Effect of Market Value Ratios on Stock Price Volatility of Listed Companies on Nairobi Securities Exchange in Kenya

Abstract

Background Information Stock Price Volatility (SPV)Is a statistical measure of a security's price fluctuation over time (Osundina et al., 2016). SPVs are a critical phenomenon for investors worldwide, particularly in emerging markets such as Kenya. The SPV is of great interest in the capital market due to its impact on stock market stability and investor strategies. The share price fluctuates dramatically depending on a variety of factors. Knowledge of the factors causing these fluctuations and their potential impact on share prices is highly valuable because it allows investors to make wise investment decisions and firms to increase their market value.According to Musallam (2018), the goal of investors investing in company stocks is to maximize their money, which will be accomplished through market stock prices. Market stock return is regarded as an important factor in determining the best investment opportunity. Investors need more information about a company's financial reporting to identify its fiscal health and financial performance in order to find the appropriate opportunity with a good profit and low risk. According to Anwaar (2016), financial information is one of the essential components that can help investors invest in a firm. Share prices are influenced by a variety of factors, including market value ratios (Nirmala, 2011).According to Ndwiga (2016), the stock's volatility is frequently used to assess risk. The volatility of a stock indicates the rate at which its price changes over a given time period. The price of a volatile stock would fluctuate significantly over time, making it extremely difficult to predict the future price of such a stock. Concerns can arise when stock price volatility reaches extreme levels. If such volatility continues, firms will be less able to use their available capital efficiently because they will need to reserve a larger percentage of cash-equivalent investments to reassure lenders and regulators. Volatility raises market-making risks and forces market intermediaries to charge higher fees for liquidity services, resulting in lower market liquidity. Furthermore, high volatility discourages investors from holding stock because expected returns must be traded off for risk exposure, resulting in a demand for high-risk premiums to diversify against volatility risks.In Africa, Ikhatua (2013) concluded that market value ratios influence stock volatility while attempting to determine if they contribute to stock volatility in the Nigerian Capital Market. Angahar (2015) discovered a significant relationship between revenues and stock prices on the Nigerian Stock Exchange. In Kenya, the Nairobi Securities Exchange

Effect of Price Earnings Ratio on Share Price Volatility of Firms Listed on Nairobi Securities Exchange

“…The results showed presence of significant negative relationship between exchange rate volatility and stock prices. Wafula (2016) studied the effect of share price volatility on stock market performance at the NSE. Twenty companies on NSEs 20 share index for a 10 year period from 2006 to 2015 were targeted in the study.…”

Effect of Integrated Financial Reporting on the Value of Firms listed at the Nairobi Securities Exchange

“…In Kenya, potential investors obtain important details on how companies listed at the Nairobi Stock Exchange (NSE) operate by examining their annual reports and other Capital Markets Authority (CMA) bulletins. Similar to other exchanges, NSE encourages firms to disclose as much information as possible so that stock prices in the exchange reflect the most current information (Mwangi & Mwiti, 2015). Since 2008, the exchange has greatly focused on corporate governance to an extent of punishing participants for going against the acceptable market regulations.…”