Browsing by Author "Ochenge, Rogers"

Now showing 1 - 3 of 3
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    Foreign equity flows and stock market liquidity in Kenya
    (Taylor and Francis, 2020-06) Ochenge, Rogers; Ngugi, Rose; Muriu, Peter
    In this paper, we explore the dynamic relationship between aggregate foreign equity inflows and aggregate liquidity of the Kenyan stock market using transactional foreign trading data and several liquidity measures. We employ vector autoregression with monthly gross foreign inflows, local stock market liquidity and returns over the period 2011–2018. We discover a one- way causality link from inflows to liquidity and that foreign investors promote rather than impede local liquidity. Our analysis therefore renders support to the recent policy by Capital Market Authority of Kenya that now allows foreign investors to acquire up to 100% of any stock listed at the Kenyan stock exchange market.
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    Illiquidity, Foreign Investor Preferences and Asset Pricing In Kenya
    (IISTE, 2017) Ochenge, Rogers; Muiru, Peter
    In this paper we examine the role of illiquidity and foreign investor preferences in asset pricing in the Kenyan frontier stock market. Since stock illiquidity and heterogeneous foreign investor preferences are pervasive features of this market, investors are likely to demand higher compensation for holding illiquid and less foreign investor-preferred stocks, thereby increasing cost of equity. We test this hypothesis by incorporating an illiquidity and foreign stock holding factor into the classical Capital Asset Pricing Model (CAPM). Our analysis employs monthly data for the period January 2011 to September 2016. Our empirical results support a fourfactor CAPM which incorporates size, illiquidity, and foreign preferences factor. Importantly, the illiquidity and foreign factors attract a risk premium ranging between 5-9 percent yearly. This implies that Kenyan firms can significantly reduce the cost of equity finance by improving liquidity and foreign investor holdings.
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    Macroeconomic Conditions and Stock Market Liquidity in Kenya
    (Canadian Center of Science and Education, 2020-11) Ochenge, Rogers; Muriu, Peter; Ngugi, Rose
    This paper explores the role of macroeconomic conditions on systematic stock market liquidity in Kenya. The study first estimates the monthly probability of liquidity switching from a high to a low liquidity state using the Markov regime switching framework. Then, using ordinary least squares, the study identifies macro factors that significantly drive liquidity fluctuations. Importantly, monetary policy changes, exchange rate fluctuations and global risk aversion are found to significantly explain the resilience of stock market liquidity. Understanding the specific macroeconomic variables that drive liquidity fluctuations helps investors to monitor their liquidity exposures further enabling them to make informed investment choices. This ultimately leads to efficient resource allocation. Additionally, the empirical findings of this study provide key information to financial market supervisors regarding which macro variables to watch in their surveillance duties.