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An Analysis of the Reverse Weekend Anomaly at the Nairobi
Securities Exchange in Kenya

Sifun,o -. .isa/a
10
12herutoi) -li3a .i3onda
1
1 4ellen 5urugi .a3uti
*
16enedict 5ango7e 8afu7wa
%
1.School of 6usiness) 9ni:ersit; of Nairo7i. !.&. 6o< *+197) Nairo7i) .en;a
2.=ecturer) &shwal 2ollege) !.&. 6o< 1+17+$-++1+1) Ja3ia 5all) Nairo7i) .en;a
*.National 4ousing 2or"oration) !.& 6o< *+2(7) Nairo7i) .en;a
0-3ail of the corres"onding author> sifun,o./isa/a?g3ail.co3

Abstract
@he o7,ecti:e of this stud; is to in:estigate whether the Nairo7i Securities -<change NS-# e<hi7its the re:erse
wee/end ano3al;. @he re:erse wee/end ano3al; e<ists when 5onda; returns are significantl; "ositi:e and
larger than those on other da;s of the wee/. @he data used in this stud; consisted of dail; stoc/ returns of *2
sa3"led co3"anies listed continuousl; at the NS- fro3 1 Januar; 2++1 to *1
st
Aece37er 2++(. Since the
re:erse wee/end effect tends to 7e associated with stoc/s of large fir3s) the data set was s"lit into two su7-
sa3"les for large and s3all co3"anies. @hen wee/l; stoc/ returns were regressed on the dail; stoc/ returns for
the two su7-sa3"les and the full sa3"le. @he sign) 3agnitude and significance of 5onda; returns in relation to
those of other da;s of the wee/ were e<a3ined. @he results show that 5onda; returns are highl; significant 7ut
their coefficient is not "ositi:e. 4ence there is no re:erse wee/end ano3al; at the Nairo7i Securities -<change.
@his finding is attri7uted to the increasing efficienc; of the Nairo7i Securities -<change. @he findings of this
stud; are consistent with the findings of =euthold 1991# 7ut contradict those of 6rusa) =iu B Schul3an 2++(#.
Keywords: 8ee/end Ano3al;) Re:erse 8ee/end Ano3al;) -fficient 5ar/et 4;"othesis) Nairo7i Securities
-<change) .en;a

! "ntroduction
Securit; "rices and their 7eha:ior) o:er the ;ears) has 7een a concern to 3an; financial anal;sts as well as other
sta/eholders in the econo3;. @here has 7een intensi:e research) es"eciall; in the field of finance towards
deter3ining the 7eha:ior of stoc/ 3ar/ets Roll) 19771 .endall) 19(*1 5andel7rot) 196*1 Ro7erts) 19(9) 19671
6lac/) et al.) 19721 2ootner) 196%1 Fa3a) 196( # and share "rices in "articular Ai3son) 19$$1 @haler) 19921
Cie37a) 19$$) 199%a#. 5a,or re:iews of this literature are Fa3a 1991#) 6lu3e B Siegel 1992#) 4awawini B
.ei3 199%#) and Cie37a 199%7#. In:estors attach a lot of i3"ortance to stoc/ "rices hence /nowledge of
infor3ation a7out stoc/ "rices ena7le the3 3a/e infor3ed decisions on when to 7u;) dis"ose or hold shares all
for the "ur"ose of 3a/ing ca"ital gains.
@he e<tent to which infor3ation is relia7le de"ends on the efficienc; of the stoc/ 3ar/et. @he -fficient 5ar/et
4;"othesis -54# states that at an; gi:en ti3e) securit; "rices full; reflect all a:aila7le infor3ation) i3"l;ing
that indi:iduals who 7u; and sell securities do so with the assu3"tion that the securities the; are 7u;ing are
worth 3ore than the "rice the; are "a;ing ) while those the; are selling are worth less than the selling "rice. 6ut
if 3ar/ets are efficient and current "rices full; reflect all infor3ation) then 7u;ing and selling securities in an
atte3"t to out"erfor3 the 3ar/et will effecti:el; 7e a ga3e of chance rather than s/ill.
@he contri7utions of scholars such as Fa3a 197+# on -fficient 5ar/et 4;"othesis 197+#) also asserts that if a
3ar/et is efficient ) no infor3ation or anal;sis can 7e e<"ected to result in out "erfor3ance of an a""ro"riate
7ench3ar/. @he rando3 wal/ theor; howe:er asserts that "rice 3o:e3ents cannot follow an; "atterns or trends
and that "ast "rice 3o:e3ents cannot 7e used to "redict future "rice 3o:e3ents. @he de7ate a7out efficient
3ar/et h;"othesis has resulted in nu3erous e3"irical studies atte3"ting to deter3ine whether s"ecific 3ar/ets
are in fact efficient and if so) to what degree. Researchers ha:e howe:er docu3ented so3e technical ano3alies
that see3 to contradict the efficient 3ar/et h;"othesis French) 19$+) Dalai) and .edar-=e:;) 2++(#. @he
ano3alies which ha:e 7een cited tend to wor/ against the efficienc; of the stoc/ 3ar/et. Such ano3alies include
the Januar; effect) s3all fir3 and wee/end effects 6rusa) =iu B Schul3an) 2++(#. Findings fro3 research on
these ano3alies show that stoc/ 3ar/et 3a; not 7e efficient) es"eciall; in the wea/ for3.
@he wee/end effect is a situation where stoc/ returns on 5onda; are significantl; negati:e and are lower than
returns on other da;s of the wee/. @he wee/end effect and its re:erse are so3e of the ano3alies that ha:e 7een
unco:ered to 7e "osing a challenge to the efficient 3ar/et h;"othesis es"eciall; in the wea/ for3. So3e of the
researchers who ha:e studied the calendar ano3al; /nown as the 5onda; or wee/end effect are for e<a3"le
2ross 197*# and 3ore recentl; Schwert 199+#. Results of these studies show that stoc/ returns on 5onda; are
significantl; negati:e and are lower than returns on other da;s of the wee/.
Further3ore) studies of 6rusa) =iu and Schul3an 2++*) 2++(# suggest that the wee/end effect has re:ersed)
where7; 5onda; returns are significantl; "ositi:e and larger than those on other da;s of the wee/. In addition)
there is also e:idence that the wee/end effect and the re:erse wee/end effect de"ends on the siEe of fir3s as well
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as stoc/ ownershi" co3"osition in the 3ar/et 6rusa) =iu B Schul3an) 2++*#. @he focus of this stud; is on the
re:erse wee/end effect. @he ai3 is to esta7lish whether or not the re:erse wee/end effect is e<"erienced at the
NS-.
