THE EFFECTS OF PROFIT WARNINGS ANNOUNCEMENT ON SHARE PRICE: THE CASE OF COMPANIES LISTED ON THE NAIROBI SECURITIES EXCHANGE

BY: DANIEL MWANGI KAMAU FRANCIS MUCHANGI GITARI MICHAEL EUNICE MBULA SAMUEL MUBEA GATHOGA WINNY NYAMARI MOGOTU D33/34208/2010 D33/39086/2010 D33/30284/2011 D33/33442/2011 D33/30115/2011

A Management Research Project Submitted in Partial Fulfillment of the Requirements for The Award of the Degree of Bachelor of commerce at the University of Nairobi, School of Business

September, 2013.

DECLARATION This management research project is our original work and has not been submitted for the award of a degree at any other university. DANIEL KAMAU .....D33/34208/2010 SIGNATURE

FRANCIS GITARI......D33/39086/2010

SIGNATURE

MICHAEL MBULA D33/30284/2011

SIGNATURE

SAMUEL GATHOGAD33/33442/2011

SIGNATURE

WINNY MOGOTU..D33/30115/2011

SIGNATURE

This Management Research Project has been submitted for the examination with my approval as the University supervisor

Signed ................................... MR. Duncan Elly Lecturer Department of Finance and Accounting University of Nairobi

Date ........................................

ACKNOWLEDGMENTS The path towards completion of this Management Research Project has been long and with many challenges. There are many people who in one way or another greatly assisted in the process. I wish to convey our heartfelt gratitude to all of them. Special thanks to our supervisor Mr. Duncan Elly whose guidance facilitated the realisation of this work. Their invaluable critique and input in terms of materials and discussions opened our minds to the quality of academic writing. To Justus Agoti of Capital Markets Authority and Joseph Mwenda an analyst at Nairobi Securities Exchange who took their valuable time to provide the necessary information for the study, we would want to thank them very sincerely for freely sharing knowledge and ideas on the subject under study. Their input was critical in establishing the findings is this study in which conclusions are made and therefore bringing it to an end.

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DEDICATION To Samuel Mubeas father David Gathoga, mother, Janet Wambui, for their unwavering support, financially and encouragement through the academic progression. Through their support, I was able to accomplish the research project. To Francis Muchangis brother, Mr.John Mugo Gitari who supported me financially and emotionally. To Winny Mogotus parents Mr. Nelson Nyamari and Mrs. Rebecca Nyamari for their understanding, financial and moral support through the process of writing this paper. To Eunice Michaels father, Mr. Michael Maluki for their unconditional love, moral and financial support during this time. To Daniel Mwangis parents, Mr and Mrs. Kamau and uncle, James.K.Warui, who were a great source of love, encouragement and wisdom. They have given me the drive and discipline to tackle any task with enthusiasm and determination. Without their love and support this project would not have been made possible.

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ABSTRACT Some of the companies listed on the Nairobi Securities Exchange issue profit warning announcement once their lifetimes while others announce on a regular basis. So far, there is no study or theory that has been put across on how the share prices are supposed to react to profit warning announcement. This study has the main objective of examining the effect of such profit warning announcements on the value of shares of those companies using an exploratory approach. The population of the study consists of fifteen companies listed on the Nairobi Securities Exchange with at least one from each segment/industry. It covers a period of ten years (2003-2013). The data required was obtained from Nairobi Securities Exchange and Microsoft Excel was used to analyze it. A comparison-period-approach was used in analyzing price movements. Average share prices, returns and cumulative returns are then calculated for a time window of 41 days - 20 days before and 20 days after announcement and charts are developed to show the trend for each of the fifteen companies for the year period. The analysis of the study shows the share prices and stock returns have got no specific trend or movement before the profit warnings as well as after the warnings. The different companies in the various industries react differently to the profit warning announcement. These results indicate that indeed share prices do not have a specific or common reaction to profit warning. They have both a positive and negative reaction to the announcements. Various other studies can be conducted that would be useful to investors as well as management of companies, for example, the impact of merger/acquisitions, stock splits, stock repurchase, bonus issue and their impact on stock prices. Changes in dividend such as increases, decreases and omissions as well as dividend announcement can also be studied. We can also examine the effect of profit warning announcement on the share prices of the announcing firms and the nonannouncers.

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CAPM CDSC CMA EABL EMH H1 HO KQ NASI NSE NYSE PAD TOTAL

ABBREVIATIONS Capital Asset Pricing Method Central Depository and Settlement Corporation Capital Markets Authority East African Breweries Limited Efficient Market Hypothesis Alternative Hypothesis Null Hypothesis Kenya airways NSE-All share Index Nairobi Securities Exchange New York Stock Exchange Post-Announcement Drift Total Kenya Company Limited

TABLE OF CONTENTS DECLARATION ............................................................................................................................. i ACKNOWLEDGMENTS .............................................................................................................. ii DEDICATION ............................................................................................................................... iii ABSTRACT ................................................................................................................................... iv ABBREVIATIONS ........................................................................................................................ v CHAPTER ONE: INTRODUCTION ............................................................................................. 1 1.1Background of the study ........................................................................................................ 1 1.1.1Profit Warnings Announcement ...................................................................................... 4 1.1.2 Classification Of Profit Warnings. ................................................................................. 5 1.1.3 An Overview of Nairobi Securities Exchange ............................................................... 5 1.2 Statement of the Problem ...................................................................................................... 7 1.3 Objectives of the Study ......................................................................................................... 7 1.4 Research Questions ............................................................................................................... 8 1.5 Significance of the study ....................................................................................................... 8 CHAPTER TWO: LITERATURE REVIEW ............................................................................... 10 2.1 Introduction ......................................................................................................................... 10 2.2 Profit warnings .................................................................................................................... 10 2.2 Theoretical Framework of the study ................................................................................... 11 2.2.1 Efficient market hypothesis .......................................................................................... 11 2.2.2 Random walk theory ..................................................................................................... 14 2.2.3 Post-announcement drift ............................................................................................... 15 2.3 Empirical studies ................................................................................................................. 17 2.3.1 Profit warnings ............................................................................................................. 17
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2.3.2 Insider trades around profit warnings ........................................................................... 20 2.4 Conclusions ......................................................................................................................... 21 CHAPTER THREE: RESEARCH METHODOLOGY ............................................................... 23 3.1 Introduction ......................................................................................................................... 23 3.2 Research Design .................................................................................................................. 23 3.3 Population............................................................................................................................ 23 3.4 Sample size.......................................................................................................................... 24 3.5 Data collection..................................................................................................................... 24 3.6 Data analysis ....................................................................................................................... 25 3.6.1 Event date specification . .25 3.6.2 Measuring daily returns ...26 3.6.3 Measuring the cumulative returns ...26 CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND INTERPRETATION ..................... 27 4.1 Introduction ......................................................................................................................... 27 4.2 Findings ............................................................................................................................... 27 CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS..................... 42 5.1 Summary and conclusion of findings .................................................................................. 42 5.2 Policy recommendations ..................................................................................................... 43 5.3 Limitations for the study ..................................................................................................... 43 5.4 Suggestions for further study .............................................................................................. 44 References ..................................................................................................................................... 45 APPENDICES .............................................................................................................................. 49 APPENDIX 1 LIST OF COMPANIES AND DATES OF PROFIT WARNING ANNOUNCEMENT ................................................................................................................. 49 APPENDIX 2 EAST AFRICAN BREWERIES LIMITED .................................................... 50

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APPENDIX 3 APPENDIX 4 APPENDIX 5 APPENDIX 6 APPENDIX 7

KENYA AIRWAYS .................................................................................. 51 CMC HOLDING LIMITED .................................................................. 52 TOTAL KENYA LIMITED........................................................................ 53 SAMEER AFRICA LIMITED ...................................................................... 54 SASINI LIMITED ......................................................................................... 55

APPENDIX 8 ACCESS KENYA GROUP LIMITED ........................................................... 56 APPENDIX 9 EVEREADY EAST AFRICA LIMITED ....................................................... 57 APPENDIX 10 EAST AFRICAN CABLES LIMITED ...................................................... 58

APPENDIX 11 KAKUZI LIMITED ...................................................................................... 59 APPENDIX 12 LONGHORN KENYA LIMITED ................................................................ 60 APPENDIX 13 NATIONAL BANK OF KENYA .................................................................. 61 APPENDIX 14 MUMIAS SUGAR COMPANY LIMITED ................................................ 62 APPENDIX 15 CFC STANBIC ............................................................................................ 63 APPENDIX 16 UCHUMI SUPER MARKET ........................................................................ 64

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CHAPTER ONE: INTRODUCTION

1.1 Background of the study Investors who participate in the capital markets expect that their investment will bring a high return in the future which will compensate for the related risks and expenses. Thus, they evaluate the investment; they calculate the benefits and the costs at the same time, which is the net present value calculation. However, firms that sells their shares to investors will receive more funds if stock prices are high, so that these firms can grow and produce values or assets in the economy (Penman, 2009, Bodies, Kane, & Marcus, 2009).The stock prices play a signalling role in the distribution of the economic resources from investors to firms. (Fama, 1970) From a broader perspective, in order to efficiently allocate the funds in society, it is important that the stock market valuation process and prices is correct (Arnold, 2008). The incorrect value of the stock today or tomorrow can be harmful in ten or twenty years and therefore impact the economy and society in terms of uneven allocation of resources. Todays and tomorrows lower or higher than true value of the stock can beharmful in ten or twenty years economy and society in terms of asset allocation thusvalue creation. (Arnold, 2008, Shiller, 2000).In allocating the capital effectively and productively, the transparency should exist in the market so that investors will make a rational, well-informed decision. If a firm misleads the investors about the future prospect of the firm it will be difficult for investors to make such decisions (Bodie et al., 2009). Therefore, information disclosures from the firm are essential in order to make a correct decision in valuing a stock, thus allocating capital optimally. Moreover, according to Fama (1970), if the market is efficient, all available information should reflect in the security price and the security price will move as soon as the new information comes to the market. In order to maintain transparency, companies disclose different types of information to communicate with the public, such as, the key operating performance indicators, borrowing and capital structure, and dividend payment. In this way, the investors will know the companys financial condition. The companys earnings are a main determinant of the stock price, because the earnings indicate the operational result of the firm and its future success. Therefore, companies are required to

inform the investors about its performance. Earnings are presented to the public on a half yearly or yearly basis. In Kenya for example, companies are supposed to report 3 months after the end of each accounting period .If earnings reported are above or below the analysts earnings estimates, it will be a surprise to the market. Consequently, if this earnings surprise is positive the share price will usually increase, or if it is negative the share price will decrease. In order to avoid such drastic changes in the stock prices and to reduce the magnitude of the market reaction, companies warn the public regarding the unexpected level of earnings. The content of the warning is that the company earnings will not meet the market expectations.

This announcement is called the profit warning. It is an attempt to communicate the earnings disappointment from the companies to the investment community. As the information disclosure, the profit warning improves transparency; this may result in re-evaluation of the stock price thus enabling financial market participants to make the right choice. According to Clare (2001), the profit warning is an adverse outlook for the companys future earnings and profitability through the press, which is market-relevant information and might result in revising profitability expectations from financial agents. Holland & Stoner (1996) claimed that the profit warning is one of the events that make the companies reveal price-sensitive information to the market. The 1994 Criminal Justice Act defined price-sensitive information as information that can result in a significant effect on the price of securities if the public receives it. Furthermore, Holland& Stoner (1996) pointed out that the significant effect of information is related to the companys main financial performance aspects such as future earnings and profitability, borrowings and capital structure. The disclosure of the profit warning will influence brokers and analysts evaluation of company. Analysts will revise the previous earnings expectation based on the companys current operating conditions. Then the analysts might warn the companys shareholders and potential shareholders. The investors are concerned about the companys profitability and competitive power in the long-term after the company releases the profit warning, which might cause a negative market reaction. Thus the companys value will decrease, which may result in the increase of the cost of capital, lowering in the companys rating. Consequently, the companys circumstances become worse. When the company fails to meet the new expected earnings, the similar result occurs. It
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becomes a vicious circle. The disadvantage of keeping such transparency is that the company reveals their bad condition to the investors and the competitors. That will impact the companys reputation after the profit warning.

The profit warning disclosure results in a negative market response to warning companies. However, from the long-term perspective, it is helpful for allocating the capital efficiently, reducing the information asymmetry, protecting the interests of the investors, building the investors confidence in the market and correcting the market expectation regarding overvalued firms. If there is regulation to disclose the profit warning, there will be less information asymmetry problem. Kasznik& Lev (1995) studied the regulated firms like banks and utility providers give reports to regulators, which indirectly inform the public. From these reports, the public will constantly obtain more detailed and timely operating information than they can obtain from the quarterly financial reports, thus information asymmetry is reduced.

Moreover, the impact of the profit warning is different based on firm specific factors, such as size. Kasznik& Lev (1995), Bulkley & Herrerias (2004), Jackson& Madura (2003), Collett (2004), Francoeur, Labelle, & Martinez (2008), and Elayan&Pukthuanthong (2009) compared the different effects for large versus small firms following the profit warning. They divided the companies into large or small according to the total assets. All of them found that small firms were beaten more than the large firms. The market reactions following the profit warning is a complicated issue. Based on the Efficient Market Hypothesis (Fama, 1970), the market will respond to the new information rapidly. The profit warning will result in the movement of the stock prices, as soon as, the company releases it to the market. After the adjustment of the market, the security price can reflect the all available information in the market. No company will be overvalued or undervalued. However, in practice, the investors over-react or under-react to the warning announcement, which is associated with the investors behaviour and the timing of the information. If the profit warning causes a negative market reaction and it reveals the companys bad condition to the market, why are the companies still willing to disclose it? There are several main
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reasons. The first reason is, to prevent a significant decrease in the stock price. The management tries to prepare the investors for the earnings disappointment prior to the real earnings announcements and reduce the magnitude of the reactions. Therefore, they avoid the dramatic volatility of the companys value. The second reason is to avert the legal liability and lawsuit cost. The company will face legal consequences if it fails to disclose the bad news. This might result in the loss of investment value for the stock holders.

