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The Effect of Foreign Portfolio Equity Sales on Stock Returns in Kenya: Evidence from NSE Listed Financial Institutions

Author

Listed:
  • Loice Koskei

Abstract

Fluctuations of foreign portfolio equity intensify risk and unpredictability in financial institutions leading to high volatility. The main aim of this study was to find out the effect of foreign portfolio equity outflows on stock returns of listed financial institutions in Kenya. The study population was 21 financial institutions listed on the Nairobi Securities Exchange. Using purposive sampling technique the study concentrated on 14 financial institutions. The research design of the study was causal as it is concerned more with understanding the connection between cause and effect relationships. The study adopted panel data regression using the Ordinary Least Squares (OLS) method where the data included time series and cross-sectional. A unit root test was carried in this study to examine stationarity of variables because it used panel data which combined both cross-sectional and time series information. Panel estimation results indicated that foreign portfolio equity outflows have no effect on stock returns of listed financial institutions in Kenya. The study recommended implementation of policies that would curb foreign portfolio outflows in financial institutions in order to minimize reversals of foreign portfolio investments.

Suggested Citation

  • Loice Koskei, 2017. "The Effect of Foreign Portfolio Equity Sales on Stock Returns in Kenya: Evidence from NSE Listed Financial Institutions," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(4), pages 185-190, April.
    • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:4:p:185-190
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    References listed on IDEAS

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    Cited by:

    1. Oyucho Esnas O. & Ochieng' Linus I. & Agong' David O., 2023. "Foreign Equity Portfolio Investments and Market Returns at the NSE20 Share Index; Kenya," International Journal of Finance and Accounting, IPRJB, vol. 8(3), pages 1-21.

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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