Moderating role of savings on the relationship between interest rates and the stock market performance. A case of Nairobi Securities Exchange

Abstract

Nairobi Securities exchange (NSE) is playing a vital role in the growth of Kenya’s economy by encouraging savings and investment, as well as helping local and international companies’ access cost-effective capital. NSE operates under the jurisdiction of the Capital Markets Authority of Kenya. This study sought to examine the Moderating role of Savings on the Relationship between Interest rates and the Stock market Performance a case of Nairobi securities exchange. Data was analyzed using Descriptive statistics; Mean median standard deviation, skewness and kurtosis while inferential statistics used were multiple regression analysis and Pearson correlation. The study was informed by Capital Asset Pricing Model. The philosophical foundation underpinning the study was positivism and an explanatory research design. In addition, panel regression analysis was engaged to establish the nature as well as significance of the association between Interest rates and Stock market performance. The outcome displayed that Interest rates had a negative influence on Stock market performance. The study findings are in contrast with the assertion that high savings increase value with interest rates (β= -.203, ρ<.05) to Stock Market Performance. Later the process was repeated with the moderating variable results showing that savings has a negative and significant moderating influence on the association between Interest rates and Stock Market Performance (R2Δ=0.05 β= -0.08; ρ<0.05). The study found that the Savings had a buffering moderation influence on Interest rates and Stock Market Performance. Finally, the researcher recommends a further study focusing on firms listed in NSE to ascertain whether the study results hold.