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Distribution of Nairobi Stock Exchange 20 Share Index Returns: 1998-2011
Cox Lwaka Tamba , Dickson Siele Cheruiyot, Martin Wafula Nandelenga
Pages - 1 - 14     |    Revised - 20-01-2014     |    Published - 11-02-2014
Volume - 5   Issue - 1    |    Publication Date - January / February 2014  Table of Contents
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KEYWORDS
Returns, Leptokurtosis, Tail, 20 Share Index, t-location Scale.
ABSTRACT
The assumption that returns of daily share index prices are normally distributed has long been disputed by the data. In this paper, the normality assumption has been tested using time series data of daily Nairobi Stock Exchange 20-Share Index (NSE 20-Share Index) for the period 1998- 2011. It has been confirmed that the share price index returns does not follow the normal distribution. Other symmetrical distributions have been fit to the data i.e. logistic distribution and t- location scale distribution. With the aid of a programming language; Matlab we have computed the various Maximum Likelihood (ML) estimates from this distributions and tested how well they fit to the data. It has been established that the NSE 20 Share Index returns follows a t-location scale distribution (normal inverse gamma mixture). We recommend that since we have found that the normal inverse gamma mixture best fits the NSE 20 Share Index return, other normal mixtures can be investigated how well they fit this data.
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Mr. Cox Lwaka Tamba
Egerton University - Kenya
clwaka@yahoo.com
Mr. Dickson Siele Cheruiyot
Egerton University - Kenya
Mr. Martin Wafula Nandelenga
Egerton University - Kenya