The third reason is to maintain the reputation in the market and sustain good communication with the public. The fourth reason is the cost of capital. If the company fails to disclose bad news, the investors might lose confidence in it. That will result in declining share prices, falling credit rating and liquidity problems, and ultimately in an increase in the cost of capital. The reason is the regulation. In some countries, it is compulsory for companies to issue the profit warning if the companys financial condition changes enough to affect the market value of the company. The violation of this regulation will result in legal consequences. The above introduction demonstrates that the profit warning is a complicated issue.The effects of the profit warning on the stock price and the companys value triggers our interest and attention to do research in this academic and practical area.

1.1.1Profit Warnings Announcement The profit warning is an announcement released by companies and it reveals that the earnings will be lower than expected. Moreover, the earnings drop can be expressed in other terms, like net profits, sales, earnings before interest and taxes, and earnings per share

(Elayan&Pukthuanthong, 2009).In the definition of profit warning, the earnings expectation is used to compare with the incoming earnings. If the incoming earnings will not meet the expected earnings, the company will publish the warning announcement to the market by press, conference, or on the company website. Business daily newspaper from the Nation media group (December 2nd,2012) posted that 10 companies had issued profit warnings unlike the previous year where only 2 companies had made such announcements. Examples of such companies include; Uchumi Supermarket, Kenya Airways, Total Kenya, Sasini, CMC holdings, Eveready Kenya, Sameer Africa, East African Breweries limited, East Africa cables, East Africa Portland Cement company, Access Kenya,
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Mumias Sugar Company, CFC Bank, National Bank, Agricultural firm Kakuzi and Longhorn Kenya. Companies and their advisers should be aware of the market expectations built into the companys share price. That is, earnings expectations affect the companys stock prices. The earnings estimates of companies are important for investors in the security market because investors assess the companys future income and profitability based on earnings estimates. Therefore, it impacts investors decision of purchasing or selling the stocks.

1.1.2 Classification Of Profit Warnings. The profit warning is classified into two types: quantitative and qualitative. Literally, the quantitative warning is the warning announcement involved in the numbers, which provides the exact number of earnings estimate or interval. On the other hand, the qualitative one states or indicates that earnings will fall below the current expectations without offering a specific estimation of the new earnings. For example, firms prefer to employ these phrases to express qualitative warnings; unlikely to reach estimates and significantly below estimate

Bulkley & Herrerias (2004,). Skinner (1994) also wrote the management adopted quantitative announcement such as point, range and lower-bound forecasts and qualitative one like earnings will be down or earnings will be disappointing to disclose bad earnings prior to the real earnings announcement. He called this disclosure the earning-related disclosure. Two types of profit warnings offer the opportunity to test not only whether the market under reacts to news ,but also whether the scale of any under-reaction is related to the quality of the information released. This has implications for how under-reaction might be explained. This research looks at the listed companies at the Nairobi Securities Exchange with an aim of investigating the effects of profit warnings announcement on the share prices.

1.1.3 An Overview of Nairobi Securities Exchange NSE is the principle securities exchange in Kenya to date and it began in the early 1920s. Like many others emerging markets, the NSE suffers from the lack of liquidity in the market. Foreign investment on NSE and foreign ownership of companies is by application. Foreign investment in the local subsidiaries of foreign-controlled companies is banned so as to encourage input in to Kenyan companies.
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The Kenyan government has made several reforms aimed at attracting foreign investment via the NSE. In January 1995, the exchange was opened to foreign investors for the first time, but with a maximum limit of 20% shareholding for institutions and 2.5% for individuals. The ceiling on the foreign investment has recently been increased to 40% for institutions and 5% for individuals, but fewer than 20 of the 58 listed companies were available to foreigners. However, the Kenyan government since 1995 has opened trade in the NSE and gilts to foreign portfolio investors; removed exchange controls and introduced a favourable tax regime with nonresidents paying a 10% withholding tax on dividends (locals 5%) but no capital gains, stamp duty or value added tax. The NSE was registered under the companies act in 1991 and phased out the Call over trading system in favour of the floor-based Open-outcry system. Computerization has also been enhanced with installation of automated trading system. A wide area network enables broker undertake transactions from their offices without necessarily having to go to the floor of the NSE. Trading takes place on Mondays through Fridays between 9.30am to 3.00pm. The Central Depository and Settlement Corporation (CDSC) was established in 2002. The CDSC is the legal entity that owns the automated clearing, depository, registry system (CDS) and settlement. The NSE regulations and rules set out the operational and procedural rules for the purpose of ensuring orderliness, efficiency of the market in the initial admission of securities to the official list of the exchange, the listing of additional shares, and the continuing listing obligations in compliance with the Capital Markets Act and the regulations and guidelines issued there-under. Two popularly indices are used to measure performance. The NSE 20 share index has been used since 1964 and measure of performance of 20 blue chip companies with strong fundamentals and which have consistently returned positive financial results. The NSE all-share index (NASI) was introduced in 2008 as an alternative index. Its measures are on overall indicator of market performance. The index incorporates all traded shares in the day and therefore its focus is on overall market capitalization rather than the price movement of selected counters A third index is the AIG 27 share index that compares price movements of 27 companies identified as relatively stable. The operation of the index compares to the NSE 20 share index.
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However, whereas the AIG is defined by the AIG company (a financial services company and part of AIG group), the 20 share index is from the NSE itself. As at 30th September 2010, the NSE had 55 listed companies classified into three segments.

1.2 Statement of the Problem The profit warning is a complex event with advantages and disadvantages when it is issued; therefore, it is a challengeable consideration to the companies. As the companies can choose the type of profit warning them, they can alter the impact on the stock value. Moreover, firms of different sizes can also have different strategies of which the impact may not be the same. The economic power of the Kenyan economy is increasing and it plays an important role in the African financial market. Therefore, we believe it worth to do research covering this geographical area. In addition, there is no much research conducted in this integrated area regarding profit warning. During a period of economic downturn the profit warning is issued more often than under normal economic conditions. The profit warning is one of the common events in the financial market that have influenced the stock value during the period between 2003 and 2013 that we have often seen in the financial newspapers and magazines.

In Kenya, studies have been done to test various stock market reactions to various information generating corporate events. These include; Muragu (1994), Jackson and Madura (2003), Mbugua (2004) Onyango (2004), Kiio (2006), Ndirangu (2008), Aduda and Chemarun (2010), Mohamed (2010), Augustine K.S (2011) which tested various information content ranging from annual reports, earning announcements, stock dividend announcements, cash dividend announcements, dividends signalling theory, stock splits. Thus, little is known about how the Kenyan market reacts to the profit warning announcement. This is the Knowledge gap which this research seeks to bridge by analysing share price reaction to profit warnings announcement.

1.3 Objectives of the Study To determine whether stock prices of the listed companies are affected by the profit warnings announcement.

1.4 Research Questions The profit warning is considered as bad news by the market because it reveals companys adverse future profitability and competitiveness. Therefore, it results in significant negative returns in the stock markets. According to previous empirical researches on Efficient Market Hypothesis (EMH), some African countries stock markets are efficient and the security prices are followed by a random walk. Therefore, based on the concept of EMH, the stock price will fluctuate immediately after the information of profit warning is disclosed. Then the information provided with the profit warning will be reflected in the stock price. Thus, the question we seek to answer is: what are the effects of profit warnings announcement on share price? To analyse the problem, the study will test the following two hypotheses; HO: There is no relationship between share prices and profit warnings announcements. H1: There is a relationship between share prices and profit warnings announcement

1.5 Significance of the study Our research will give suggestions to the following: Companies managers, investors, academicians, financial analysts and fund managers. Companys management; the profit warning disclosure reduces the impact of surprise at the time of the real earnings announcement, because the profit warning prepares the market for the bad news. Since the profit warning may result in negative stock returns, the management can minimize the effect through selecting different types of warning announcements, such as quantitative or qualitative ones. At the same time, the companies delivering the announcement regarding the companies condition are being more transparent to the public. Not only do the companies avoid a law suit, they might gain the trust from the public by issuing the profit warning.

Investors; the investors can consider the profit warning rationally and make a wise investment strategy. Investors assess the companys value and the future profitability based on the analysis of the companys financial statements and industry environment. By having knowledge about the profit warning and its impact, investors might re-assess their investment decisions thus avoid overreaction or under-reaction regarding the event of profit warning. Furthermore, some
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investors might benefit from the significant negative market reaction and take a speculative position right after the disclosure of the profit warning.

Financial analysts; By studying the findings of this research, financial analysts will be able to obtain accurate information on the effect of profit warning announcement on share prices, adding to the information they have and hence they will be in a better position to advice investors on which companies to invest in. Academicians; This study will add to the body of knowledge in the discipline of finance. The findings may also motivate other researchers to do further research in other countries, undertake the same research in subsequent periods or explore the topic further. Fund managers; The findings of this study will assist fund managers in making informed decisions on portfolio mix, by making use on information on effect of profit warning announcements on share prices, fund managers can decide whether to invest in a portfolio with stocks that pay consistent dividends or not, and how to hedge their portfolio returns.

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction This study draws basis from several research areas. First, it examines theoretical foundations on the Efficient market hypothesis (Fama 1970, Augustine K S 2011), the Random walk theory (Odiwuor W 2002,Kendall 1953 , Cowles 1937) and Post-announcement drift theory(Bernad and Thomas 1989,1990, Ball 1992). Literature that documents earlier empirical studies on profit warning announcement is also discussed .Research work on insider trades around profit warning is also revealed. Finally, prior empirical research focusing on related areas of earnings announcements and anomalies at the NSE are revealed. Major conclusions from the literature review, identification of research gaps and a summary of how the study differs from the reviewed studies is made.

2.2 Profit warnings Profit warning is a warning declaration issued by a listed company to investors through a stock exchange. It warns that the profit of the company in the coming quarter will obviously decline or even have a loss compared with that of the same quarter of previous year. Investors should be aware of the possible loss when buying or selling its stock. Sometimes, profit warning is considered to be a neutral term and it refers to "estimated results improvement".

Some companies may issue "profit warning" to inform that their expected profit will obviously increase in the coming quarter. A profit warning is usually done two or more weeks before an earnings announcement. Companies do this to soften the blow to investors. This gives the investors and the market more time to adjust accordingly before the public release, ideally taking some of the sting out of the expected price adjustment. If no profit warning is released, the earnings announcement is called a negative earnings surprise. Profit warnings are part of the large, fluid world of earnings guidance, whereby the management of publicly traded companies issue estimates about what they expect earnings to be for the coming quarter. The guidance is based on management's experience, calculations, and outlook. Management earnings estimates significantly influence the analysts covering the stock, because
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the analysts incorporate these estimates into their own research and earnings forecasts for their clients. Some companies do not give guidance, and thus do not issue profit warnings. The choice to not provide guidance is usually made to reduce legal liability in the event that management's estimates are wrong. Some analysts claim that companies that do not offer any guidance often receive a "break" on stock price changes when these companies miss earnings, because the market is aware that the company's management has given the analysts (and their resulting estimates) no input.

2.2 Theoretical Framework of the study 2.2.1 Efficient market hypothesis The origin of efficient markets hypothesis dates back to 1965 when Samuelson1965 published his proof that properly anticipated prices fluctuate randomly. The term efficient markets was first introduced in economics literature by EugeneFama (1970).The study also known as the efficient market theory asserts that financial markets are informationally efficient or that prices on traded assets e.g. stocks, bonds or property already reflect known information. It supports that prices of the financial assets traded such as stocks, bond, derivatives, in a market, reflect and incorporate all the available known and relevant information. In this respect these prices are unbiased and reflect the aggregate beliefs of all investors about future prospects of firms, market sectors and the market as a whole. Accordingly its thus impossible to consistently outperform the market through expert stock selection or market timing by using any information that the market already knows except through luck, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments. According to EMH stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. Information or news in EMH is anything that may affect prices that is unknowable in the present and thus appears randomly in the future.

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Market efficiency means security prices adjust rapidly and correctly to the arrival of new information and thus current security prices reflect all information about the security, and there is no reason to believe that the current prices is too low or too high. In an efficient market, information is widely and cheaply available to investors and that all relevant and attainable information is already reflected in the security prices. EMHs advocates argue that although inefficiencies may exist, they are relatively small and not common. Fama classified the market efficiency in to three forms of market efficiency on the basis of the information:

Weak form: Stock price will reflect historical information of past prices and returns. Market prices reflect all historical price information and are only changed due to random walk i.e. new information reaching the market. The information subset is merely historical price or return sequences. Consequently, the price of a financial asset on any given day can be predicted by the previous days price plus the expected return of the asset and an unpredictable random factor. Hence, technical analysis is of no use. Any analysis based on previously known facts cannot yield abnormal returns, since market prices already reflect all historical information available (Fama 1970, 1991).

Semi strong form: The semi strong level of market efficiency states that the price of a financial asset in addition to all the historical prices also reflects all available public information (1970, 1991) Public information consists of a combination of macro and company specific data. In this market, prices of financial assets already reflect all available information. Hence fundamental analysis is of no use. The only way to achieve abnormal returns is to use inside information (Arnold, 2005).

Strong form: Stock prices fully reflect all information including public and private works known to any market participants .All information is reflected in market prices including inside information. In this case, no investor can have an information advantage. Since the strong level of market efficiency reflects all information, no information asymmetry exists. Thus, not even inside information can be used to achieve abnormal returns (Arnold, 2005).