!# Statement of the $roblem
@he "redicta7ilit; of stoc/ returns is a feature of inefficient stoc/ 3ar/ets. Research has unco:ered stoc/ 3ar/et
ano3alies that see3 to contradict the efficient 3ar/et h;"othesis French) 19$+#. Such ano3alies include the
wee/end effect and re:erse wee/end effect 6rusa) =iu B Schul3an) 2++(#. Studies done in the se:enties)
eighties and earl; nineties 7; 2ross 197*#) French 19$+# and Schwert 199+#) A7raha3 B I/en7err; 199%#
confir3ed the e<istence of a wee/end effect. @his 3eans that 5onda; returns are significantl; lower than on
other da;s of the wee/.
4owe:er) .a3ara 1997# re"orts that the wee/end effect has di3inished significantl; in the 9.S. since the
introduction of the S B ! (++ futures contract in 19$2. Further3ore) studies of 6rusa) =iu and Schul3an 2+++#
suggest that the wee/end effect has re:ersed so that 5onda; returns arc significantl; "ositi:e and larger than
those on other da;s of the wee/. @hese studies also found that the wee/end effect and the re:erse wee/end effect
are as a result of such factors as fir3 siEe) share ownershi" co3"osition and the "re:ious Frida; returns.
Studies in:estigating stoc/ 3ar/et ano3alies in .en;a include Rasugu 2++(# entitled F@he -<istence of the
4olida; -ffect at the NS-G and 5o/ua 2++*# entitled F8ee/end -ffect on stoc/ returns at the Nairo7i
Securities -<changeG. RasuguHs stud; sought to esta7lish whether the Nairo7i Securities -<change e<hi7its the
wee/end effect. 4is sa3"le consisted of %% co3"anies that traded continuousl; in the NS- for ( ;ears fro3 1G
Januar; 199$ to *1st Aece37er 2++2. @he stud; in:ol:ed the use of secondar; data o7tained fro3 NS- dail;
stoc/ "rices 7ids# and di:idends collected fro3 1 Januar; 199$ to *1H Aece37er 2++2. 4e used regression
anal;sis 3odels and tests to deter3ine the significance of stoc/ returns on 7efore the holida;s) "ost holida;
"eriod and other da;s. A co3"arison of the 3ean returns of "re holida; and "ost holida; da;s showed no
significant differences 7etween the 3eans. 4is findings de"ict the a7sence of holida; effect on the NS-.
5o/ua 2++*# sa3"led %* co3"anies listed in the NS- continuousl; for ( ;ears fro3 1 A"ril 1996 to *1
st
5arch)
2++1. Secondar; data was o7tained for dail; transaction "rices e<tracted fro3 NS- records and 7id "rices were
used as an a""ro<i3ation of the transaction "rices. @he data were anal;Eed using linear regression and
co3"arison of 3eans done under inde"endent sa3"le Nest. 4is stud; concluded that 5onda; returns are not
significantl; lower than the other da;s nor are Frida; returns significantl; higher than the other da;s of the
trading wee/. 4is findings also de"ict the a7sence to the wee/end effect on the NS-. @he a7sence of the
wee/end ano3al; let to the e<a3ination of the "ossi7ilit; of the re:erse wee/end ano3al;.

#! %iterature Review
#! Efficient &arket 'y(othesis )E&'*
-fficient 3ar/et h;"othesis is an in:est3ent theor; which states that it is i3"ossi7le to F7eat the 3ar/etG
7ecause stoc/ 3ar/et efficienc; causes e<isting share "rices to alwa;s incor"orate and reflect all rele:ant
infor3ation Fa3a) Fisher) Jensen B Roll) 1969#. According to the -54) this 3eans that stoc/s alwa;s trade at
their fair :alue on stoc/ e<changes) and thus it is i3"ossi7le for in:estors to either "urchase under:alued stoc/s
or sell stoc/s for inflated "rices. @hus) the cru< of the -54 is that it should 7e i3"ossi7le to out"erfor3 the
o:erall 3ar/et through e<"ert stoc/ selection or 3ar/et ti3ing) and that the onl; wa; an in:estor can "ossi7l;
o7tain higher returns is 7; "urchasing ris/ier in:est3ents 4ar:e;) 1991#. @his theor; has 3et a lot of o""osition)
es"eciall; fro3 the technical anal;sts =a/onisho/ and 5ar7erl:) 199+#. @heir argu3ent against the efficient
3ar/et theor; is that 3an; in:estors 7ase their e<"ectations on "ast "rices) "ast earnings) trac/ records and other
indicators. 6ecause stoc/ "rices are largel; 7ased on in:estor e<"ectation 3an; 7elie:e it onl; 3a/es sense to
7elie:e that "ast "rices influence future "rices 4augen B 6a/er) 19961 4irshleifer) 2++1#.
@he nature of infor3ation does not ha:e to 7e li3ited to financial news and research alone indeed infor3ation
a7out "olitical) econo3ic and social e:ents) co37ined with how in:estors "ercei:e such infor3ation) whether
true or ru3ored) will 7e reflected in the stoc/ "rice 4irshleifer) 2++1#. According to -54) as "rices res"ond
onl; to infor3ation a:aila7le in the 3ar/et) and) 7ecause all 3ar/et "artici"ants are "ri:; to the sa3e
infor3ation) no one will ha:e the a7ilit; to out-"erfor3 the 3ar/et.
In efficient 3ar/ets) "rices are rando3) so no in:est3ent "attern can 7e discerned =euthold) 1+9$#. "lanned
a""roach to In:est3ent) therefore) cannot 7e successful. @his Frando3 wal/G of "rices) co33onl; s"o/en a7out
in the -54 school of thought) results in the failure of an; in:est3ent strateg; that ai3s to 7eat the 3ar/et
consistentl;. In fact) the -54 suggests that gi:en the transaction costs in:ol:ed in "ortfolio 3anage3ent) it
would 7e 3ore "rofita7le for an in:estor to "ut his or her 3one; into an inde< fund =ee) Shleifer B @haler)
199+#.
