Political Risk, Macroeconomic Factors and Stock Market Returns

This study provides a critical review of the effects of political risk and macroeconomic factors on stock market performance in Kenya. The study was undertaken due to the country's increasingly volatile political environment following the 2007/2008 political violence that rocked the country as a result of the fiercely contested presidential elections in addition to the erratic movement in key macroeconomic variables in the Kenyan economy. Unlike previous studies that analysed the impact of political risk on stock returns in isolation, this study seeks to incorporate key macroeconomic variables such as interest rates, money supply, exchange rates, crude oil prices and inflation rate for a holistic analysis. The main objective of the study is to determine the effects of political risk and macroeconomic factors on stock market returns at Nairobi Securities exchange, in addition the effects of each independent variable on the stock market returns at Nairobi securities exchange is determined, The study will not only be of importance to the investors seeking to invest at NSE by helping them understand how political risk and key macroeconomic variables affect the market performance.