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2.2.1.1 Anomalies of efficient market hypothesis The Efficient Market Hypothesis became controversial especially after the detection of certain anomalies in the capital markets. Some of the main anomalies that have been identified are as follows. Small size effect: Banz (1981) published one of the earliest articles on the small-firm effect which is also known as the size-effect. His analysis of the 1936-1975 periods reveals that excess returns would have been earned by holding stocks of low capitalization companies. Supporting evidence is provided by Reinganum (1981) who reports that the risk adjusted annual return of small firms were greater than 20%. If the market were efficient, one would expect the prices of stocks of these companies to go up to a level where the risk adjusted to future investors would be normal. But that did not happen. January effect: Rozeff and Kinney (1976) were the first to document evidence higher mean returns in January as compared to other months. Using the NYSE stocks for the period 19041974, they found that the average return for the month of January was 3.48% as compared to only 0.42 percent for the other months The weekend effect (Monday effect): French (1980) analyses daily returns of stocks for the period 1953-1977 and finds that there is a tendency for returns to be negative on Mondays whereas they are positive on the other days of the week. He notes that these negatives returns are caused only by the weekend effect and not by a general closed-market effect. A trading strategy, which would be profitable in this case, would be to buy stocks on Monday and sell then on Friday.

Over/under reaction of stock prices to earnings announcement: There is substantial documented evidence on both over and under-reaction to earnings announcement. DeBondt and Thaler (1985, 1987) present evidence that is consistent with stock prices overreacting to current changes in earnings. They report positive (negative) estimated abnormal stock returns for portfolios that previously generated inferior (superior) stock price and earning performance. This could be construed as the prior period stock price behaviour overreacting to earnings development (Bernard, 1993).
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Such interpretation has been challenged by Zarowin (1989) but is supported by DeBondt and Thaler (1990). Bernard (1993) provides evidence that is consistent with the initial reaction being too small, and being completed over a period of at least six months. Ou and Penman (1989) also argue that the market underutilizes financial statement information. Bernard (1993) further notes that such anomalies are not due to research design flaws, inappropriate adjustment for risk, or transaction costs. Thus, the evidence suggests that information is not impounded in prices instantaneously as EMH would predict.

2.2.2 Random walk theory The random walk theory argues that the share price movement are independent of one another and unrelated. This happens in an efficient market where the current prices of the securities represent unbiased estimates of their intrinsic values. The theory holds that the price move in a random manner hence it is not possible to predict future prices. The price movement, whether up or down, occurs as a result of new information and since investors cannot predict the kind of new information(whether good or bad), it is not possible to predict future price movement. The random walk theory is closely related to the EMH. When Kendall (1953) studied 22 UK stock commodity price series, he concluded that in a series of price which are observed at fairly close intervals the random changes from one term to the next are so large as to swamp any systematic effect which may be present. The data behaves almost like wandering series. This empirical observation came to be called the Random Walk Model. If the prices wander randomly, then this poses a major challenge to market analysts who try to predict the future path of security prices; Drawing on Kendalls work and earlier research by Cowles (1937) demonstrated that a time series generated from a sequence of random numbers was not distinguishable from a record of US stock prices, the raw material used by market technicians to predict future price levels. Despite the emerging evidence on the randomness of stock prices changes, there were occasional instances of anomalous price behaviour, where certain series appeared to follow predictable

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paths. This includes a subset of the stock and commodity price series examined by (Owler 1937) and (Kendall 1953). According to Fisher and Jordan (1979), the random walk theory is a special case of a more general EMH. 2.2.3 Post-announcement drift On a broader level, profit warnings are related to earning announcements containing surprises. The only difference is that earnings announcements have a predetermined date and profit warnings are unexpected. According to the semi-strong efficient market hypothesis (Fama, 1970) stock prices react quickly in an unbiased matter to new public information. Over the years many researchers studied the market reaction in response to earnings information. This led to the discovery of one of the most robust anomaly in finance and accounting literature: post-earningsannouncement drift (hereafter, PAD). PAD is the phenomenon that stock returns continue to drift downward (upward) following a negative (positive) earnings signal reported at the scheduled earnings announcement date. In a seminar work, Ball and Brown (1968) were the first one who provided evidence of the PAD phenomenon after studying annual earnings announcements in the US for the period 1946-1966. Since then, many researchers found supporting evidence for this phenomenon using more recent data and for various markets outside the US. After the discovery of this anomaly many researchers tried to explain the phenomenon and up to now no consensus has been reached regarding the source of the drift. The explanations include: methodological issues, misspecification of normal returns and market under reaction. Bernard and Thomas (1989, 1990) and Ball (1992) show that PAD cannot be attributed to research design flaws such as: survivorship bias, hindsight bias arising from restatements of CRSP data or measurement errors in CRSP returns resulting from imbalances in quoting bid or ask prices. In addition, Bernard and Thomas (1989) studied whether PAD is the result of CAPM misspecifications. They show that neither factors from the arbitrage-pricing theory nor beta fluctuations around earnings announcements are able to explain the drift. Fama (1998) failed to explain the phenomenon using a three-factor model (Fama& French, 1996), which extends the CAPM model with two additional factors; the difference between the return on a portfolio of

15

small and large stocks and the difference between a portfolios of high and low book-to-market stocks. The third explanation is that markets under react to earnings announcement, and is considered by many researchers as the predominant explanation. Market under-reaction is the phenomenon that new information is incorporated into stock prices with a delay resulting in a post-event drift. However the cause of this market under-reaction remains unclear. According to Bernard and Thomas (1990) market under reaction is a consequence of investors who wrongly believe earnings follow a seasonal random walk process, i.e. future earnings equal corresponding prior period earnings. This argument is based on the finding that a relatively large part of the drift occurs around the next earnings announcement, suggesting the market tends to be surprised. The seasonal random walk model is based on year-to-year comparisons financial media use whenever listed firms publish their earnings information. As a result investors neglect the autocorrelation of in-between quarterly earnings announcements and end up with a nave expectation model that underestimates the implications of current earnings on future earnings. On the other hand, Ball and Bartov (1996) present a more sophisticated investor who doesnt base his expectations on a simple seasonal random walk and acknowledges the existence of autocorrelations in unexpected earnings. It is the magnitude of the autocorrelation that is underestimated by the market (by approximately 50%) and this in turn causes market under reaction. Another paper by Chordia and Shivakumar (2005) argues that contrary to bond investors, stock investors underestimate the implication of inflation on future earnings, i.e. the stock market under reacts to inflation information. This can partially explain the underestimation of the magnitude of serial correlation documented by Ball and Bartov (1996). More recently, several researchers moved towards incorporating behavioural finance as a possible explanation for market under reaction. Behavioral finance assumes investors form biases which might influences their judgment of information, resulting in less than fully rational decisions. For instance, Daniel, Hirshleifer and Subrahmanyam (1998) develop a model of investor behaviours based on two well-known psychological findings: overconfidence and selfattribution bias. Overconfidence means investors overestimate the precision of private
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information signals. Biased self-attribution means investors overweight information that confirms prior beliefs and underweight information that contradicts prior beliefs. Consequently the model predicts that investors under react to public information. In a contemporaneous paper Barberis, Shleifer and Vishny (1998) develop a model of investor behaviour where market under reaction is the result of investors suffering from a conservatism bias, the phenomenon that people only gradually adjust their beliefs to new information (Edwards, 1968). As a consequence investors assume earnings follow a mean-reverting process and underweight the information content of earnings announcements.

2.3 Empirical studies 2.3.1 Profit warnings According to Elayan (2009), profit warnings are defined as earnings forecasts made by management that warns of an expected earnings shortfall in relation to a relevant standard .Management profit warnings may be released at any time prior to the announcement of actual earnings report. The earnings shortfalls may be in terms of net profits, sales, earnings before interest and taxes (EBIT), and earnings per share (EPS), etc. Previous research has shown that the timing of management disclosures affect the revision of subsequent analyst forecasts. Baginski and Hanssell (1990), show that analysts follow management forecasts more closely in the fourth quartet. These issues suggest that the differential timing of profit warnings have several implications for shareholder reaction. In their investigation of managements discretionary before a large earnings disappointment, Kasznik and Lev (1995), reported that the likelihood of warning increased with firm size, the presence of an earlier forecast and membership in the high technology industry. Warnings were also found to be associated with permanent earnings decreases. Helbok and Walkers (2003) findings in the less litigious UK environment where firms reported less frequently indicated that profit warnings are value-relevant events with firms experiencing an average 20% decline in share price in response to them. They also found profit warnings to signal a permanent earnings decline. Firms did not appear to be reprimanded for their honesty when issuing profit warnings where Tucker (2005), found that while in the short-term , their returns were more
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negative relative to firms with no warnings ,their long run returns were more positive. In terms of long term consequences, Bulkley, Harris and Herreiras (2002) also found strong reversal one to two years after the warnings, mainly in small firms Mohamed (2010) studied the effect of earning announcements on the stock prices of companies listed at the NSE. He studied 45 companies declaring earnings between January 2004 and December 2008. The study found that earning announcement may carry some information for the market and stock prices may be adjusted accordingly. The findings showed that statistically significant negative abnormal returns were observed in the post and pre-earnings announcements period. Onyango, (2004) in his study covered 16 companies out of a population of 48 listed companies at NSE, discovering the period 1998-2003. The study concluded that the earnings announcement contain relevant information which is fully impounded the stock prices prior to or almost instantaneously at the time of announcement. Secondary evidence resulting from the study showed that NSE shows the presence of semi strong model of EMH. He suggested further research on information content to support his conclusion. Jackson and Madura (2003) reported a strong negative reaction, starting five days before the announcement with the reaction complete within five days after the warning .While there was no overreaction to the announcement, small firms reacted more negatively in the announcement and post-announcement periods while in the pre-announcement period, more negative reactions were observed in large firms. Collet (2004), studied the accounting detail provided in profit warnings, in particular information on sales growth and operating margin changes and found only 35% and 42% of firms issuing warnings and upgrades respective provided quantitative information Insider trading activity around profit warnings has not yet been studied though similarities exists with studies around financial distress (Seyhun and Bradley, 1197), breaks in earnings trends (Ke, Huddart and Petroni, 2003) and around management earnings forecasts (Noe, 1999; Cheng and Lo, 2006). Seyhun and Bradley (1997) reported insider selling beginning five years before a bankruptcy filing, escalating to the announcement month. Top executives were responsible for more intense selling with insiders buying after prices have fallen and selling before they fall. According to Noe (1999), managers are opportunistic in timing their trades to increase personal
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gains given they are aware of the intention to trade and obligation to release information. He reported that managers sell more after the release of good news and buy more after the bad news releases. Cheng and Lo (2006) provide additional evidence that when managers intend to buy, increase the number of bad news forecasts while delaying good news to decrease share price. However, they were unable to show that managers increased good news forecasts or avoid bad news forecasts when selling, possibly due to the risk of litigation Prior literature has explored why firms preannounce. Lang and Lundholm (2000) conducted research that examined whether voluntary disclosures represented an attempt to reduce information asymmetry between management, shareholders and analysts. A reduction in information asymmetry lowers the opportunity for investors to profit from informed trading and therefore reduces the costs to investors of acquiring private information (Diamond, 1985; King et al, 1990). Moreover, a reduction in information asymmetry increases liquidity in the companys stock and reduces the cost of capital (Diamond and Verrecchia, 1990). Firms warn in order to reduce earnings surprises. Typically, investors and analysts do not like negative earnings surprises and they discount firms that are not transparent about potential negative earnings. King, et al (1990); Skinner (1994) and Frankel et al (1995) observed that by not being candid about their future earnings, firms may tarnish their reputation with analysts and investors. One motivation for pre-announcing earnings is to pre-empt litigation. Skinner (1994) argues that announcing bad news early can mitigate litigation costs by reducing the number of potential plaintiffs who could claim that they bought shares at a time when management had held negative undisclosed information. Consistent with this argument, Skinner (1994) documents that unlike firms with good news, firms with bad news are more likely to voluntarily disclose earningsrelated information prior to the formal earnings announcement. Further, Kasznik and Lev (1995) find that firms in high-litigation industries have a higher probability of warnings before large earnings surprises. A second motivation for pre-announcing earnings is to affect the overall market reaction to earnings news. Conversely, Skinner (1994, 1997) suggests that management voluntarily issues earnings estimates with negative implications in an attempt to avoid shareholder lawsuits that may be brought upon management for its failure to release material information in a timely manner. On the other hand, Damodaran (1988, 1989), Mendenhall and Nichols (1988) and Chen
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and Mohan (1994) report that management releases profit warnings by timing the releases of bad news hence minimize negative market reaction. These arguments suggest that, in the long run, the market should value profit warning firms for their openness. Nevertheless, Kasznik and Lev (1995) show that warning firms have higher negative stock market reactions than non-warning firms given that both have the same level of earnings surprise. Kasznik and Lev (1995)s finding is counterintuitive. Tucker (2007) argues warning firms are penalized because announcing firms tend to have more bad news than non-warning firms. Bulkley, Harris and Herreiras (2002) noted that profit warnings are the discretionary disclosure of bad news by companies prior to earnings announcement. They may take the form of a specific revised earnings forecasts (quantitative warnings) or may be a qualitative statement that simply states, or implies, that earnings will be significantly less than current brokers expectations. Approximately half of all companies whose earnings announcements are going to be bad news warn in advance (Kasznik and Lev 1995). 2.3.2 Insider trades around profit warnings Numerous studies have investigated insider trading activity around corporate announcements including equity offerings (Gombola, Lee and Liu, 1997: Ching, Firth and Rui, 2006), bankruptcy(Seyhun and Bradeley, 1997)and takeovers (Seyhun, 1990).They show that insiders are aware of these events well in advance of their announcements, in some cases up to years beforehand. Seyhun and Bradley (1997) report the occurrence of insider selling commencing five years before the bankruptcy filing that continues up to the announcement month.Insider also sell before a fall in price and buy after prices had fallen. According to Ke, Huddalt and Petroni(2003), they trade on specific information about future accounting disclosures up to two years prior. In particular, insider selling increased three tonine quarters before a break in a string of consecutive quarterly earnings increases. In their examination of the association between insider trading and voluntary disclosures, Cheng and Lo(2006) report that insiders withheld good news and increased the number of bad news disclosures when they purchases shares but they did not attempt to increase prices when they sold their shares. This is possibly due to litigation concerns associated with sales.