Fa3aHs 197+ re:iew re:isited in 1991# di:ides wor/ on 3ar/et efficienc; into three categories> 8ea/ for3)
Se3i-strong for3) and Strong for3 of 3ar/et efficienc;. @he strong for3 suggests that securities "rices reflect
all a:aila7le infor3ation) e:en "ri:ate infor3ation. Se;hun 19$6# "ro:ides sufficient e:idence that insiders
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"rofit fro3 trading on infor3ation not alread; incor"orated into "rices. 4ence the strong for3 does not hold in a
world with an une:en "la;ing field. @he se3i-strong for3 of -54 asserts that securit; "rices reflect all "u7licl;
a:aila7le infor3ation. @here are no under:alued or o:er:alued securities and thus) trading rules are inca"a7le of
"roducing su"erior returns. 8hen new infor3ation is released) it is full; incor"orated into the "rice rather
s"eedil;. @he a:aila7ilit; of intrada; data ena7led tests which offer e:idence of "u7lic infor3ation i3"acting
stoc/ "rices within 3inutes !atell B 8olfson) 19$%) Dosnell) .eown B !in/erton) 1996#. @he wea/ for3 of the
h;"othesis suggests that "ast "rices or returns reflect future "rices or returns. @he inconsistent "erfor3ance of
technical anal;sts suggests this for3 holds. 4owe:er) Fa3a 1991# e<"anded the conce"t of the wea/ for3 to
include "redicting future returns with the use of accounting or 3acroecono3ic :aria7les. 1-lowe:er) the
e:idence of "redicta7ilit; of returns "ro:ides an argu3ent against the wea/ for3 Shiller) 199$#.
@he -54 has "ro:ided the theoretical 7asis for 3uch of the financial 3ar/et research during the se:enties and
the eighties. In the "ast) 3ost of the e:idence see3s to ha:e 7een consistent with the -54 Se;hun) 196$#.
!rices were seen to follow a rando3 wal/ 3odel and the "redicta7le :ariations in eIuit; returns) if an;) were
found to 7e statisticall; insignificant. 8hile 3ost of the studies in the se:enties focused on "redicting "rices
fro3 "ast "rices 5al/iel)1977#) studies in the eighties also loo/ed at the "ossi7ilit; of forecasting 7ased on
:aria7les such as di:idend ;ield Fa3a B French) 19$$#) !J- ratios 2a3"7ell and Shiller )19$$# and ter3
structure :aria7les 4ar:e; ) 1991#. Studies in the nineties loo/ed at inadeIuacies of current asset "ricing 3odels
=a !orta) =a/onisho/) Shleifer B 'ishn;) 1997#.
@he 3aintained h;"othesis of -54 also sti3ulated a "lethora of studies that loo/ed) a3ong other things) at the
reaction of the stoc/ 3ar/et to the announce3ent of :arious e:ents such as earnings 6all B 6rown )l96$#) stoc/
s"lits Fa3a) Fisher) Jensen B Roll )1969#) ca"ital e<"enditure 5c2onnell B 5uscarella) 19$(#) di:estitures
.lein 19$6# and ta/eo:ers Jensen B Ru7ac/ ) 19$*#. @he usefulness or rele:ance of the infor3ation was
,udged 7ased on the 3ar/et acti:it; associated with a "articular e:ent. In general) the t;"ical results fro3 e:ent
studies showed that securit; "rices see3ed to ad,ust to new infor3ation within a da; of the e:ent announce3ent)
an inference that is consistent with the -54 !atell B 8olfson) 19$%#. -:en though there is considera7le
e:idence regarding the e<istence of efficient 3ar/etsShiller) 199() Dross3an B StiglitE) l9$+#) one has to 7ear
in 3ind that there are no uni:ersall; acce"ted definitions of crucial ter3s such as a7nor3al returns) econo3ic
:alue) and e:en the null h;"othesis of 3ar/et efficienc;. @o this list of ca:eats) one could add the li3itations of
econo3etric "rocedures on which the e3"irical tests are 7ased Reiganu3) 19$1#.
Fa3aHs second re:iew 1991# on -fficient 5ar/et 4;"othesis reiterates that an; in:estigation of 3ar/et
efficienc; has at least two "ro7le3s> ihe first is infor3ation and transaction costs and the other is the ,oint-
h;"othesis "ro7le3. 9nli/e the 197+ "a"er which he used the ter3s 8ea/-for3) Se3i-Strong for3 and Strong
for3) Fa3a 1991# focuses on three areas> tests for return "redicta7ilit;) e:ent studies and tests of "ri:ate
infor3ation.
8hen loo/ing at return "redicta7ilit;) Fa3a 1991# "oints out the change in focus in this area. For3erl; it was
,ust testing short-run return "redicta7ilit; fro3 "ast returns. Now it includes other :aria7les such as di:idend
;ields AJ!#) -arningsJ!rice -J!#) ter3 - structure :aria7les) as well as for longer horiEons. 4e 7orrows the
contri7utions of French B Roll 19$6# who re"ort that stoc/ "rices are 3ore :aria7le when the 3ar/et is o"en.
@his has 7een inter"reted 7; so3e as noise and an indication of 3ar/et inefficienc; 6asu) 1997#. 4owe:er) the
siEe of the autocorrelations is s3all for short-run autocorrelations.
For longer-ter3 horiEons) Shiller 19$%# and Su33ers 19$6# "resent a :iew that stoc/ "rices ta/e large slowl;
deca;ing swings awa; fro3 funda3ental :alues) 7ut short-horiEons ha:e s3all autocorrelations. @ests of this
3odel ha:e 7een largel; fruitless. @here has 7een so3e e:idence of negati:e autocorrelations in the *-( ;ear
horiEons 7ut as Fa3a B French 19$$# show these largel; disa""ear when the 1926-19%+ "eriod is dro""ed fro3
the data.
Still on return "redicta7ilit;) Fa3a 1991# "oints our that an; test of asset "ricing 3odels runs into the ,oint-
h;"othesis "ro7le3) where he e3"hasiEes the fact if at one can ne:er /now whether the 3ar/et is inefficient or
the 3odel is wrong and that the choice of 3odel 3ar influence the findings. 4is conclusion on "redicta7ilit; is
the a7sence of a "ricing 3odel. Not sur"risingl; 3ulti-factor 3odels wor/ 7etter not sur"rising 7ecause
researcher can loo/ until the; find so3ething#. 5oreo:er) it is "ossi7le that all of the 3odels are ca"turing the
sa3e ris/ factor 7ut we do not recogniEe it ;et.
&n tests for "ri:ate infor3ation) Fa3a 1991# suggests se:eral different wa;s of in:estigating this. Insider
trading> insiders do 7eat the 3ar/et Daffe) 197%1 Se;hun 19$6#. Insider trading is where insiders "rofit fro3
trading on infor3ation not alread; incor"orated into "rices. Securit; Anal;sts> 'alue =ine and other ano3alies
suggest that anal;sts do "ro:ide so3e infor3ation. @his is inconsistent with -fficient 5ar/ets if one assu3es the
a7sence of infor3ation costs) 7ut is "erfectl; consistent if infor3ation is costl; to o7tain Dross3an B StiglitE)
19$+#. !rofessional "ortfolio 3anage3ent> Results are largel; consistent with the idea that on a:erage "eo"le do
not 7eat the 3ar/et. @here are so3e conflicting theories Daffe) 197%#) 7ut other researchers for e<a3"le Fa3a
B French 199(# agree with this conclusion.
