To read this content please select one of the options below:

Modelling the time‐varying volatility of equities returns in Kenya

Morekwa Esman Nyamongo (Research Department, Central Bank of Kenya, Nairobi, Kenya)
Roseline Misati (Research Department, Central Bank of Kenya, Nairobi, Kenya)

African Journal of Economic and Management Studies

ISSN: 2040-0705

Article publication date: 1 February 2010




The paper seeks to investigate the relationship between stock volatility and returns in the Nairobi Stock Exchange, Kenya. It uses daily returns data over the period January 2006 to April 2009.


Empirical analysis is based on quantitative analysis with emphasis on descriptive statistics, and advanced econometrics models which are well suited to capture the time‐varying volatility. The models utilised in this study fall into the family of generalised autoregressive conditional heteroscedasticity models.


The main findings of the paper are as follows: the equities returns are symmetric but leptokurtic and thus not normally distributed; volatility of returns is highly persistent; the leverage effects are not significant; and the impact of news on volatility is not significantly asymmetric.

Practical implications

The findings of this paper will aid policy makers, policy analysts, investors, and academics to gain in‐depth understanding of dynamics of the equities returns in Kenya particularly, with regard to leverage and impact of news.


The paper was conducted at a time when the volatility of the equity market returns in the global stock markets in general and Kenya in particular was high on account of the global financial crisis and the aftermath of the post‐election violence in Kenya. Given that excess volatility in the stock market undermines the reliability of stock market prices as a signal to the true value of the firm, the findings of this paper will provide useful insights in the assessment of portfolio allocation and investment decisions in Kenya.



Esman Nyamongo, M. and Misati, R. (2010), "Modelling the time‐varying volatility of equities returns in Kenya", African Journal of Economic and Management Studies, Vol. 1 No. 2, pp. 183-196.



Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

Related articles