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The joint signal of insider trading and the voluntary release of profit warnings may convey insider's private information to the market ,at the least cost in an efficient signal equilibrium(John and Mishra,1990).Net trading by insiders contribute to the overall information content of the corporate announcement. With insiders having under diversified holdings in their own firms, their net trading activity may provide a signal of private information which includes, in addition to information about the future prospects of the firm, the amount of effort individual insiders intend to invest .This is particularly interesting in the event of a profit warning because Donaldson and Weigand (2006)found that in firms that filed for voluntary bankruptcy, insiders had fewer incentives to maximise shareholders wealth compared to firms experiencing involuntary bankruptcy .As a result ,the former were net sellers while latter were net buyers in their own firms. There is limited research on profit warnings announcement at the NSE. However, Dulacha, Hancock and Izan(2006) in their study on corporate voluntary disclosures at the NSE finds that in all years (1992-2001), listed companies make voluntary information disclosures in their annual reports. However, there are related studies on market efficiency at the NSE. Muragu (1994) provides evidence consistent with the market efficiency at the NSE. He observed a low serial correlation of stock prices consistent with weak form efficiency. Kiio(2006)empirical investigation into market efficiency and the effects of cash dividends announcements on share of companies listed on the NSE reveal that cumulative market adjusted returns to be significant for ten days before and ten days after the announcement for dividend paying firms. This indicates that share prices are indeed responsive to cash dividend announcements.

2.4 Conclusions Profit warning is one form of corporate disclosure and the above arguments suggests that, in the long-run, the market should value profit warning firms for their openness. Nevertheless, Kaznik and Lev (1995) show that warning firms have a higher negative stock market reactions than nonwarning firms given that both groups have the same level of earnings surprise. Kaznik and Lev (1995) findings is counterintuitive. Tucker (2007) argues that firms are penalized for their transparency when they make disclosures because announcing firms tend to have more bad news than non-warning firms.
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The timing of profit warning announcement is an important consideration by the management. (Damodaran 1989), Mendenhall and Nichols (1988) and Chen and Mohan (1994). If the management potentially wishes to reduce the negative market response to profit warnings then it is conceivable that the announcement will be made at a time when the market response is delayed. The expectations under this reasoning is that announcement made after Friday 4p.m will generate a different response than announcement made at Tuesday 10a.m during a trading week. Whereas review of prior literature indicates sufficient research conclusions that unexpected declines in firm earning elicits a negative and a significant stock price reactions, there is no consensus on whether this effect are temporary or a permanent. For example Datta and Dhillon (1993) determine that market valuation decline by about 2%, on average, in response to unexpected earnings declines. Bremer and Sweeney (1991) document that large stock price reaction are often followed by abnormal price reversals in subsequent days. Therefore, if there is a large negative response to a profit warning, some investors will resort to arbitrage and still profit from the market resulting in a share price reversal contrary to efficient market hypothesis expectations. Most of these studies cover markets in developed countries. There is lack of empirical evidence on extent of negative market reaction to profit warning announcement in emerging equity markets generally and particularly at the NSE. Earlier studies at the NSE point to the existence of some degree of market efficiency. This study build on this foundation by seeking empirical evidence on extent of market reaction to profit warning announcement by companies listed at the NSE.

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CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction This study aims at establishing the effects of profit warnings on share prices for companies listed at the NSE. The design is an event study. Mackinlay (1997) noted that an event study measures the impact of an event on the value of the firm. He also noted that economic impact of an event can be constructed using security prices observed over a short period. Event study have along history dating to Dolley (1993) who examined the effects of stock splits and share prices. In this chapter we define the research design, population and sample size together with the description on data collection as well as data analysis.

3.2 Research Design We will conduct an analytical study in which quantitative data will be collected and analysed across the sampled listed companies using event study methodology. The test for share price response will be accomplished with an ordinary event study, which is useful when measuring the effect of an economic event. Event studies have been used since the 1930s with increased sophistication and modification over the years. Dolley (1933) examined the effect of stock splits to stock prices. Event studies have been used in a large variety of studies including earnings announcement, corporate evaluations, debt or equity issues, mergers and acquisitions, investment decisions and corporate social responsibility (Mackinaw 1997). Campbell et. al. (1997) gives their structure to an event study; the structure is organised in steps. 3.3 Population There are three main market segments at the NSE namely: Fixed securities market, Main investments market and Alternative investments market. For our research purpose, the population will constitute all the listed companies at the NSE that issued profit warnings announcement between the years 2003 to 2013. We consider this period adequately long enough to capture any incidences of profit warning. In 2002, the Capital Markets Authority put in place the mandatory disclosure rules on profit warning announcements for listed companies.

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3.4 Sample size The selected sample consists of well-publicized profit warning announcements. To ensure that the market was well aware of the effects of profit warnings announcement on share price, we include warnings that were publicly announced and published in the media and notices issued to the NSE and CMA. To narrow our focus on share price responses to profit warnings, announcement mentioning several events are not included. We eliminate announcements that include information such as dividend announcements, as the market reaction could not then be fully ascribed to the earnings warnings. In addition, the announcements that provide actual quarter earnings along with a warning about future earnings are eliminated, as the current earnings report could bias the market response. Firms are also excluded for insufficient data or the presence of confounding events such as stock splits, acquisition announcements or dividend changes within a two-day window of the earnings announcement. Repeated warnings are excluded from the sample because overlapping multimonth returns implies that the inclusion would result in a double counting of returns from some firms and hence biased statistical inference. 3.5 Data collection The study relies on secondary data from the NSE daily market reports, press websites such as nation media and standard media and stock brokers research departments. The data to be collected include corporate announcements in form of profit warnings, company details, the date of the warning, the industry in which the company belonged and the primary reason given for the warning as well as daily observed average prices for the periods between 2003 to 2013. This data will be collected from the published financial statements of listed companies, NSE website, Capital market authority website as well as libraries and libraries of the Kenyan media houses. Secondary data available at the NSE database on daily prices and corporate announcements as well a published data in the internet and print media will be used. Stratified and convenient sampling will be used to determine size and nature of the sample to be included in the study. Data is analysed using event study methodology based on Campbell et, al. (1997) structure to an event study

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3.6 Data analysis The following methods will be used to analyse the data collected on daily share prices; Average prices, returns and cumulative returns. This statistical analysis will be carried out using Ms-Excel by manipulating data on stock prices at the NSE. Share price movements are computed over several windows ranging in length from one to twenty days. Standard event study procedures are used to calculate stock returns. The return in any given period is the market model residual, which is the difference between the stock actual price and the previous price based on the market for that period divided by the previous price. To determine the individual stock prices betas in the estimation model, an estimation period of 100 trading days is used, ending twenty days before the event date. Hence the market adjusted returns are calculated on a 100 day computed betas for each firm Statistically significant returns at announcement accumulated over the entire event window, would support the study on the returns and hence their effect on firm valuation.

3.6.1: Event date specification The profit warning date is assigned day 0 if it happens on trading day. If announcements are done on a non-trading day, the next available trading day is assigned day 0. Cumulative returns are the sum of returns in a given time period. Returns are defined as the difference between the actual price and previous price divided by the previous price surrounding a corporate event. The event period is taken to be twenty days before the announcement to twenty days after the announcement of profit warning. Returns are measured for the announcement period (day -20 to day +20). Measure of return is constructed on each day over the event window relative to normal control period (estimation window covering the 100).

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3.6.2 Measuring daily returns The return in any given period is the market model residual, which is the difference between the stock actual price and the previous price based on the market for that period divided by the previous price. Returns = (Actual Price Previous price)/ Previous price Where the Actual price also known as the average price is given by the average of Highest and Lowest price of the stock price at a given day expressed as: Actual price = (Highest price + lowest price)/2 The highest and lowest prices are provided as secondary data from the Nairobi Securities Exchange for the specific days.

3.6.3 Measuring the Cumulative Returns The cumulative returns are gotten by adding the return for the day to the previous day returns. Its important in indicating the growth in returns over the period of analysis whether its increasing or decreasing over the period. In some days, the returns decrease thus having a negative effect on the cumulative returns whereas in some days, the returns increase having a positive effect on the cumulative returns.

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CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND INTERPRETATION 4.1 Introduction This chapter focused on the daily prices for various companies in different industries listed in the Nairobi securities exchange 20 days before and after profit warnings announcement. The findings were based on this general objective of the study. The results were analysed, compared, tabulated and graphically presented as shown in the following sections. 4.2 Findings Figure 4.2.1: EABL Company 20 days before and 20 days after profit warning announcement

EABL share Price trend

360 350 340 SHARE PRICE 330 320 310 300 290 20 18 16 14 12 10 8 6 4 2 0 2 4 6 8 10 12 14 DAYS average

Figure 4.2.1 shows the share price of East African Breweries Limited in the year 2013 on 30th July as day 0, being the day it issued the profit warning and for 35 day event window in the period under review. For more details about the share prices, the returns and cumulative returns, see appendix 2
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The average daily prices for EABL Company as showed in the Nairobi Securities Exchange 20 days before and 20 days after profit announcement or event date, the prices are increasing from day 20 to day 3 before the profit warning date where the price falls and raises the day 0. After profit warning shows a drastic price decrease up till the 14th day with no price increases.

Figure 4.2.2: Kenya Airways company 20 days before and 20 days after profit warning announcement

Kenya Airways share prices trend

12.6 12.4 12.2 12 SHARE PRICE 11.8 11.6 11.4 11.2 11 10.8 10.6 20 18 16 14 12 10 8 6 4 2 0 DAYS 2 4 6 8 10 12 14 16 18 20 average

Figure 4.2.2 shows the share price of Kenya Airways in the year 2012 on 6th November as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns see appendix 3. The findings show that the share prices for Kenya Airways fluctuates more before and after profit warning announcement. Before the profit warning the share prices increases between day 20 and day 12 then remains constant for 10 days, it drops sharply during the day of issue of profit
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warning. After the price warning the share prices increases for the next 6 days and stabilises for 10 days continuously and after while drops drastically for the remaining four days.

Figure 4.2.3: CMC Holding company 20 days before and 20 days after profit warning announcement.

CMC Holding share price trend

18.5 18 17.5 SHARE PRICE 17 16.5 16 15.5 15 14.5 14 20 18 16 14 12 10 8 6 4 2 0 DAYS 2 4 6 8 10 12 14 16 18 20 average

Figure 4.2.3 shows the share price of CMC Holding Limited in the year 2011 on 7th October as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns, see appendix 4. The analysis shows that for CMC Holding company the share prices fluctuate from day 20 to day 0 with major increases and decreases. After the profit warning the share prices keeps fluctuating for 10 days then increases drastically for 7 days before it drops for the day after and remains constant.

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Figure 4.2.4: Total Kenya share prices trend 20 days before and 20 days after profit warning announcement.

Total kenya share price trend

16.5 16 15.5 SHARE PRICE 15 14.5 14 13.5 13 20 18 16 14 12 10 8 6 4 2 0 2 DAYS 4 6 8 10 12 14 16 18 20 average

Figure 4.2.4 shows the share price of Total Kenya limited in the year 2012 on 29th June as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns, see appendix 5. From the analysis, total share prices keeps fluctuating but insignificantly increasing before the profit warning issue. Thereafter the price warning the share prices remains fluctuating before drastically decreasing on the 5th day and starts increasing towards day 6 and remains levelled with insignificant increase towards day 20.

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Figure 4.2.5: Sameer Africa share prices trend 20 days before and 20 days after profit warning announcement.

Sameer Africa Share price trend

8 7 6 SHARE PRICE 5 4 3 2 1 0 20 18 16 14 12 10 8 6 4 2 0 DAYS 2 4 6 8 10 12 14 16 18 20 average

Figure 4.2.5 shows the share price of Sameer Africa Limited in the year 2012 on 29th June as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns, see appendix 6. The results show that before and after profit warnings, the share prices remains levelled with minimal fluctuations. Before the profit warning, the share prices remains constant for 10 days, it had decreased from day 20 to day 10 but with insignificant variations. After profit warning, the share prices remains constant with minimal variations on daily prices quoted.

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Figure 4.2.6: Sasini limited share prices trend 20 days before and 20 days after profit

Sasini share price trend

13 12.5 SHARE PRICE 12 11.5 11 average 10.5 10 20 18 16 14 12 10 8 6 4 2 0 DAYS 2 4 6 8 10 12 14 16 18 20

Figure 4.2.6 shows the share price of Sasini limited in the year 2012 on 2nd August as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns, see appendix 7. The analysis revealed that the share prices for sasini africa decreases for 6 days before the profit warning and there before had remained relatively constant for 14 days towards the 20th day under study before profit warning. After the profit warning the share prices shoot up to the prices before the profit warning then again drops on the next day and thereafter tends to stabilise towards day 20.

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Figure 4.2.7: Access Kenya share prices trend 20 days before and 20 days after profit warning announcement.

Access kenya share prices trend

5.6 5.4 5.2 SHARE PRICE average 5 4.8 4.6 4.4 20 18 16 14 12 10 8 6 4 2 0 DAYS 2 4 6 8 10 12 14 16 18 20

Figure 4.2.7 shows the share price of Access Kenya Group limited in the year 2012 on 12th July as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns, see appendix 8. From the analysis the results found that before the profit announcement was issued the share prices remains significantly fluctuating with large decrease on the 18th and 16th day before starting to decrease again, then after the profit warning the prices decreases for 8 days, it recovers for 4 days and starts to fluctuate towards the 20th day and retaining its price before the profit warning issue.