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&:erall it a""ears the 3ar/et is Iuite efficient 7ut not "erfectl; so. @here a""ears to 7e so3e "redicta7ilit; and
so3e 3ean re:ersion in long-run returns) 7ut not so 3uch in the short-run tests. @he earl; eu"horic research of
the se:enties was followed 7; a 3ore cautioned and critical a""roach to the -54 in the eighties and nineties.
Researchers re"eatedl; challenged the studies 7ased on -54 7; raising critical Iuestions such as> 2an the
3o:e3ent in "rices 7e full; attri7uted to the announce3ent of e:ents !atell B 8olfson) 19$%#K Ao "u7lic
announce3ents affect "rices at all 6ernard) 199*#K And what could 7e so3e of the other factors affecting "rice
3o:e3ents 2utler) !orte7a B Su33ers) 19$9#K For e<a3"le) Roll 19$$# argues that 3ost "rice 3o:e3ents for
indi:idual stoc/s cannot 7e traced to "u7lic announce3ents. In their anal;sis of the aggregate stoc/ 3ar/et)
2utler) !oter7a B Su33ers 19$9# reach si3ilar conclusions. @he; re"ort that there is little) if an;) correlation
7etween the greatest aggregate 3ar/et 3o:e3ent and "u7lic release of i3"ortant infor3ation. 5ore recentl;)
4augen B 6a/er 1996# in their anal;sis of deter3inants of returns in fi:e countries conclude that none of the
factors related to sensiti:ities to 3acroecono3ic :aria7les see3 to 7e i3"ortant deter3inants of e<"ected stoc/
returns.
#!# +he ,hallenge to Efficient &arket 'y(othesis
@he accu3ulating e:idence suggests that stoc/ "rices can 7e "redicted with a fair degree of relia7ilit; Fa3a)
197+#. @wo co3"eting e<"lanations ha:e 7een offered for such 7eha:ior. !ro"onents of -54 Fa3a and French)
199(# 3aintain that such "redicta7ilit; results fro3 ti3e-:ar;ing eIuili7riu3 e<"ected returns generated 7;
rational "ricing in an efficient 3ar/et that co3"ensates for the le:el of ris/ underta/en. 2ritics of -54 =a
!orta) =a/onisho/) Shleifer) B 'ishn;) 1997# argue that the "redicta7ilit; of stoc/ returns reflects the
"s;chological factors) social 3o:e3ents) noise trading) and fashions or LfadsG of irrational in:estors in a
s"eculati:e 3ar/et. @he Iuestion a7out whether "redicta7ilit; of returns re"resents rational :ariations in
e<"ected returns or arises due to irrational s"eculati:e de:iations fro3 theoretical :alues has "ro:ided the
i3"etus for fer:ent intellectual inIuiries in the recent ;ears.
@he hitherto do3inant "aradig3 in financial 3ar/et research) the -fficient 5ar/et 4;"othesis -54#) has 7een
"ut on trial recentl; and su7,ected to critical re-e<a3ination !orte7a B Sa3wic/) 199(#. @he "reli3inar;
e:idence indicates that the initial confidence in the -fficient 5ar/et 4;"othesis 3ight ha:e 7een 3is"laced
Reiganu3) 19$1#. It is o7ser:ed that financial eIuili7riu3 3odels 7ased on -54 fail to de"ict trading
o"erations in the real world 4augen B 6a/er) 1996#. 'arious ano3alies and inconsistent results call for
refine3ent of the e<isting "aradig3 4augen B 6a/er) 1996#.
In the real world of in:est3ent) howe:er) there are o7:ious argu3ents against the -54) @here are in:estors who
ha:e 7eaten the 3ar/et. 8arren 6uffet) whose in:est3ent strateg; focuses on under:alued stoc/s) 3ade 3illions
and set an e<a3"le for nu3erous followers Aechow) 4utton) 5eul7ere/ B Sloan) 2+++#. @here are "ortfolio
3anagers that ha:e 7etter trac/ records than others) and there are in:est3ent houses with 3ore renowned
research anal;sis than others Do3"ers B 5etric/) 2++1#. So how can "erfor3ance 7e rando3 when "eo"le are
clearl; "rofiting fro3 and 7eating the 3ar/etK
Studies in 7eha:ioral finance) which loo/ into the effects of in:estor "s;cholog; on stoc/ "rices) also re:eal that
there are so3e "redicta7le "atterns in the stoc/ 3ar/et 4irshleifer B Shu3wa:) 2++1#. In:estors tend to 7u;
under:alued stoc/s and sell o:er:alued stoc/s) and) in a 3ar/et of 3an; "artici"ants) the result can 7e an;thing
7ut efficient .lein) 19$6#.
!atel) Cec/hauser B 4endric/s 1991# argue that for 3ost econo3ists it is an article of faith that financial
3ar/ets reach rational aggregate outco3es) des"ite the irrational 7eha:ior of so3e "artici"ants) since
so"histicated "la;ers stand read; to ca"italiEe on the 3ista/es of the nai:e. Met financial 3ar/ets ha:e 7een
su7,ect to s"eculati:e fads that are hard to inter"ret as rational 4irshleifer) 2++1#. Shiller 199$# reiterates that
recent literature in e3"irical finance is sur:e;ed in its relation to underl;ing 7eha:ioral "rinci"les) "rinci"les
which co3e "ri3aril; fro3 "s;cholog;) sociolog; and anthro"olog;. @he 7eha:ioral "rinci"les discussed are>
"ros"ect theor;) regret and cogniti:e dissonance) anchoring) 3ental accounting) o:erconfidence) o:er and under
reaction) ga37ling 7eha:ior and s"eculation) attention ano3alies and glo7al culture.
6ar7er B &dean 1999# argue that the field of 3odern financial econo3ics assu3es that "eo"le 7eha:e with
e<tre3e rationalit;) 7ut the; do not. @he; "oint out that "eo"leHs de:iations fro3 rationalit; are often s;ste3atic.
6eha:ioral finance rela<es the traditional assu3"tions of financial econo3ics 7; incor"orating these o7ser:a7le)
s;ste3atic and :er; hu3an de"artures fro3 rationalit; into standard 3odels of financial 3ar/ets. @he; highlight
two co33on 3ista/es in:estors 3a/e> e<cessi:e trading and the tendenc; to dis"ro"ortionatel; hold on to losing
in:est3ents while selling winners. @he; further argue that s;ste3atic 7iases ha:e their origins in hu3an
"s;cholog;. @hat the tendenc; for hu3an 7eings to 7e o:erconfident causes the first 7ias in in:estors) and the
hu3an desire to a:oid regret "ro3"ts the second.
