RELATIONSHIP BETWEEN INTEREST RATES AND PERFORMANCE OF NAIROBI SECURITIES EXCHANGE MARKET
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Date
2021-03-03
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Publisher
International Journal of Economics, Commerce and Management
Abstract
Performance of Nairobi Securities Exchange market has remained unpredictable as
observed in February, 2006 when the index rose from 4057 to 5774 in January, 2007 and
declined to 2475 in February, 2009. This could have led to past investor losses that led to
collapse of some investment firms leaving investors in despair. However, literature links
interest rates with securities market performance. Further, stable interest rates attract
investors who may be oblivious of risks involved in securities trading. Despite this, interest
rates have hitherto not been considered as influencing securities market performance. The
purpose of the study was to determine the relationship between interest rates and
performance of Nairobi Securities exchange market. The specific objectives were to
establish the relationship between lending rates as well as deposit rates and market
performance. Correlational design and Secondary data between January, 2006 and
December, 2010 was utilized. Results indicated that lending rates was negative but not
significant predictor (β1=-0.166, p>0.05) while deposit rates was negative and significant
predictor (ß2=-0.678, p<0.05), interest rates explained 65.7% of the variance in market
performance (Adj. R2=.657). The study concluded that there exist an inverse relationship
between interest rate and market performance.
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Keywords
Interest rates, performance, securities market, lending rates, deposit rates