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Figure 4.2.8: Eveready East Africa share prices trend 20 days before and 20 days after profit warning announcement.

Eveready Share price trend

4 3.5 3 SHARE PRICE 2.5 2 1.5 1 0.5 0 20 18 16 14 12 10 8 6 4 2 0 2 DAYS 4 6 8 10 12 14 16 18 20 AVERAGE

Figure 4.2.8 shows the share price of Eveready East Africa in the year 2010 on 30th November as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns, see appendix 9. From the analysis its clear that before the profit announcement the share prices for Eveready Kenya were significantly decreasing with calculated differences, at day 0, the share price sharply falls and after the profit warning the share prices forms a convex behaviour for the first 10 days of profit warning announcement before starting to fluctuate thereafter trying to recover and level as before the announcement.

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Figure 4.2.9: East African cables share prices trend 20 days before and 20 days after profit warning announcement.

East African cables share price Trend

22 21.5 21 20.5 SHARE PRICE 20 19.5 19 18.5 18 17.5 17 20 18 16 14 12 10 8 6 4 2 0 2 DAYS 4 6 8 10 12 14 16 18 20 average

Figure 4.2.9 shows the share price of East African cables in the year 2010 on 14th July as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns see appendix 10. From the analysis, its clear that before the profit warning announcement the share prices had been decreasing for the 1st 4 days then remains constant for 10 days, increase for the next 4 days before sharply decreasing after the profit warning. After the profit warning the share prices increases for the next 2 days before starting to decrease on the 5th day and drastically drops significantly towards the 20th day.

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Figure 4.2.10: Kakuzi share prices trend 20 days before and 20 days after profit warning announcement.

Kakuzi share price trend

73 72 71 SHARE PRICE 70 69 68 67 66 65 64 20 18 16 14 12 10 8 6 4 2 0 DAYS 2 4 6 8 10 12 14 16 18 20 average

Figure 4.2.10 shows the share price of Kakuzi limited in the year 2012 on 30th November as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns, see appendix 11. From the analysis the share prices trend shows that before the profit warning the share prices remains levelled on a steady state with significant fluctuations thereafter the profit warning the prices shifts up for 2 days before dropping on a bigger margin and then keeps fluctuating but with more ups than downs up to 19th day before the share prices starting to move downwards.

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Figure 4.2.11: Longhorn Kenya limited share prices trend 20 days before and 20 days after profit warning announcement.

Longhorn Share price trend

20.5 20 19.5 SHARE PRICE 19 18.5 18 17.5 17 16.5 20 18 16 14 12 10 8 6 4 2 0 DAYS 2 4 6 8 10 12 14 16 18 20 average

Figure 4.2.11 shows the share price of Longhorn Kenya limited in the year 2012 on 29th June as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns see appendix 12. From this study the share prices for longhorn Kenya before the profit warning increases for the first four days before fluctuating for the next 9 days with major differences and thereafter fluctuates more as it moves downwards. After the profit warning longhorn share prices decreases for the next 18 days with massive increases for the next one day before starting to drop again sharply.

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Figure 4.2.12: National Bank OF Kenya share prices trend 20 days before and 20 days after profit warning announcement.

National bank share price trend

25 20 SHARE PRICE 15 10 5 0 20 18 16 14 12 10 8 6 4 2 0 DAYS 2 4 6 8 10 12 14 16 18 20

AVERAGE

Figure 4.2.12 shows the share price of National Bank of Kenya in the year 2013 on 22th March as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns see appendix 13. From the results, it showed that national bank share prices fluctuates more on a increasing manner before the profit warning announcement and increases a while on profit warning before going to steady state for the next 16 days with insignificant percentage changes.

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Table 4.2.13: Mumias Sugar company share prices trend 20 days before and 20 days after profit warning announcement.

6 5 4 3 2 1 0

Mumias share price trend

SHARE PRICE

average

20 18 16 14 12 10 8

0 DAYS

8 10 12 14 16 18 20

Figure 4.2.13 shows the share price of Mumias Sugar Company in the year 2013 on 22nd February as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns, see appendix 14. Its clears that before the profit announcement, the share prices quoted in nairobi securities exchange was seen to be constant for the 20 days considered for this study before with minimal fluctuations and slight differences on the daily prices quoted. After the profit warning announcement the share prices increases and decreases at the same time with sharp increase and decrease on the 15th day before the prices starts to move much down.

39

Table 4.2.14: CFC Stanbic share prices trend 20 days before and 20 days after profit warning announcement.

CFC bank share price trend

82 80 78 76 Axis Title 74 72 70 68 66 64 62 60 20 18 16 14 12 10 8 6 4 2 0 2 4 6 8 10 12 14 16 18 20 Axis Title average

Figure 4.2.14 shows the share price of CFC Stanbic in the year 2006 on 31st January as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns, see appendix 15.

From the analysis, its very clear that cfc bank share prices before profit warnings fluctuates more with sharp increases and decreases at the same time before it start to move down completely on the 8th day. After the profit announcement the share prices moves downwards with major fluctuations but with insignificant increases compared to the decreases.

40

Table 4.2.15: Uchumi Kenya share prices trend 20 days before and 20 days after profit warning announcement.

Uchumi share price trend

25 20 SHARE PRICE 15 10 5 average 0 20 18 16 14 12 10 8 6 4 2 0 DAYS 2 4 6 8 10 12 14 16 18 20

Figure 4.2.15 shows the share price of Uchumi Super market limited in the year 2005 on 25th August as day 0, being the day the company issued the profit warning and for 41 day event window in the period under review. For more details about the share prices, the returns and cumulative returns, see appendix 16. From the findings, its evident that before the profits warning issue the share prices were constant from the 20 the day to 10th day, it starts to increase for 6 days before decreasing for 3 days. After the profit warning Uchumi share prices moves downwards but with minimal variation from the expected mean on the event day in particular.

41

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary and conclusion of findings The objective of the study was to investigate the impact of profit warning on the stock prices of the listed companies in Nairobi Security Exchange. From the analysis of the findings it was found that among the listed companies who declared profit warning between 2003-2013 East African breweries limited, Kakuzi tea and CFC bank have the highest stock prices on average. East African breweries limited has the highest quoted stock prices on average before profit warning issue. Mumias Sugar Company, Eveready, Access Kenya and Sameer Africa shows the lowest quoted stock prices in Nairobi stock exchange on average 20 days before profit warning declaration by company management. Most of the companies indicated moderate stock prices for the period under study. To elaborate further 20 days after companies profit warning declaration the share prices remains constant for most companies with minimal fluctuation in some companies. East African breweries limited, Kakuzi limited prices and CFC Stanbic, records the highest quoted stock prices for 20 days under consideration after profit warning with Mumias Sugar Limited, Eveready, Access Kenya, Sameer Africa and Sasini tea records the lowest quoted stock prices on average. From the literature review there is wide analysis and discussion concerning the profit warnings despite the emerging evidence on the randomness of stock prices changes, there were occasional instances of anomalous price behaviour, where certain series appeared to follow unpredictable paths. The study found that earning announcement may carry some enormous implications for the market and stock prices but it was hard to determine the magnitude of the impact because the period considered for the study was not representative. The findings showed statistically significant negative stock prices fluctuations despite to some companies remaining unchanged.

42

5.2 Policy recommendations This study recommends that the company managers should undertake their profit warnings openly to the public to increase their credibility. The fund managers need to come up with clear framework and tools to monitor performance of their business to decide on their portfolio mix and how returns should be expected. This study recommends that financial analyst should take more time to analyse the market to enable give accurate information to the public to help them make right decision. Theres also need for more training to the public on the effect and meaning of profit warning to investors who might not understand the implications associated and the best measures to take. This study also recommends that adequate information should be provided to the investors to help re-consider their decision on a particular company following profit warnings issued thereafter. Finally this study recommends that companies should give guidance, and thus not to issue profit warnings. The choice to not provide guidance is usually made to reduce legal liability in the event that management's estimates are wrong. Some analysts claim that companies that do not offer any guidance often receive a negative attitude which might ruin their reputation greatly thus affecting their performance. 5.3 Limitations for the study There were a number of limitations faced during the study. Firstly, the study covered a relative short period of 10 years. Therefore the trend exhibited in the returns may not adequately represent the other years that were not covered in the analysis. Limited time used and resource constraints, which is includes finances when collecting data for this study was inevitable and thus only listed companies were considered and involved in this study. The data was also costly to obtain as we were required to pay a substantial sum of money. This was because the N.S.E. price lists were available at a cost which we had to settle before acquisition. Another limitation in the course of the study was the limited access to the information especially the primary data which made this study to refocus on secondary data for this study.
43

Also the study was of 15 companies which is a relatively small sample in considering that NSE has 58 companies. This was occasioned by lack of information on profit warning announcements in some companies which was our sample selection criteria. Fifthly, the study was unable to consider a period of two years, 2007 and 2008. This was due to the effect of the post election violence experienced during that period that would have resulted to many profit warning announcements by companies that were unable to operate at this time. Another limitation is that historical stock prices and reports were not readily available for some companies listed at the Nairobi securities exchange that had issued profit warning.

Unlike the studies conducted in USA, Australia and Malaysia, the period of the study was relatively short and thus some results were not in consistent to the results obtained in developed markets.

5.4 Suggestions for further study This study suggests that analytical research should be undertaken to investigate the challenges that investors face on issue of profit warnings announcements. This study also suggests that more studies can be carried on to investigate the impact of profit warnings to the new investors and whole market in general. Another study can be carried on to establish the growth trend of the companies in the country in respect with the period that these companies have issued more than one profit warning consequently. This study can be further expanded in future in other areas like impact of merger/acquisitions, stock splits, sock repurchase, bonus issue and their impact on stock prices. Changes in dividend such as increases and omissions can also be studied. Finally another study can be carried on to advise investors on how to evaluate and establish the growth trend of a particular company before committing their resources.

44

References American Economic Review, American Economic Association, vol.71 Augustine .K. S. (2011), An empirical investigation of the information content of profit warnings announcement for companies quoted at the NSE Bamber, L.S (1986), The informational content of annual earnings releases: A trading volume approach. Journal of accounting research 24 Campbell John Y and ShillerRobert.J (1988), Stock prices, Earnings and Expected dividends, journal of finance 43 Chambers A.E and Pennman S.H (1984), Timeliness of reporting and stock price reaction to earnings announcement journal of accounting research. Cheng .Q and K.LO, 2006,Insider trading and voluntary disclosures ,journal of accounting research, forthcoming Ching D and J.Madura,2003, Profit Warnings and Timing, Financial review 38 Collet ,N,2004,Reactions to the London stock Exchange to company trading statement announcement, journal of finance and accounting 31 Damondaran, A,1989,The Weekend effect in information release: A study of earnings and dividend announcement , Review of financial studies 2 De Bondt, W.F.M.9 and R.H Thaler(1985) Does the stock market overreact ? Journal of Finance 40 Dickson J.P and Muragu K 1994, Market efficiency in developing countries; a case study o9f Nairobi stock exchange ;journal of Business Finance & Accounting vol 21
Easton, S., & Sinclair, N. (1989). The impact of unexpected earnings and dividends on abnomal returns to equity. Accounting and finance

ElayanF and Pakthuanthong K,2009Why warn?The impact of profit warnings on shareholders equity, journal of investment management and financial innovations volume 6 Fama .E and A Laffer,information and capital markets journal of business (1971) Fama,Eugene (1970), Efficient capital markets :A review of theory and empirical work, journal of finance 25 Frankel,R., M. McNichols,and G.P. Wilson(1995),Discretionary disclosure and external financing ,The accounting Review 70

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Helbok.Gand M.Walker,2003On the willingness UK companies to issue profit warnings: Regulartory, earnings surprise permanence, and agency costs effect, working paper, Manchesteschool of accounting and finance
Hussein, S., & AlBahsh, R. (2011). Testing the Efficient Market Hypothesis at the Semi Strong Level in Palestine Stock Exchange Event Study of the Mandatory Disclosure. International Research Journal of Finance and Economics , Issue 69.

