Determinants of Share Price Fluctuations at the Nairobi Securities Exchange

Abstract

In recent times, retail investors have been exiting the Nairobi Securities Exchange (NSE) in large numbers. The net exit is attributable to erratic share price fluctuations, which make investors anxious about the safety of their capital. The research, which adopted the descriptive design sought to determine whether independence of securities firms, public announcements, investor perception, interest rate changes and company performance influence share price fluctuations at the NSE. The population of the study included all the employees of securities firms listed on the NSE. The researcher used purposive sampling to randomly select research participants on the basis of professional stratification. The stratification samples were based on at least four services offered by securities firms that include broking, portfolio management, research and investment banking and underwriting. The researcher utilized seventy-two parcipants by selecting four participants from all the eighteen securities firms listed on the NSE as at 31 December 2012. Primary data was collected through a survey approach by the use of a questionnaire. The researcher utilized SPSS to process and carry out descriptive and inferential statistical analysis on the data. Research findings show that independence of securities firms, public announcements, investor perception, interest rate changes and company performance combine to significantly influence share price fluctuations at the NSE. The researcher recommends that the Capital Market Authority (CMA) should put in place technologies to monitor all market activities in real time to flag out abusive behavior at the NSE. The CMA can use audit trail to prevent potential market manipulators from hiding their identies. Financial advisors should ensure their clients adopt a long-term investment strategy to offer market stability. The researcher recommends that a further study that intertwines psychology and finance be undertaken to explain individual investment decision-making.