Day of The Week Anomaly and Stock Returns Volatility at Nairobi Securities Exchange

Abstract

This study sought to investigate the effect of the day of the week anomaly on the stock market returns volatility on the performance of Nairobi Securities Exchange. The study sampled NSE - 20 share index closing prices from September 2000 to December 2019. Data was obtained from the Nairobi Securities Exchange database. Stata version 12 software was used and descriptive statistics to analyse the data using the EGARCH (1, 1) model. The mean analysis results showed the presence of the day of the week effect on the stock market returns of the NSE 20 Share Index at the Nairobi Securities Exchange. This implies that Nairobi Security Exchange performance still contravenes the Efficient Market Hypothesis Theory since investors can use the day of the week anomalies to make abnormal return. The variance analysis showed a positive asymmetric term, implying that positive shocks have greater impact on volatility more than negative shocks of the same magnitude. Positive information in the stock market generates less variance or volatility in the market since positive return translates to high equity prices. This implies that volatility tends to decrease when the stock market returns at the NSE increases than when the stock market decreases with the same amount.