4irshleifer 2++1# also 3a/es his contri7ution that the 7asic "aradig3 of asset "ricing is in :i7rant flu<. @he
"urel; rational a""roach is 7eing su7su3ed 7; a 7roader a""roach 7ased u"on the "s;cholog; of in:estors. In
this a""roach) securit; e<"ected returns are deter3ined 7; 7oth ris/ and 3ise:aluation. 4irshleiferHs 7roader
o7ser:ation is that in:estor 7eha:ior in natural and e<"eri3ental 3ar/ets re"ort e:idence consistent with a
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dis"osition effect) a greater readiness to realiEe gains than losses. 2ertain grou"s of in:estors change their
7eha:iors in "arallel) in so3e cases engaging in 3o3entu3 trading that result in gain.
#!- Em(irical Studies on the Reverse Weekend Anomaly
@he re:erse wee/end effect ano3al; "ur"orts that 5onda; returns are significantl; "ositi:e and larger than
those on other da;s of the wee/. !re:ious studies in the financial literature ha:e docu3ented the e<istence of
significantl; negati:e 5onda; returns in stoc/ 3ar/ets Schwert) 199+1 .ei3) 19$7#. For instances) Schwert
199+i e<a3ines the 9.S.) toc/ inde<es fro3 1$+2 to 19$7 and re"orts the e<istence of a wee/end effect during
this "eriod. .ei3 19$7#) who studies the 9.S. inde<es during the 196*- 19$( "eriod) also re"orts the e<istence
of a wee/end effect. .a3ara 1997# re"orts that the effect) while still e<ists) has di3inished significantl; since
the introduction of the SB! (++ futures contract in 19$2.
&ther studies on the wee/end effect include those 7; 2ross 197*#) French 19$+#) and 3ore recentl;) Schwert
199+#) =a/onisho/ B 5a7eri: 199+#) A7raha3 B I/en7err; 199%#) and 8ang) =i) B -ric/son 1997#. @he
results in these studies conclude that stoc/ returns on 5onda; are significantl; negati:e and the; are lower than
returns on other da;s of the wee/. 4owe:er) 2onnoll; 19$9# "oints out that the wee/end effect is not sta7le
o:er ti3e. It a""ears in so3e "eriods) disa""ears in certain "eriods) and rea""ears in others. In addition) .a3ara
1997# re"orts that the effect has di3inished significantl; since the introduction of the SB! (++ futures contract
in 19$2.
Recent e:idence fro3 the stoc/ 3ar/ets of the 9nited States indicates that the traditional wee/end effect has
re:ersed with 5onda; returns 7eing significantl; "ositi:e) 6rusa) =iu B Schul3an) 2++(# .@his stud; e<a3ined
the dail; returns fro3 9.S S B ! (++ inde< and the 2anadian S B ! J@SN 2o3"osition inde< o:er the "eriod
19$$-2++*.2onsistent with findings of other e3"irical studies) the researchers find that there is indeed a re:ersal
of the wee/end effect in the 9.S 3ar/et. 8hile there is a wea/ e:idence 7ased on non-"ara3etric tests of this
effect in the 2anadian 3ar/et) this is not su""orted 7; t-tests and the regression used 7; French 19$+#.
Studies 7; 6rusa) =iu) B Schul3an 2+++) 2++(# suggest that the wee/end effect has re:ersed recentl; in the
earl; nineties. @heir stud; was done o:er an e<tended "eriod of ele:en ;ears 19$$ to 199$# with the ai3 of
in:estigating 5onda; returns for four 3a,or stoc/ 3ar/et inde<es> the Aow Jones Industrial A:erage AJIA#) the
Standard and !oorHs (++ inde<es SB! (++#) the 2RS! :alue-weighted inde<) and the NASAAO stoc/ inde<.
@he; find that while 5onda; returns tend to 7e negati:e during the "re-19$$ "eriod) this wee/end effect is
re:ersed during the "ost-19$$ "eriod. @he degree of the re:erse wee/end effect is related to fir3 siEe. 8hile
s3all fir3s still show di3inishing wee/end effect) large fir3s ha:e strong re:erse wee/end effect. @heir results
indicate that the re:erse wee/end effect is not onl; a te3"orar; "heno3enon. Instead) it is a sustained ano3al;
that e<ists o:er an e<tended "eriod in the recent 3ar/et. @he; also e<a3ined whether the a""earance of the
re:erse wee/end effect can 7e attri7uted to the change in the stoc/ ownershi" co3"osition in the 3ar/et.
!re:ious studies of the wee/end effect conclude that the trading acti:ities of indi:idual in:estors contri7ute to
the e<istence of the FtraditionalG wee/end effect =a/onisho/ B 5a7erl:) 199+1 A7raha3 B I/en7err;) 199%#.
Further3ore) the stud; of A7raha3 and I/en7err: 199%# also re"orts that the trading 7eha:ior of indi:idual
in:estors is one of the factors contri7uting to the "ositi:e autocorrelation 7etween Frida; returns and the
following 5onda; returns P i.e. "ositi:e negati:e# returns on Frida; tend to 7e followed 7; "ositi:e negati:e#
returns on the following 5onda; and this "ositi:e Frida;-5onda; autocorrelation is stronger for s3all and
3ediu3 siEe co3"anies than large co3"anies.
@he co3"osition of the stoc/ ownershi" in the 9.S.) howe:er) has steadil; shifted fro3 indi:iduals to institutions
in the "ast few decades as noted 7; !oter7a and Sa3wic/ 199(#) and Do3"ers and 5etric/ 2++1#. For instance)
the stoc/ ownershi" 7; indi:iduals has declined significantl; fro3 nearl; 9+ "ercent in the 19(+s to less than (+
"ercent in the 3id 199+s) while the stoc/ ownershi" 7; institutions "ension funds) 3utual funds) and insurance
co3"anies# has increased considera7l; fro3 less than $ "ercent to 3ore than %+ "ercent during the sa3e "eriod
!oter7a B Sa3wic/) 199( ".*l*#. 5oreo:er) 7; Aece37er 1996 large institutional in:estors P institutions
ha:ing at least Q 1++ 3illions under 3anage3ent held control o:er 3ore than half of the 9.S. eIuit; 3ar/et
Do3"ers B 5etric/ 2++1#.