Jackson .D and J Madura,2007,Impact of regulation fair disclosure on the information flow associated with profit warning ,journal of economics and finance 31 Jennings R and L Starks, Earnings announcement ,stock prices adjustment and existence of option market, journal of finance vol 12 (1986) Kamau D.S (2003),Turn of the month and January effects on stock prices at the NSE Kasznik ,R. and B.Lev(1995),To warn or not to warn: Management disclosures in the face of an earnings surprise,The Accounting Review 70 Ke,B., S.Huddart and K.Petroni(2003),What insiders know about the future earnings and how they use it; Evidence from insider trades, journal of accounting and economics 35 KiiioE ,2006, An empirical investigation into the market efficiency & the effect of cash dividends announcement on share of companies listed at the NSE KingoriE.N(1995),Stock market seasonalities at the NSE: An empirical study KiptooLinahMaina(2006), Information content on dividend announcement by companies quoted at the NSE KiweuJ.M,The behavior of share prices at the Nairobi Stock Exchange: An empirical investigation(1991)
Kong, S., & Taghavi, M. (2006). The Effect of Annual Earnings Announcements on the Chinese Stock Markets. International in Economic Research ,

Krassas I.(2006),Investporreactions, trading volume and EPS surprise: The case of profit warnings Krinsky I and J.Lee(1996) Earnings Announcement and the components of the Bid-Ask spread, journal of finance 51 Lang M and R.J Lundholm(2000),Voluntary disclosure and equity offerings: Reducing information asymmetry or hyping the stock. Contemporary accounting research 17

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Libby R and Tan H.T Analysts reactions to warnings of Negative Earnings surprises, journal of accounting research,(Auctum 1999)
Litner, J. (1962). Dividends, Earnings, Leverage, Stock prices, and the supply of Capital to coporations. Review of economics and Statistics McQueen, G., & Vance, V. R. (1993). Stock Prices, News and Business Conditions. Review of Financial Statistics Mehndiratta, N., & Gupta, S. (2010). Impact of dividend announcement on stock prices. International Journal of Information Technology and Knowledge Management

Mendenhall RR and W.D Nicholas(1988) Bad news and differential market reactions to announcements of earlier quarters versus fourth quarter earnings, journal of accounting research 26 Miya Gilbert(2007),Stock market behavior around national elections in Kenya NjiruJM(2007), Test for under-reaction to stock dividends announcement at the NSE Noe(1999), voluntary disclosures and insider transactions, journal of accounting and economic 27 OnyangoP.N(2004),Stock price responses to earnings announcements, evidence from the NSE
Raja, M., Sudhahar, C. J., & Selvam, M. (2009). Testing the Semi-Strong form Efficiency of Indian Stock Market. with Respect to Information Content of Stock Split Announcement A study in IT Industry. International Research Journal of Finance and Economics Rapach, D. (2002). The Long -Run Relationships between Inflation and Real stock Prices. Journal of Macroeconomis Ray, B., & Kothari, S. (1991). Security Returns and Earnings Announcement. The Accounting Review Rozeff, M., & Kinney, W. (1976). Capital market seasonality: The case of Stock Returns. The Journal of Finance and economics

Sharpe.W.F(1994)Capital asset prices: A theory of market equilibrium under conditions of risk journal of finance 19 Shiller Robert J(1981)Do stock prices move too much to be justified by subsequent changes in dividends? Skinner, D.J,1994,Why firms voluntarily disclose bad news, journal of accounting research 32
Syed, A. S., & Mustafa, K. (2001). Testing semi-strong form market efficiency. The Parkistan Development Review

47

Tucker .J.W 2007, Is openness penalized? stock returns around earnings warnings, The accounting Review 82. www.cma.co.ke www.nationmedia.com www.nse.co.ke

48

APPENDICES APPENDIX 1 LIST OF COMPANIES AND DATES OF PROFIT WARNING ANNOUNCEMENT DATE COMPANY
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 EAST AFRICAN BREWERIES LIMITED KENYA AIRWAYS CMC HOLDINGS LIMITED TOTAL KENYA LIMITED SAMEER AFRICA LIMITED SASINI LIMITED ACCESS KENYA GROUP LIMITED EVEREADY EAST AFRICA EAST AFRICAN CABLES KAKUZI LIMITED LONG HORN KENYA LIMITED NATIONAL BANK OF KENYA MUMIAS SUGAR COMPANY CFC BANK UCHUMI SUPERMARKET 30th JULY 2013 6th NOVEMBER 2012 7th OCTOBER 2011 29th JUNE 2012 29th JUNE 2012 2nd AUGUST 2012 12th JULY 2012 30th NOVEMBER 2010 14th JULY 2010 30th NOVEMBER 2012 29th JUNE 2012 22nd MACH 2013 22nd FEBRUARY 2013 31st JANUARY 2006 25th AUGUST 2005

49

APPENDIX 2 EAST AFRICAN BREWERIES LIMITED

DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

HIGH

LOW

PREVIOUS

AVERAGE

RETURN

CUMMULATIVE

325 325 325 328 328 331 340 350 350 348 345 346 350 352 355 352 355 360 357 352 355 345 345 346 345 340 340 339 339 336 336 334 330 330 320 320

320 325 324 324 320 325 331 335 335 343 344 345 345 348 349 350 347 352 342 321 346 328 335 335 335 336 331 335 335 335 331 330 325 320 305 305

325 324 325 325 326 327 329 335 343 344 344 344 345 348 349 351 350 351 346 352 346 329 335 339 345 344 339 339 338 337 335 334 330 327 321 314

322.5 325 324.5 326 324 328 335.5 342.5 342.5 345.5 344.5 345.5 347.5 350 352 351 351 356 349.5 336.5 350.5 336.5 340 340.5 340 338 335.5 337 337 335.5 333.5 332 327.5 325 312.5 312.5

-0.00769 0.003086 -0.00154 0.003077 -0.00613 0.003058 0.019757 0.022388 -0.00146 0.00436 0.001453 0.00436 0.007246 0.005747 0.008596 0 0.002857 0.014245 0.010116 -0.04403 0.013006 0.022796 0.014925 0.004425 -0.01449 -0.01744 -0.01032 -0.0059 -0.00296 -0.00445 -0.00448 -0.00599 -0.00758 -0.00612 -0.02648 -0.00478

-0.00769 -0.00461 -0.00614 -0.00307 -0.0092 -0.00614 0.013613 0.036001 0.034543 0.038903 0.040357 0.044717 0.051964 0.057711 0.066307 0.066307 0.069164 0.083409 0.093525 0.04949 0.062496 0.085293 0.100218 0.104643 0.09015 0.072708 0.062384 0.056484 0.053525 0.049074 0.044597 0.038609 0.031033 0.024917 -0.00156 -0.00634

50

APPENDIX 3
DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

KENYA AIRWAYS
LOW PREVIOUS AVERAGE RETURN CUMMULATIVE

HIGH

12 11.9 11.9 12 11.95 12 12 12.1 12.5 12.7 12.5 12.8 12.7 12.7 12.65 12.4 12.5 12.5 12.5 12.45 12 11.7 12 11.8 12.4 12.3 12.5 12.5 12.5 12.5 12.3 12.4 12.4 12.3 12.4 12.4 12.4 12.2 12 12 11.6

11.7 11.7 11.75 11.75 11.7 12.7 11.7 11.8 12 12.1 12.3 12 12 12.15 12.1 12.3 12.3 12.3 12.25 11.8 11.2 11.05 11.25 11.55 11.6 12 12 12 12 11.85 12.1 12.05 12.15 12.15 12 12.05 12.1 11.7 11.5 10.5 11

11.75 11.75 11.75 11.75 11.8 11.75 11.8 11.95 12 12 12.45 12.45 12.05 12.4 12.5 12.45 12.45 12.35 12.35 11.25 12 11.4 11.2 11.7 11.7 11.9 12.2 12.25 12.4 12.2 12.1 12.05 12.2 12.2 12.2 12.2 12.2 12.1 11.9 11.6 11.3

11.85 11.8 11.825 11.875 11.825 12.35 11.85 11.95 12.25 12.4 12.4 12.4 12.35 12.425 12.375 12.35 12.4 12.4 12.375 12.125 11.6 11.375 11.625 11.675 12 12.15 12.25 12.25 12.25 12.175 12.2 12.225 12.275 12.225 12.2 12.225 12.25 11.95 11.75 11.25 11.3

0.008511 0.004255 0.006383 0.010638 0.002119 0.051064 0.004237 0 0.020833 0.033333 -0.00402 -0.00402 0.024896 0.002016 -0.01 -0.00803 -0.00402 0.004049 0.002024 0.077778 -0.03333 -0.00219 0.037946 -0.00214 0.025641 0.021008 0.004098 0 -0.0121 -0.00205 0.008264 0.014523 0.006148 0.002049 0 0.002049 0.004098 -0.0124 -0.01261 -0.03017 0

0.008511 0.012766 0.019149 0.029787 0.031906 0.08297 0.087207 0.087207 0.10804 0.141374 0.137358 0.133342 0.158238 0.160254 0.150254 0.142222 0.138206 0.142254 0.144279 0.222056 0.188723 0.18653 0.224477 0.22234 0.247981 0.268989 0.273088 0.273088 0.260991 0.258942 0.267206 0.281729 0.287876 0.289926 0.289926 0.291975 0.296073 0.283676 0.271071 0.240899 0.240899

51

APPENDIX 4
DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

CMC HOLDING LIMITED

LOW PREVIOUS AVERAGE RETURN CUMMULATIVE

HIGH

10.7 10.5 11 11 10.55 10.5 10.5 10.35 10.55 10.75 10.55 10.8 11.45 11.5 11.45 11.5 11 11.6 11.1 11.25 11 10.5 11 10.75 10.3 10.5 10.75 10.5 10.5 11 10.75 10.65 10.7 10.95 11.5 11.5 12.76 11.5 11.5 11.5 11.5

10.1 10.1 10.2 10.1 10.4 10.3 10 10.05 10 10.05 10.2 10.2 10.9 11.4 11.05 11 10 10.6 11 10.8 10.6 10 9.9 9.8 10.1 10.15 10.35 10.35 10.35 10.3 10.45 10.4 10.5 10.6 10.7 11.1 10.44 11.2 11.2 11.2 11.2

10.1 10.2 10.2 10.35 10.15 10.5 10.4 10.2 10.1 10.1 10.25 10.2 10.7 11 11.05 11.45 11 10.6 11.3 11 11 10.75 10.15 10.05 10.15 10.25 10.35 10.35 10.45 10.45 10.4 10.55 10.55 10.55 10.7 11 10.21 11.6 11.35 11.4 11.2

10.4 10.3 10.6 10.55 10.475 10.4 10.25 10.2 10.275 10.4 10.375 10.5 11.175 11.45 11.25 11.25 10.5 11.1 11.05 11.025 10.8 10.25 10.45 10.275 10.2 10.325 10.55 10.425 10.425 10.65 10.6 10.525 10.6 10.775 11.1 11.3 11.6 11.35 11.35 11.35 11.35

0.029703 0.009804 0.039216 0.019324 0.03202 -0.00952 -0.01442 0 0.017327 0.029703 0.012195 0.029412 0.044393 0.040909 0.0181 -0.01747 -0.04545 0.04717 -0.02212 0.002273 -0.01818 -0.04651 0.029557 0.022388 0.004926 0.007317 0.019324 0.007246 -0.00239 0.019139 0.019231 -0.00237 0.004739 0.021327 0.037383 0.027273 0.136141 -0.02155 0 -0.00439 0.013393

0.039507 0.04902 0.058539 0.051343 0.022496 -0.02395 -0.01442 0.017327 0.04703 0.041898 0.041607 0.073804 0.085302 0.059009 0.000632 -0.06292 0.001715 0.025046 -0.01985 -0.01591 -0.06469 -0.01695 0.051945 0.027314 0.012243 0.026641 0.02657 0.004854 0.016746 0.03837 0.016861 0.00237 0.026066 0.05871 0.064656 0.163414 0.114589 -0.02155 -0.00439 0.009007 0.013393

52

APPENDIX 5
DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

TOTAL KENYA LIMITED

LOW PREVIOUS AVERAGE RETURN CUMMULATIVE

HIGH

15.6 16 15.9 16 16 16 16 16 16 15.5 15.5 16 15.95 15.95 15.65 15.65 15.35 15.1 15.6 15.8 15.9 15.5 15.5 15.5 15.45 15 16 15.5 15.45 15.5 15.45 15.8 15.45 15.5 15.45 15.5 15.8 15.8 15.85 16 16

15.6 15.9 15.5 15.9 15.6 16 16 16 15 14.9 15 16 15 15.35 15.65 15.4 15 15.05 15.5 15.6 15.05 15.4 16.1 15.4 15.45 13.24 15.5 15.4 15.3 15.45 15.45 15.45 15.4 15.4 15.45 15.45 15.45 15.5 15.5 15.55 15.55

15.55 15.95 15.9 15.6 15.95 15.9 16 16 16 15.5 15.1 15.1 16 15.35 15.65 15.65 15.55 15.6 15.05 15.6 15.75 15.45 15.45 15.45 15.45 16 15.25 15.8 15.45 15.35 15.5 15.45 15.5 15.4 15.45 15.45 15.5 15.3 15.55 15.7 16

15.6 15.95 15.7 15.95 15.8 16 16 16 15.5 15.2 15.25 16 15.475 15.65 15.65 15.525 15.175 15.075 15.55 15.7 15.475 15.45 15.8 15.45 15.45 14.12 15.75 15.45 15.375 15.475 15.45 15.625 15.425 15.45 15.45 15.475 15.625 15.65 15.675 15.775 15.775

0.003215 0 -0.01258 0.022436 -0.0094 0.006289 0 0 -0.03125 -0.01935 0.009934 0.059603 -0.03281 0.019544 0 -0.00799 -0.02412 -0.03365 0.033223 0.00641 -0.01746 0 0.022654 0 0 -0.1175 0.032787 -0.02215 -0.00485 0.008143 -0.00323 0.011327 -0.00484 0.003247 0 0.001618 0.008065 0.022876 0.008039 0.004777 -0.01406

0.003215 0.003215 -0.00936 0.013073 0.003668 0.009958 0.009958 0.009958 -0.02129 -0.04065 -0.03071 0.028889 -0.00392 0.015621 0.015621 0.007633 -0.01648 -0.05014 -0.01691 -0.0105 -0.02796 -0.02796 -0.00531 -0.00531 -0.00531 -0.12281 -0.09002 -0.11217 -0.11703 -0.10889 -0.11211 -0.10078 -0.10562 -0.10238 -0.10238 -0.10076 -0.09269 -0.06982 -0.06178 -0.057 -0.07107

53

APPENDIX 6
DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

SAMEER AFRICA LIMITED

LOW PREVIOUS AVERAGE RETURN CUMMULATIVE

HIGH

4.8 4.65 4.9 4.9 4.9 4.8 4.65 4.6 4.6 4.5 4.5 4.2 4.2 4.2 4.2 4.15 4.2 4.2 4.2 4.2 4.2 4.15 4.15 4.15 4.15 4.1 4.2 4.2 4.1 4.2 4.2 4 4 4 4.1 4 4 4.1 4.2 4 4

