ 6 2.2. Theoretical review ..................................................................................................... 6 2.2.1. Efficient market hypothesis ........................................................................ 6 v 2.2.2. Behavioral Finance Theory ......................................................................... 6 2.2.2. The Random walk model ............................................................................ 7 2.2.3. Capital assets pricing model ....................................................................... 7 2.3 Determinants of stock returns ..................................................................................... 7 2.3.1 Market performance ..................................................................................... 7 2.3.2 Beta .............................................................................................................. 7 2.3.3 Risk free returns ........................................................................................... 7 2.4 Empirical Literature review ....................................................................................... 8 2.5 Conceptual framework ................................................................................................ 10 2.6 Summary ..................................................................................................................... 10 CHAPTER THREE: RESEARCH METHODOLOGY ......................... 11 3.1. Introduction ................................................................................................................ 11 3.2. Research Design......................................................................................................... 11 3.3. Population .................................................................................................................. 11 3.4 Data collection ............................................................................................................ 11 3.5 Data analysis ............................................................................................................... 11 CHAPTER FOUR: DATA ANALYSIS, RESULTS & DISCUSSION .. 13 4.1 Introduction ..................................................................................................................... 13 4.2 Response Rate ................................................................................................................. 13 4.3 Descriptive Statistics ...................................................................................................... 13 4.4 Discussion of Research Findings ................................................................................... 26 vi CHAPTER FIVE: SUMMARY, CONCLUSION & RECOMMENDATIONS .............................................................................. 27 5.1 Introduction ..................................................................................................................... 27 5.2 Summary of Findings ..................................................................................................... 27 5.3 Conclusion ...................................................................................................................... 27 5.4 Recommendations ........................................................................................................... 28 5.5 Limitations of the Study ................................................................................................. 28 5.6 Suggestions for Further Research .................................................................................. 29 REFERENCE .............................................................................................. 30 APPENDICES ............................................................................................. 35 vii LIST OF TABLES Table 2.5 Conceptual Framework ..................................................................................... 10 Table 4.1 Analysis of Actual, Expected, Abnormal & Cumulative Abnormal Returns for Twelve Months for the period 2011 ............................................................................ 15 Table 4.2 Coefficient of Regression Model for Twelve Months for year2011 ................ 16 Table 4.3: Analysis of Actual, Expected, Abnormal & Cumulative Abnormal Returns for the period 2012 ............................................................................................................ 17 Table 4.4: Coefficient for Regression Model for Twelve Months for the year 2012 ....... 18 Table 4.5: Analysis of Actual, Expected, Abnormal & cumulative Abnormal Returns for Twelve Months for the period 2013 ............................................................................ 29 Table 4.6: Coefficient for Regression Model for Twelve Months for the Year 2013 ...... 20 Table 4.7: Analysis of Actual, Expected, Abnormal & Cumulative Abnormal Returns for Twelve Months for the period 2014 ............................................................................ 21 Table 4.8: Coefficient of Regression Model for Twelve Months for the year 2014 ........ 22 Table 4.9: Analysis of Actual, Expected, Abnormal & Cumulative Abnormal Returns for Twelve Months for the period 2015 ............................................................................ 23 Table 4.10: Coefficient of Regression Model for Twelve Months for the year 2015 ...... 24 Table 4.11: Analysis of Descriptive
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