Since institutional in:estors 7eha:e differentl; fro3 indi:idual in:estors in 3an; as"ects) the docu3entation of
the shift in stoc/ ownershi" co3"osition fro3 indi:iduals to institutions raises an interesting Iuestion> 2ould the
shift in stoc/ ownershi"-co3"osition e<"lain) at least in "art) the e<istence of the re:erse wee/end effectK For
instance) if the trading acti:it; of indi:idual in:estors is one of the contri7uting factors to the e<istence of the
traditional wee/end effect as docu3ented 7; =a/onisho/ B 5a7erl; 199+# and A7raha3 B I/en7err:) 199%#)
could the trading acti:it; of institutional in:estors 7e related to the re:erse wee/end effectK
@he con,ecture of the association 7etween the shift in stoc/ ownershi"-co3"osition and the re:ersal of the
wee/end effect 7eco3es 3ore "lausi7le if we ta/e into account the findings in the literature that the Fre:ersedG
wee/end effect is docu3ented 3ostl; in stoc/s of larger and 3ore liIuid fir3s 6rusa) =iu B Schulrnan) 2++(#)
which are also 3ore fa:ored 7; institutional in:estors Do3"ers B 5etric/) 2++1#) 7ecause these stoc/s cost
less in trading for institutional in:estors .atnara) 1997#) and in:esting in these stoc/s is considered 3ore
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F"rudentG than in:esting in stoc/s of s3all fir3s Ael Duercio 1996##. Further3ore) the studies in the literature
also re"ort that the trading 7eha:ior of indi:idual in:estors is one of the factors contri7uting to the "ositi:e
autocorrelation 7etween Frida; returns and the returns on the following 5onda; A7raha3 B I/en7err:) 199%#.
If the stoc/ ownershi" co3"osition has shifted fro3 indi:iduals toward institutions) and institutions tend to
in:est in stoc/s of larger fir3s) then we 3a; e<"ect the Frida;-5onda; return autocorrelation for larger fir3s to
7e changed.
6rusa) et al.) 2++(# h;"othesiEe that the trading of institutional in:estors in stoc/s of large fir3s contri7utes to
the e<istence of the re:erse wee/end effect. @he; test this h;"othesis and the results in show that the trading
acti:ities of institutional in:estors are "ositi:el; related to the "ositi:e 5onda; returns docu3ented in the "ost-I
9$$ "eriod while the trading acti:ities of indi:idual in:estors are negati:el; related to 5onda; returns.
Finall;) the; e<a3ine the association 7etween 5onda; returns and the "re:ious Frida; returns for stoc/s of large
and s3all fir3s. @he; find significant differences in the Frida;- 5onda; return autocorrelation 7etween stoc/s
of large and s3all fir3s. Auring the "eriod in which the re:erse wee/end effect is detected 19$$-199$#) s3all
stoc/s e<hi7it a "ositi:e autocorrelation 7etween Frida; and 5onda; returns P i.e. "ositi:e Frida; returns tend
to 7e followed 7; "ositi:e 5onda; returns) and negati:e Frida; returns tend to 7e followed 7; negati:e 5onda;
returns. 4owe:er) the "ositi:e correlation 7etween Frida; and 5onda; returns does not e<ist for stoc/s of larger
fir3s during the "ost-l9$$ "eriod. 8hile "ositi:e Frida; returns still tend to 7e followed 7; "ositi:e returns on
the following 5onda;) negati:e Frida; returns are not followed 7; negati:e 5onda; returns.
6rusaHs stud; entailed secondar; data o7tained fro3 New Mor/ Stoc/ -<change where he used dail; indices. 4e
used the following regression 3odel>
t t t
E MON R + + =
1 +
1#
8here> R
t
is the return on da; t)
o
is the interce"t)
1
is the coefficient en a du33; :aria7le 5&N
t
) that
eIuals one on 5onda; and Eero otherwise) and -
t
) is the error ter3) 4e used t-statistics to test the null h;"othesis
that +
1
= that is) the difference 7etween a:erage 5onda; returns and a:erage returns throughout the wee/ is
Eero#.
In .en;a) 5o/ua 2++*# e<a3ined the e<istence of the 8ee/end -ffect on the NS-. 4e used a sa3"le of %*
co3"anies listed continuousl; in the NS- for ( ;ears fro3 1 A"ril 1996 to *1st 5arch 2++1. Secondar; data was
o7tained fro3 the NSF) dail; transaction "rices were e<tracted fro3 NS- records and 7id "rices were used as an
a""ro<i3ation of the transaction "rices. @he data collected were anal;Eed using linear regression and
co3"arison of 3eans done under inde"endent sa3"le 7-test. F-statistic test was done to deter3ine the eIualit; of
3eans across all the ( da;s fro3 5onda; through Frida;. 4is stud; concluded that 5onda; returns arc not
significantl; lower than the other da;s nor are Frida; returns significantl; higher than the other da;s of the
trading wee/. 4is findings also de"ict the a7sence of the wee/end effect on the NS-. @his stud; ai3ed at
inIuiring into the e<istence of the re:erse wee/end effect at the NS-.

.! Research &ethodology
@his section "resents the research design) the "o"ulation and sa3"le of the stud;) the data and the data anal;sis
3ethods.
.! Research /esign
@his stud; was 7ased on a causal research design. @his research design ai3s at e<a3ining the cause and effect
7etween two :aria7les of interest to the researcher. 2ausal research design also ena7les the researcher to e<a3ine
the "redicti:e a7ilit; of one :aria7le :is-a-:is another. In this stud; the o7,ecti:e was to anal;Ee the causal
relationshi" 7etween interest rates and e<change rates in .en;a. @he focus was on the "redicti:e a7ilit; of
interest rates against e<change rates. @herefore) the causal research design was the 3ost a""ro"riate for carr;ing
out this "articular stud;.
.!# $o(ulation of the Study
@he "o"ulation of the stud; consisted of all the co3"anies Iuoted at the Nairo7i Securities -<change as at *1
st

Aece37er 2++(.&nl; those co3"anies that trade in eIuit; stoc/s were included since the stud; sought to
in:estigate eIuit; stoc/ 3ar/et 7eha:ior. @he "o"ulation of listed fir3s whose shares were traded at the NS- as
at *1st Aece37er 2++( stood at (%.
.!. Sam(ling 0rame
@he sa3"le included co3"anies listed continuousl; for ( ;ears fro3 1 Januar; 2++1 to *lH Aece37er 2++( and
for which data on stoc/ returns was a:aila7le. @hirt; two *2# co3"anies satisfied the sa3"ling criteria. @he
sa3"le was further su7di:ided into two1 large and s3all co3"anies. A su7,ecti:e ,udg3ent was done where a
co3"an; was considered large if its 3ar/et ca"italiEation was a7o:e .sh ( 7illion) otherwise it was considered
s3all.