4.5 4.65 4.65 4.65 4.7 4.65 4.3 4.45 4.5 4.14 4.15 4.2 4.2 4.1 4 4.1 4 4 4 4 4.1 4.1 4.1 4 4 3.65 4.1 4.1 4 4.1 4.1 3.9 3.9 4.15 4 3.95 3.9 3.95 3.9 3.95 3.954

4.5 4.65 4.65 4.7 4.75 4.75 4.65 4.45 4.5 4.5 4.4 4.2 4.2 4.2 4.2 4.15 4.1 4.1 4 4.05 4.1 4.15 4.1 4.1 4.1 4 4.15 4.15 4.1 4 4.15 3.1 4 3.9 4 4 3.95 3.95 4 3.95 4

4.65 4.65 4.775 4.775 4.8 4.725 4.475 4.525 4.55 4.32 4.325 4.2 4.2 4.15 4.1 4.125 4.1 4.1 4.1 4.1 4.15 4.125 4.125 4.075 4.075 3.875 4.15 4.15 4.05 4.15 4.15 3.95 3.95 4.075 4.05 3.975 3.95 4.025 4.05 3.975 3.977

0.033333 0 0.026882 0.015957 0.010526 -0.00526 -0.03763 0.016854 0.011111 -0.04 -0.01705 0 0 -0.0119 -0.02381 -0.00602 0 0 0.025 0.012346 0.012195 -0.00602 0.006098 -0.0061 -0.0061 -0.03125 0 0 -0.0122 0.0375 0 0.274194 -0.0125 0.044872 0.0125 -0.00625 0 0.018987 0.0125 0.006329 -0.00575

0.033333 0.033333 0.060215 0.076173 0.086699 0.081436 0.043801 0.060655 0.071766 0.031766 0.014721 0.014721 0.014721 0.002816 -0.02099 -0.02702 -0.02702 -0.02702 -0.00202 0.010328 0.022523 0.016499 0.022597 0.016499 0.010402 -0.02085 -0.02085 -0.02085 -0.03304 0.004456 0.004456 0.27865 0.26615 0.311022 0.323522 0.317272 0.317272 0.336259 0.348759 0.355088 0.349338

54

APPENDIX 7
DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

SASINI LIMITED
LOW PREVIOUS AVERAGE RETURN CUMMULATIVE

HIGH

12.5 12.3 12.45 12.45 12.05 12.1 12.6 12.6 12.5 12.4 12.4 12.4 12.3 12.35 12.6 13 12.5 13 12.6 12.35 12.5 11.2 12.5 11.2 11.5 11.5 11.9 11.5 11.25 11.5 11.5 11.5 11.5 11.3 11.2 11.25 11.85 11.6 11.55 11.7 11.55

12.25 11.55 11.65 11.85 12.05 12.05 12.3 12.3 12.3 12.3 12.3 12.1 12.3 12.3 12.5 12.5 12.5 12.5 11.7 12 11.65 10.85 12 10.85 11.1 11.1 11.15 11.1 11.25 11.15 11.15 11.15 11.15 11.2 11.15 11.15 11.2 11.4 1.5 11.55 11.4

12.45 12.25 12.4 12.05 12.05 12.05 12.35 12.4 12.35 12.4 12.35 12.35 12.1 12.3 12.3 12.55 12.95 12.5 12.55 12.15 12.05 11 12.3 11 11.05 11.1 11.2 11.25 11.1 11.25 11.2 11.2 11.35 11.3 11.2 11.15 11.2 11.4 11.4 11.55 11.55

12.375 11.925 12.05 12.15 12.05 12.075 12.45 12.45 12.4 12.35 12.35 12.25 12.3 12.325 12.55 12.75 12.5 12.75 12.15 12.175 12.075 11.025 12.25 11.025 11.3 11.3 11.525 11.3 11.25 11.325 11.325 11.325 11.325 11.25 11.175 11.2 11.525 11.5 6.525 11.625 11.475

-0.00602 -0.02653 -0.02823 0.008299 0 0.002075 0.008097 0.004032 0.004049 -0.00403 1.44E-16 -0.0081 0.016529 0.002033 0.020325 0.015936 -0.03475 0.02 -0.03187 0.002058 0.002075 0.002273 -0.00407 0.002273 0.022624 0.018018 0.029018 0.004444 0.013514 0.006667 0.011161 0.011161 -0.0022 -0.00442 -0.00223 0.004484 0.029018 0.008772 -0.42763 0.006494 -0.00649

-0.00602 -0.03255 -0.06078 -0.05248 -0.05248 -0.05041 -0.04231 -0.03828 -0.03423 -0.03826 -0.03826 -0.04636 -0.02983 -0.0278 -0.00747 0.008464 -0.02628 -0.00628 -0.03816 -0.0361 -0.03402 -0.03175 -0.03582 -0.03354 -0.01092 0.007098 0.036116 0.04056 0.054074 0.060741 0.071901 0.083062 0.080859 0.076435 0.074202 0.078687 0.107705 0.116476 -0.31116 -0.30466 -0.31116

55

APPENDIX 8 ACCESS KENYA GROUP LIMITED

DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

HIGH

LOW

PREVIOUS

AVERAGE

RETURN

CUMMULATIVE

5.6 5.25 5.2 5.1 5.1 5.1 5.1 5 5 5 4.95 4.85 4.85 5 4.9 5.1 5.2 5.1 5.1 4.9 5 4.95 5 5 5 5 4.85 4.85 5 5.2 5.2 5.1 5.2 5.1 5.05 5 5 4.9 5 5.1 4.95

4.95 5.05 5.05 5.8 4.75 5 4.9 4.8 4.95 4.7 4.7 4.7 4.7 4.7 4.75 4.9 5 5 4.65 4.75 4.75 4.9 4.8 4.75 4.75 4.7 4.7 4.7 4.75 5 4.9 5 5.05 5 4.8 4.75 4.9 4.75 4.75 4.8 4.8

5.5 5.4 5.15 5.1 5.1 4.85 4.9 4.95 4.85 5 4.8 4.75 4.75 4.75 4.75 4.8 5 4.75 5 4.75 4.8 4.85 4.9 4.8 4.75 4.8 4.75 4.7 4.75 4.85 5.1 5.05 5.05 5.1 5 4.95 4.95 4.75 4.8 4.9 4.9

5.275 5.15 5.125 5.45 4.925 5.05 5 4.9 4.975 4.85 4.825 4.775 4.775 4.85 4.825 5 5.1 5.05 4.875 4.825 4.875 4.925 4.9 4.875 4.875 4.85 4.775 4.775 4.875 5.1 5.05 5.05 5.125 5.05 4.925 4.875 4.95 4.825 4.875 4.95 4.875

-0.04091 -0.0463 -0.00485 0.068627 -0.03431 0.041237 0.020408 -0.0101 0.025773 -0.03 0.005208 0.005263 0.005263 0.021053 0.015789 0.041667 0.02 0.063158 -0.025 0.015789 0.015625 0.015464 0 0.015625 0.026316 0.010417 0.005263 0.015957 0.026316 0.051546 -0.0098 0 0.014851 -0.0098 -0.015 -0.01515 0 0.015789 0.015625 0.010204 -0.0051

-0.04091 -0.08721 -0.09206 -0.02343 -0.05775 -0.01651 0.003899 -0.0062 0.019571 -0.01043 -0.00522 4.29E-05 0.005306 0.026359 0.042148 0.083815 0.103815 0.166973 0.141973 0.157762 0.173387 0.188851 0.188851 0.204476 0.230792 0.241209 0.246472 0.262429 0.288745 0.340291 0.330487 0.330487 0.345339 0.335535 0.320535 0.305384 0.305384 0.321173 0.336798 0.347002 0.3419

56

APPENDIX 9 EVEREADY EAST AFRICA LIMITED

DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

HIGH

LOW

PREVIOUS

AVERAGE

RETURN

CUMMULATIVE

3.7 3.6 3.7 3.6 3.65 3.75 3.6 3.55 3.55 3.6 3.5 3.5 3.4 3.4 3.15 3.15 3.2 3.2 3.2 3 3 2.75 2.9 3 3.2 3.2 3.2 3.2 3.2 3.1 3.19 3 3 3 3 3 3.1 3.3 3.35 3.4 3.4

3.4 3.5 3.55 3.45 3.5 3.45 3.4 3.4 3.4 3.4 3.35 3.15 3.1 3 3 3 3 3 3 3 1.65 2.5 2.75 2.9 2.95 2.95 3.1 3 3 2.95 2.9 2.8 2.9 2.9 2.9 2.9 3.9 3 3 3.35 3.1

3.6 3.45 3.5 3.6 3.5 3.5 3.6 3.5 3.45 3.4 3.45 3.4 3.4 3.15 3.1 3.05 3.1 3.1 3 3.05 3 2.5 2.65 2.8 2.95 3.05 3.1 3.15 2.95 2.95 2.61 2.9 2.85 2.9 2.9 2.9 2.95 3 3.25 3.05 3.35

3.55 3.55 3.625 3.525 3.575 3.6 3.5 3.475 3.475 3.5 3.425 3.325 3.25 3.2 3.075 3.075 3.1 3.1 3.1 3 2.325 2.625 2.825 2.95 3.075 3.075 3.15 3.1 3.1 3.025 3.045 2.9 2.95 2.95 2.95 2.95 3.5 3.15 3.175 3.375 3.25

-0.01389 0.028986 0.035714 -0.02083 0.021429 0.028571 -0.02778 -0.00714 0.007246 0.029412 -0.00725 -0.02206 -0.04412 0.015873 -0.00806 0.008197 0 0 0.033333 -0.01639 -0.225 0.05 0.066038 0.053571 0.042373 0.008197 0.016129 -0.01587 0.050847 0.025424 0.166667 0 0.035088 0.017241 0.017241 0.017241 0.186441 0.05 -0.02308 0.106557 -0.02985

-0.01389 0.015097 0.050811 0.029978 0.051406 0.079978 0.0522 0.045057 0.052303 0.081715 0.074469 0.05241 0.008292 0.024165 0.016101 0.024297 0.024297 0.024297 0.057631 0.041237 -0.18376 -0.13376 -0.06772 -0.01415 0.028219 0.036416 0.052545 0.036672 0.08752 0.112943 0.27961 0.27961 0.314698 0.331939 0.34918 0.366422 0.552863 0.602863 0.579786 0.686343 0.656492

57

APPENDIX 10
DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

EAST AFRICAN CABLES LIMITED

LOW PREVIOUS AVERAGE RETURN CUMMULATIVE

HIGH

21.5 21.5 21.5 21 21 20.25 20.5 21 21.5 20.75 205 20.25 20.5 20.5 20.5 20.5 20.5 20.5 20.25 21 20.5 20.5 22.25 20.25 20 20 20.5 20 19.5 19.5 19.45 19.5 19.5 19.5 19.5 19.55 19 19.4 19 18.9 19

21 21 21 20 20 19.4 19.5 20 20 20 20.25 20 20 20 20 20.25 20.25 20.25 20.25 20.25 20.25 20.5 20.5 18 19.2 19.3 19.5 19 19 19 18.5 18.5 19 19 18.75 18.75 18.8 19 18.7 18.5 18.5

21.5 21.25 21 21 20.5 20.25 19.95 19.9 21.25 20.25 20.25 20.25 20 20 20.25 20.25 20.25 20.25 20.25 20.25 20.25 20.25 20.25 21.75 19.95 19.5 19.75 20.25 19.4 19.45 19.4 19.1 19 19.25 19 18.75 19 19 19.05 18.85 18.5

21.25 21.25 21.25 20.5 20.5 19.825 20 20.5 20.75 20.375 112.625 20.125 20.25 20.25 20.25 20.375 20.375 20.375 20.25 20.625 20.375 20.5 21.375 19.125 19.6 19.65 20 19.5 19.25 19.25 18.975 19 19.25 19.25 19.125 19.15 18.9 19.2 18.85 18.7 18.75

-0.01163 0 0.011905 -0.02381 0 -0.02099 0.002506 0.030151 -0.02353 0.006173 4.561728 -0.00617 0.0125 0.0125 0 0.006173 0.006173 0.006173 0 0.018519 0.006173 0.012346 0.055556 -0.12069 -0.01754 0.007692 0.012658 -0.03704 -0.00773 -0.01028 -0.02191 -0.00524 0.013158 0 0.006579 0.021333 -0.00526 0.010526 -0.0105 -0.00796 0.013514

-0.01163 -0.01163 0.000277 -0.02353 -0.02353 -0.04452 -0.04201 -0.01186 -0.03539 -0.02922 4.532509 4.526336 4.538836 4.551336 4.551336 4.557509 4.563681 4.569854 4.569854 4.588373 4.594546 4.606891 4.662447 4.541757 4.524213 4.531906 4.544564 4.507527 4.499795 4.489512 4.467605 4.462369 4.475527 4.475527 4.482106 4.503439 4.498176 4.508703 4.498204 4.490246 4.50376

58

APPENDIX 11 KAKUZI LIMITED

DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

HIGH

LOW

PREVIOUS

AVERAGE

RETURN

CUMMULATIVE

73 73 71 73 70 71 71 71 71 71 71 72 72 71 71 70 70 72 71 70 68 70 73 72 70 68 70 69 67.5 70 68 70 71 70 70 71 69 70 72 72 67.5

70 72 71 70 70 70 71 70 71 71 70 71 71 70 70 70 70 70 70 70 68 68 71 69 68 66 68 68 67.5 67.5 67.5 69 70 69 69 70 69 69 71 72 67.5

70 72 71 71 70 70 70 71 71 71 71 70 71.5 71 70 70 70 70 70 70 70 68 71 79 68 68 68 70 70 67.5 67.5 67.5 69 69 69 69 69 69 69 69 72

71.5 72.5 71 71.5 70 70.5 71 70.5 71 71 70.5 71.5 71.5 70.5 70.5 70 70 71 70.5 70 68 69 72 70.5 69 67 69 68.5 67.5 68.75 67.75 69.5 70.5 69.5 69.5 70.5 69 69.5 71.5 72 67.5

