Joseph E. Barasa

There has been constant quest for improved service delivery by the people of Kenya. To achieve that, the Kenya government opted to step in through inception of devolve funds. The intervention was through the introduction of local authority transfer fund (LATF), roads levy, constituency development fund (CDF) etc. Despite the central government financing, the incremental local revenue generated is not justifiable to the financing granted, considering return on investments, value for money. While on the other hand, improved service delivery is justifiable to the financing. The paper highlights is based on a sample size of fifty three local authorities representing the views of a target population of 175 local authorities in Kenya. It commences by obtaining revenue means prior and after LATF. And undertaking T-statistics for volatility of various revenue. This is followed by evaluating the extent on effect on LATF, factors affecting revenue, component matrix analysis and principle comp...

Volatility as an erratic rise and fall in the stock returns with a lot of demerits especially when it comes to valuation of equities at the stock exchange in that it may cause the bourse to value the securities incorrectly. All it may act as a cold shoulder to investors confidence due to increased uncertainty and hence risk which subsequently may lead to limited investment as a result of the high capital cost emanating from high premium, demanded by shareholders in their investment. This will eventually lead to a slow growth and development of an economy. The main objective of this study is to establish the effect of macroeconomic variables on volatility of securities prices in the Nairobi Securities Exchange (NSE). To achieve the objective of the study, models were developed using annual inflation rate, exchange rate, interest rate, money supply, broad money supply and general money supply as the independent variables and the stock returns as the dependent variable. An empirical analysis was conducted using Nairobi Securities Exchange (NSE) listed firms as the population. The period of analysis was 22 years from 1 st January 1990 to 31 st December 2011 on an annual basis. The correlation results reveal that exchange rate (EXR) has the highest negative impact on volatility of security prices, whereas inflation rate (INF) had the lowest marginal impact and/ or effect on volatility of security prices. Moreover, interest rate (INT) had a significant, negative impact on volatility of security prices. Others such as general money supply (GMS), money supply (M3) and broad money supply (M3X) had a higher positive effect on volatility of security prices. In our empirical analysis, by employing the EGARCH and TGARCH model we were able to deduce that the level and/ or degree of volatility persistence, volatility magnitude and leverage effects to be in existence at the NSE but varied in terms of significance of the shocks impact on stock volatility, of each of the selected macroeconomic variables. However, collective impact was significant.