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.!- /ata and Study $eriod
8e used secondar; data o7tained fro3 the Nairo7i Securities -<change and dail; transaction "rices e<tracted
fro3 the NS- records. .iweu 1991# in his "ilot stud; shows that the NS- hid "rices are close to the transaction
"rices. In this stud; too) we used 7id "rices as an a""ro<i3ation of transaction "rices. A duration of fi:e ;ears
fro3 1 Januar; 2++1 to *1 Aece37er 2++( is used due the fact that re:erse wee/end effect is a recent
"heno3enon.
.!1 /ata Analysis
@he dail; 7id "rices were then transfor3ed into dail; stoc/ returns using the for3ula 7elow
( )
j
j o
j
P
P P
=
8here>
j
is the dail; stoc/ return of stoc/ j. 8here !
+
is the dail; closing "rice and !
,
is the dail; o"ening
"rice.
@o test for the significance and 3agnitude of the dail; returns) inde"endent sa3"les tests were used in the
e:aluation of the null h;"othesis) in which all 5onda; returns were co3"ared with the rest of the da;s that is
@uesda;) 8ednesda;) @hursda; and Frida;#. Regression anal;sis 3ethod was used where wee/l; returns were
regressed against dail; returns. @he t-statistics and coefficients of the :aria7les were co3"ared.
@he 3ethodolog; de:elo"ed 7; 2onnoll; 19$9# and later used in the literature for e<a3"le 7; 2hang) !inegar
and Ra:ichandran) 199*# was a""lied to dail; returns. @he 3ethodolog; was 7ased on the following regression
3odel>
t t t t t t t
E R + + + + + =
( ( % % * * 2 2 1 1
2#
8here R
t
) is the wee/l; return1
i
i R 1) 2) *) % B (# is the coefficient for each da; of the wee/ and E
t
is the
error ter3. Return for each da; of the wee/. @he h;"othesis is> + >
1 +
> H ) a "ositi:e coefficient.
+ >
1 +
< H ) a negati:e coefficient. @he regression 3odel used is a slight 3odification fro3 6rusaHs 7ecause
he used share indices while in our case we used share "rices.
@he significance of
1
and the sign of the coefficient were e<a3ined to deter3ine whether
1
is larger than the
rest of the coefficients. If
1
is "ositi:e with a high t-statistic the result suggests that 5onda; 3ean returns are
not onl; significantl; "ositi:e 7ut also significantl; greater than other da;s of the wee/. @he null h;"othesis is
therefore re,ected and the results su""ort the h;"othesis for the e<istence of a re:erse wee/end ano3al; at the
NS-.
.!-! Autocorrelation +est
AutoPcorrelation test is a relia7le 3easure for testing of either de"endence or inde"endence of rando3
:aria7les in a series. @he serial correlation coefficient 3easures the relationshi" 7etween the :alues of a rando3
:aria7le at ti3e t and its :alue in the "re:ious "eriod) t-i. Autocorrelation test "ro:ides e:idence whether the
correlation coefficients # for lagged :aria7les are significantl; different fro3 Eero. @he test is 7ased on the
following regression of eIuation *#>
n t n t t t t
R R R R R

+ + + + = ...
* 2 1 1 1
*#
8here = 2oefficient of the error ter31 R
t
R Residual fro3 the regression1 =
1
2oefficient of the lagged
residuals1
t
R R R
t
S R
t-1.
8e used the t-statistics to test the significance of the coefficients. &ur null h;"othesis
was> @here is no autocorrelation ( ) + >
* 2 1 +
= = = H .
.!-!# +est for 'eteroscedasticity
@he heteroscedasticit; test was 7ased on the AR24 3odel 7elow>
2 2
2 2
2
1 1
2
...
n t n t t t
+ + + = %#
8here =
2
:ariance of the error ter3 and
2
R sIuared lagged residuals. @he null h;"othesis was> @here is
no heteroscedasticit; . A t-test was a""lied to deter3ine the significance of the
coefficients.

-! Results /ata Analysis
-! Regression Analysis Results for Weekly Returns 2s /aily Returns
@a7le 1 is a su33ar; of regression anal;sis in which wee/l; returns of all co3"anies were regressed against
dail; returns for 5onda;) @uesda;) 8ednesda;) @hursda; and Frida;.
( ) + >
* 2 1 +
= = = H
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+able Regression Analysis Results for All Sam(le ,om(anies
2oefficients Standards
-rror
Statistics !-:alue
Interce"t -+.+$6$ +.+1+1 -7.$92* +.+++1
5onda; -+.6*1% +.*+++ -2.1+66 +.+*(2
@uesda; -1.+*79 +.*17( -*.269+ +.++12
8ednesda; -+.(*+* +.267* -1.9$%+ +.+%7*
@hursda; -+.%%+2 +.2*6+ -1.$6(+ +.+622
Frida; -.+799 +.22+$ +.*619 +.717(
Source> Authors co3"utation
@otal o7ser:ations were $)*2+. @he null h;"othesis was tested at 9(T le:el of significance. @he critical :alue at
9(T le:el of significance is 1.96. As shown a7o:e) results indicate that 5onda; returns ha:e a t-statistic of -
2.1+66 with a corres"onding coefficient of -+.6*1%. @herefore 5onda; returns are significant since the t-statistic
is higher than the critical :alue. @he coefficient howe:er is negati:e. @hese results contradict the theor; of
re:erse wee/end effect.
As stated in section *) the data was anal;Eed according to co3"an; siEes. According to 6rusa =iu and Schul3an
2++(#) stoc/s of large fir3s are associated with the re:erse wee/end effect. =arge fir3s in our case are those
that ha:e a 3ar/et ca"italiEation of .sh ( 7illion and a7o:e) the rest are considered s3all. According to the
criteria used) large co3"anies in the sa3"le are fifteen 1(# and the s3all ones are se:enteen 17. @hese
co3"anies ha:e 7een listed in a""endi< 2.