0.021429 0.006944 0 0.007042 0 0.007143 0.014286 -0.00704 0 0 -0.00704 0.021429 0 -0.00704 0.007143 0 0 0.014286 0.007143 0 -0.02857 0.014706 0.014085 -0.10759 0.014706 -0.01471 0.014706 -0.02143 -0.03571 0.018519 0.003704 0.02963 0.021739 0.007246 0.007246 0.021739 0 0.007246 0.036232 0.043478 -0.0625

0.021429 0.028373 0.028373 0.035415 0.035415 0.042558 0.056844 0.049802 0.049802 0.049802 0.042759 0.064188 0.064188 0.057146 0.064289 0.064289 0.064289 0.078574 0.085717 0.085717 0.057146 0.071852 0.085936 -0.02166 -0.00695 -0.02166 -0.00695 -0.02838 -0.0641 -0.04558 -0.04187 -0.01224 0.009495 0.016741 0.023988 0.045727 0.045727 0.052973 0.089205 0.132684 0.070184

59

APPENDIX 12 LONGHORN KENYA LIMITED

DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

HIGH

LOW

PREVIOUS

AVERAGE

RETURN

CUMMULATIVE

19.5 17.75 19.5 18.25 20 20 20 20 20 20 19.5 20 19.5 19.5 19.5 19 19 20 19.45 21 20 19 19 19.35 18.5 18.5 18.4 18.45 18.45 18.3 18.3 18.3 18.3 18.3 18.5 18.3 19 18.55 21 18.3 20

18.25 17.75 18 18.25 18 20 18 19.25 20 19.75 19.5 20 19.5 19.5 19.5 19 18 19 19.45 19 18 19 18 18.4 18.5 18.5 18.4 18.4 18.4 18.3 18.3 18.3 18.3 18.3 18 18.3 18.5 18.3 19 18.35 19

18.25 16.15 17.25 18.25 18.25 19.5 18 19.25 19.75 20 19.9 19.5 20 19.5 19.5 19.5 17.45 19.45 19 19.5 19.5 18.5 18.15 18.4 18.65 18.5 18.3 18.4 18.45 18.45 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.35 18.35 18.3

18.875 17.75 18.75 18.25 19 20 19 19.625 20 19.875 19.5 20 19.5 19.5 19.5 19 18.5 19.5 19.45 20 19 19 18.5 18.875 18.5 18.5 18.4 18.425 18.425 18.3 18.3 18.3 18.3 18.3 18.25 18.3 18.75 18.425 20 18.325 19.5

0.034247 0.099071 0.086957 0 0.041096 0.025641 0.055556 0.019481 0.012658 -0.00625 -0.0201 0.025641 -0.025 0 0 -0.02564 0.060172 0.002571 0.023684 0.025641 -0.02564 0.027027 0.019284 0.025815 -0.00804 0 0.005464 0.001359 -0.00136 -0.00813 0 0 0 0 -0.00273 0 0.02459 0.006831 0.089918 -0.00136 0.065574

0.034247 0.133318 0.220274 0.220274 0.26137 0.287011 0.342567 0.362047 0.374706 0.368456 0.348355 0.373996 0.348996 0.348996 0.348996 0.323355 0.383527 0.386098 0.409782 0.435423 0.409782 0.436809 0.456093 0.481908 0.473865 0.473865 0.479329 0.480688 0.479333 0.471203 0.471203 0.471203 0.471203 0.471203 0.468471 0.468471 0.493061 0.499892 0.58981 0.588447 0.654021

60

APPENDIX 13 NATIONAL BANK OF KENYA

DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

HIGH

LOW

PREVIOUS

AVERAGE

RETURN

CUMMULATIVE

18 19.5 19.1 18.3 18 18 18.75 19.1 19.5 19.05 19.15 19.1 21 22.25 24 22 21.75 22 22.5 23 23 20.75 20 21.25 22.5 24.25 23.25 22.75 22.75 23.25 23 23 23 23 22.75 22.75 23 23 23 23 22.75

16.9 18.9 17.25 17.5 16.5 16.9 18 18.1 19 18.9 19 19.1 19.1 20.5 20.5 20 20.5 20.75 20.75 21.5 22 18.5 18.75 19.75 22 21 21.5 21 21 21.5 22.75 22.75 22.75 22.5 22.5 22.5 22.5 22.5 22.75 22.5 22

16.6 19.15 19.05 17.9 17.9 16.6 17.65 19.15 18.65 19.1 18.95 19.1 19.1 20.25 22 21.75 20.25 21 21.25 22 22.25 22.5 20.25 19.35 20.5 22.5 23 22.5 21.5 22 22.25 22.75 22.75 22.75 22.5 22.5 22.5 22.75 22.5 22.75 22.5

17.45 19.2 18.175 17.9 17.25 17.45 18.375 18.6 19.25 18.975 19.075 19.1 20.05 21.375 22.25 21 21.125 21.375 21.625 22.25 22.5 19.625 19.375 20.5 22.25 22.625 22.375 21.875 21.875 22.375 22.875 22.875 22.875 22.75 22.625 22.625 22.75 22.75 22.875 22.75 22.375

0.051205 0.002611 -0.04593 0 -0.03631 0.051205 0.041076 -0.02872 0.032172 -0.00654 0.006596 0 0.049738 0.055556 0.011364 -0.03448 0.04321 0.017857 0.017647 0.011364 0.011236 -0.12778 -0.04321 0.059432 0.085366 0.005556 -0.02717 -0.02778 0.017442 0.017045 0.02809 0.005495 0.005495 0 0.005556 0.005556 0.011111 0 0.016667 0 -0.00556

0.051205 0.053816 0.007884 0.007884 -0.02843 0.022776 0.063852 0.035132 0.067303 0.060759 0.067355 0.067355 0.117093 0.172649 0.184013 0.14953 0.19274 0.210597 0.228244 0.239608 0.250844 0.123066 0.079856 0.139287 0.224653 0.230209 0.203035 0.175257 0.192699 0.209744 0.237834 0.243329 0.248823 0.248823 0.254379 0.259934 0.271046 0.271046 0.287712 0.287712 0.282157

61

APPENDIX 14 MUMIAS SUGAR COMPANY LIMITED

DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

HIGH

LOW

PREVIOUS

AVERAGE

RETURN

CUMMULATIVE

5.1 5.15 5.15 5.15 5.1 5.05 5.05 5.05 5 5 5.05 5.05 5 5 5 5 5 5 5 4.8 4.75 4.95 4.85 4.95 4.74 4.35 4.6 4.6 4.85 4.9 4.9 4.85 4.9 4.8 4.75 4.7 4.8 4.7 4.65 4.65 4.6

5.95 5.05 5 5 4.95 5 4.95 4.95 4.95 4.95 5 4.95 4.9 4.9 4.95 4.95 4.95 4.95 4.6 4.65 4.65 4.7 4.7 4.75 4 4.15 4.3 4.3 4.45 4.5 4.65 4.7 4.55 4.55 4.6 5.45 4.55 4.55 4.55 4.4 4.35

5.95 5 5.05 5.05 5.05 5.05 5 5 5 4.95 5 5 4.95 4.95 4.95 4.95 5 4.95 4.95 4.8 4.75 4.65 4.75 4.7 4.85 4.2 4.2 4.55 4.45 4.5 4.8 4.8 4.75 4.7 4.6 4.65 4.6 4.6 4.6 4.45 4.5

5.525 5.1 5.075 5.075 5.025 5.025 5 5 4.975 4.975 5.025 5 4.95 4.95 4.975 4.975 4.975 4.975 4.8 4.725 4.7 4.825 4.775 4.85 4.37 4.25 4.45 4.45 4.65 4.7 4.775 4.775 4.725 4.675 4.675 5.075 4.675 4.625 4.6 4.525 4.475

-0.07143 0.02 0.00495 0.00495 -0.00495 -0.00495 0 0 -0.005 0.005051 0.005 0 0 0 0.005051 0.005051 -0.005 0.005051 -0.0303 -0.01563 -0.01053 0.037634 0.005263 0.031915 -0.09897 0.011905 0.059524 -0.02198 0.044944 0.044444 -0.00521 -0.00521 -0.00526 -0.00532 0.016304 0.091398 0.016304 0.005435 0 0.016854 -0.00556

-0.07143 -0.05143 -0.04648 -0.04153 -0.04648 -0.05143 -0.05143 -0.05143 -0.05643 -0.05138 -0.04638 -0.04638 -0.04638 -0.04638 -0.04133 -0.03628 -0.04128 -0.03623 -0.06653 -0.08215 -0.09268 -0.05505 -0.04978 -0.01787 -0.11684 -0.10493 -0.04541 -0.06739 -0.02244 0.022001 0.016793 0.011585 0.006321 0.001002 0.017307 0.108705 0.125009 0.130444 0.130444 0.147298 0.141742

62

APPENDIX 15 CFC STANBIC

DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

HIGH

LOW

PREVIOUS

AVERAGE

RETURN

CUMMULATIVE

75 79 79.9 79 81 80 75 75 75.5 75 75 80 75 75 75 76 77 76 78 77 76 75 77 75 76 77 75 74 73 72 71 74.5 75 72.5 75 71.5 71 71 69 70 68

73 75 76.5 79 76.5 78 75 74.5 73 75 75 79 75 72 74.5 73 76 74.5 76.5 74 75 75 76 74.5 76 74 75 72 70 69.5 71 71.5 71.5 72.5 72.1 71 70 70 66.5 67.5 68

75 74 76.5 79 79 77.5 75 75 74.5 73 75 79 75 75 74.5 74.5 74.5 76 74.5 77.5 77.5 75 75 76 74.5 76 75.5 75 75 75 71.5 71 73.5 74.5 72.5 72.5 71 70 70 68 69

74 77 78.2 79 78.75 79 75 74.75 74.25 75 75 79.5 75 73.5 74.75 74.5 76.5 75.25 77.25 75.5 75.5 75 76.5 74.75 76 75.5 75 73 71.5 70.75 71 73 73.25 72.5 73.55 71.25 70.5 70.5 67.75 68.75 68

-0.01333 0.040541 0.022222 0 -0.00316 0.019355 0 -0.00333 -0.00336 0.027397 0 0.006329 0 -0.02 0.003356 0 0.026846 -0.00987 0.036913 -0.02581 -0.02581 0 0.02 -0.01645 0.020134 -0.00658 -0.00662 -0.02667 -0.04667 -0.05667 -0.00699 0.028169 -0.0034 -0.02685 0.014483 -0.01724 -0.00704 0.007143 -0.03214 0.011029 -0.01449

-0.01333 0.027207 0.049429 0.049429 0.046265 0.06562 0.06562 0.062286 0.058931 0.086328 0.086328 0.092657 0.092657 0.072657 0.076013 0.076013 0.102858 0.09299 0.129903 0.104096 0.07829 0.07829 0.09829 0.081842 0.101977 0.095398 0.088775 0.062109 0.015442 -0.04122 -0.04822 -0.02005 -0.02345 -0.0503 -0.03581 -0.05305 -0.0601 -0.05295 -0.0851 -0.07407 -0.08856

63

APPENDIX 16 UCHUMI SUPER MARKET

DAYS
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

HIGH

LOW

PREVIOUS

AVERAGE

RETURN

CUMULATIVE

16 16 16 16 16 16 16.05 16 16.25 16.55 16.8 16.5 17.65 19.4 21.25 23 23 22 22 20 17.95 18 17.65 16.95 15.5 15.1 15.05 14.9 14.9 14.55 15 13.15 12.85 12 12.25 12.55 11.65 11.85 11 11 11.7

15.95 15.2 15.85 15.9 15.75 15.8 16 16 16 16 16.5 16 17.65 19.4 18.9 20.25 21 20 19.8 19.4 17.95 17.8 16.2 13 15.5 15 14.7 14.7 14.5 13.9 14 13.1 12.35 11.5 12.25 11.95 10.8 11 11 11 11

16.05 16 15.85 15.9 15.95 16 16 16 16 16 16.15 16.5 16.05 17.65 19.4 21 22 21.75 21 19.95 19 17.95 17.95 16.3 15.2 15.5 15.05 14.9 14.9 14.9 14.5 14.5 13.1 12.5 12.25 12.25 11.45 12.2 11.1 11 11

15.975 15.6 15.925 15.95 15.875 15.9 16.025 16 16.125 16.275 16.65 16.25 17.65 19.4 20.075 21.625 22 21 20.9 19.7 17.95 17.9 16.925 14.975 15.5 15.05 14.875 14.8 14.7 14.225 14.5 13.125 12.6 11.75 12.25 12.25 11.225 11.425 11 11 11.35

-0.00467 -0.025 0.004732 0.003145 -0.0047 -0.00625 0.001562 0 0.007813 0.017187 0.03096 -0.01515 0.099688 0.09915 0.034794 0.029762 0 -0.03448 -0.00476 -0.01253 -0.05526 -0.00279 -0.0571 -0.08129 0.019737 -0.02903 -0.01163 -0.00671 -0.01342 -0.0453 0 -0.09483 -0.03817 -0.06 0 0 -0.01965 -0.06352 -0.00901 0 0.031818

-0.00467 -0.02967 -0.02494 -0.0218 -0.0265 -0.03275 -0.03119 -0.03119 -0.02337 -0.00619 0.024774 0.009622 0.109311 0.208461 0.243255 0.273016 0.273016 0.238534 0.233772 0.221241 0.165977 0.163192 0.106089 0.0248 0.044537 0.015505 0.003877 -0.00283 -0.01626 -0.06156 -0.06156 -0.15639 -0.19455 -0.25455 -0.25455 -0.25455 -0.27421 -0.33773 -0.34674 -0.34674 -0.31492

64