Effect Of National Annual Budget Reading On Equity Returns At The Nairobi Securities Exchange

Abstract

The objective of this study was to investigate the effect of budget reading on equity returnsat Nairobi Securities Exchange. The study adopts descripting staristics design using eventmodel methodology to establish the correlation between the variables. Secondary data onstock performance around the 2009, 2010, 2011, 2012and 2013 budget reading dates wascollected from the NSE database. Data analysis was done using SPSS program to generatethe descriptive statistics, and the study finds that the reading of national budget hassignificant effect on the stock returns at NSE duringthe event period, depending oninformation content. Analysis of the AAR, CAR and SCAR of the companies in the NSE-20share index, during the 5 day event period before and after the annual national budgetreading finds that other than year 2010 that recordsno statistical significance of SCAR, theSCAR p value for 2009, 2011, 2012 and 2013 are allless than p = 0.05, suggesting that themarket returns for four years deviated significantlyfrom their means during the eventperiod of budget readings. Therefore, the study recommends that investors, investmentbanks, listed companies and the capital markets authority to consider the effect of nationalbudget reading on stock returns, to formulate policies that can cussion investors against theeffects of budget reading.