+able # Regression Analysis Results for %arge ,om(anies
Standards t-
2oefficients -rror Statistics !-:alue
Interce"t -+.+((2 +.+16+ -*.%(*( +.+++6
5onda; -1.*(+6 +.%$(1 -2.7$%% +.++(%
@uesda; -1.7(*% +.%%6% -*.92$2 +.+++1
8ednesda; -+.11$6 +.%691 -+.2(2$ +.$++(
@hursda; -+.297+ +.%176 -+.711+ +.%771
Frida; +.271+ +.2629 1.+*11 +.*+26
Source> Authors co3"utation
@a7le 2 shows the results of the regression anal;sis done for the fifteen co3"anies) where wee/l; returns were
regressed against dail; returns. @otal o7ser:ations were *)9++. 8ith a critical :alue of 1.96) 5onda; returns are
statisticall; significant -2.7$%%#. @he coefficient for 5onda; returns is howe:er negati:e -1.*(+6#. In fact it is
second the lowest after @uesda; - 1.7(*%#. Again the results do not de"ict the e<istence of re:erse wee/end
effect) a contradiction to 6rusa) =iu and Schul3anHs 2++(# clai3 that re:erse wee/end effect is associated with
stoc/s of large co3"anies.
@a7le *> Regression Anal;sis Results for S3all 2o3"anies
Standards t-
2oefficients -rror Statistics "-:alue
Interce"t -+.111+ +.+1%9 -7.%(29 +.+9*+
5onda; -+.2+%( +.*7$6 -+.(%+* +.($91
@uesda; -+.*79( +.%$92 -+.77($ +.%*79
8ednesda; -+.6911 +.*2*% -2.1*71 +.+*26
@hursda; -+.%7(6 +.2$%$ -1.67+1 +.+9(+
Frida; -+.*79* +.%+9+ -+.9276 +.*(*6
Source> Authors co3"utation
@he sa3e regression anal;sis "rocedure was done for the s3all co3"anies and the results are as shown in ta7le *.
@otal o7ser:ations were %)%2+. 5onda; returns are not significant since the t-statistic -+.(%+*# is lower than the
critical :alue 1.96# and the coefficient is also not "ositi:e. -:en after segregating co3"anies into large and
s3all) 5onda; returns though significant in the large sa3"le# do not ha:e a "ositi:e coefficient. @he results
fro3 the anal;sis do not de"ict the e<istence of re:erse wee/end effect.
Results fro3 the autocorrelation indicate that wee/l; returns lagged 1 and 2 ti3es ha:e coefficients of 1 e<ce"t
for lag * with a coefficient of +. @he t-statistics are large and e<ceed the critical :alue hence the null h;"othesis
that there is no autocorrelation is re,ected. @he "-:alues are also highl; significant. @he results fro3 the
heteroscedasticit; test show that a
2
R c
+
) hence the null h;"othesis of no heteroscedasticit; is re,ected. @herefore
heteroscedasticit; is "resent in wee/l; returns.
-!. /iscussion
@he findings of this stud; showed that 5onda; returns are not higher than for the other da;s of the wee/.
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@he results fro3 this stud; ha:e i3"lications to 7oth institutional and indi:idual in:estors. S"eculati:e in:estors
will 7u; shares for short ter3 gain) holding the3 for a short "eriod then dis"ose at a gain. Institutional in:estors)
on the other hand are 3ainl; after di:idends and ca"ital gains o:er a long "eriod of ti3e. 8here in:estors ha:e
long ter3 3oti:es) the; are li/el; to wait until share "rices sta7iliEe. @his stud;) therefore) 3ade a contri7ution
towards resol:ing the e3"irical issue as to whether 5onda; would 7e the 7est da; to dis"ose stoc/s. In:estors
should in fact 7e warned that 5onda; is the worst da; after @uesda;# to dis"ose stoc/s. @he; should not rel; on
3ere s"eculation that 5onda; returns are higher than for the other da;s. Further3ore) in:esting in the stoc/s of
large fir3s does not guarantee higher returns. 8hile 3a/ing in:est3ent decisions) other factors other than fir3
siEe# could 7e considered) for instance a fir3Hs "erfor3ance in ter3s of "rofita7ilit; and its "erfor3ance in the
stoc/ 3ar/et.
For the go:ern3ent) it is e:ident fro3 the results of this stud; that stoc/ 3ar/et ano3alies at the Nairo7i
Securities -<change 3a; not 7e e<istent. For instance) we do not find the e<istence of re:erse wee/end effect.
@his i3"lies that go:ern3entHs regulations are i3"ro:ing the efficienc; of the Nairo7i Securities -<change. @he
go:ern3ent should therefore "ut in "lace 3ore regulations so that the stoc/ 3ar/et 7eco3es a fair "la;ing
ground with 3ini3al cases of e<"loitation. @he go:ern3ent is in a 7etter "osition to 3onitor the "erfor3ance of
the stoc/ 3ar/et and hence ensure the econo3ic sta7ilit; of the countr;.
In:estors 3ostl; rel; on financial anal;sts to "ro:ide sound infor3ation that would ena7le the3 3a/e infor3ed
in:est3ent decisions. Fro3 this stud;) it would 7e 3isleading for financial anal;sts to ad:ice in:estors that
dis"osing stoc/s on 5onda; guarantees higher returns. Financial anal;sts should de:ice other wa;s in which
in:estors can 3a/e higher returns. @he; can for e<a3"le hel" in:estors assess the "resent :alue of future
di:idends1 "ro:ide /nowledge of future inco3e flows and ad:ice the3 to hold their in:est3ents until the stoc/
"rices are sta7le.
Fund 3anagers identif; o""ortunities in which to in:est in :ia7le "ro,ects. @he a7sence of re:erse wee/end
effect as indicated in this stud; i3"lies that the stoc/ 3ar/et is fairl; efficient. If the re:erse wee/end effect
e<isted) fund 3anagers could 7enefit fro3 ar7itraging 7; selling stoc/s on 5onda; and selling the3 on other
da;s when "rices are low. In this case therefore) there are 3ini3al cases of "rice differentiation and no
3a<i3iEation of "ortfolio es"eciall; on 5onda;s since returns are significantl; negati:e.
In general the findings fro3 this stud; i3"l; that 5onda; does not guarantee higher returns. @hus there no
o""ortunities for in:estors to de:elo" trading strategies to earn e<cess stoc/ returns1 earning higher than a:erage
"rofits will onl; 7e 7; chance. @herefore) the results of this stud; su""ort the findings of 5uragu 1997# that the
Nairo7i Securities -<change is efficient.

1! ,onclusion
&n the 7asis of the regression anal;sis done on the wee/l; returns against dail; returns) this stud; could not find
e:idence of the re:erse wee/end effect. @hus on the 7asis of the tests carried out) this stud; concluded that there
is no re:erse wee/end ano3al; at the Nairo7i Securities -<change. @hese results contradict those of 6rusa) =iu
and Schul3an 2++(# and are consistent with the stud; 7; 5o/ua 2++*# on the lac/ of e:idence on wee/end
effect on stoc/ "rices at the NS-.

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