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Kenya Commercial Banks are Star Performers: Myth or Truth? Exploratory Empirical Evidence from Nairobi Securities Exchange

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Listed:
  • Patrick Mumo Muinde

    (Central University of Finance and Economics, Beijing, China and Kenya School of Government, Kenya,)

  • James Mwangi Karanja

    (University of Nairobi, Kenya)

Abstract

The profitability of commercial banks in Kenya has been a subject of intense policy debate over the past two decades. This paper explores and adduces evidence that the perceived abnormal profitability in the industry is reflected in stock returns. The study utilizes time series data obtained from the NSE and five macroeconomic variables for the period 1996: 2015. We regress portfolio monthly excess returns, predict and graph these returns to determine if the banking sector outperforms other sectors of the economy. The empirical evidence presented here suggests that the banking industry outperforms other sectors of the economy in Kenya.

Suggested Citation

  • Patrick Mumo Muinde & James Mwangi Karanja, 2017. "Kenya Commercial Banks are Star Performers: Myth or Truth? Exploratory Empirical Evidence from Nairobi Securities Exchange," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 340-350.
  • Handle: RePEc:eco:journ1:2017-01-45
    as

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    References listed on IDEAS

    as
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    3. Harvey, Campbell R, 1995. "Predictable Risk and Returns in Emerging Markets," Review of Financial Studies, Society for Financial Studies, vol. 8(3), pages 773-816.
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    5. de Jong, Frank & de Roon, Frans A., 2005. "Time-varying market integration and expected returns in emerging markets," Journal of Financial Economics, Elsevier, vol. 78(3), pages 583-613, December.
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    More about this item

    Keywords

    Commercial Banks; Evidence; Portfolio Returns;

    JEL classification:

    • A23 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Graduate
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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