RELATIONSHIP BETWEEN RETURNS OF THE REAL ESTATE AND STOCK MARKET RETURN IN KENYA

Victor Munene Kithinji, Dr. Geoffrey Gekara

Abstract


The stock market performance has been known to be a good indicator of the economic performance of a country. Over time, investors have been making investments in the stock market, but a lot of attention has shifted to the real estate market as it has been growing as a result of the huge housing demand. The objective of the study was to look at the relationship between real estate and the stock market. With this objective, we sought to investigate the relationship by comparing the indices for both the stock and real estate markets. Since the analysis covered the periods between 2018 and 2012, we used the NSE 20 share index for the stock market and the Hass property index for real estate. Relevant literature was analyzed with regards to the study, looking at local and international studies and this enabled the study to come up with a conceptual framework and an analysis model. Data was collected from the Nairobi Stock Exchange, Kenya National Bureau of Statistics (KNBS) and websites. The data collected was then analyzed using regression analysis and Pearson’s correlation coefficient. The study results showed that there was greater impact and relationship when there were controls in the models. The study recommended that the country needs a REITs market to monitor the real estate market since it is an important segment of the economy and may act as an economic barometer, and also to improve the storage of vital macro-economic information to enable researchers to carry out tests that may assist the economy.

Keywords: Housing Index, Inflation Rate, Interest Rate, Stock Market Return


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