Abstract:
With the increased technological disturbance in the global securities exchanges, stiff competition among corporates, global political environment and both global and local fluctuations in economic growth rates, volatility of securities exchanges has been heightened. However, there is no empirical evidence directly linking idiosyncratic risks posed by profitability to volatility of stock returns. Therefore, the present study sought to examine the relationship between profitability and volatility of stock returns amongst NSE quoted firms. The study employed quantitative research paradigm and correlational research design; secondary data was used in the study. The study used purposive sampling method where 24 listed firms were sampled yielding 240 firm-year observations from 2010 to 2019. The study used fixed effects model with panel data regression model in data analysis. Results revealed that the relationship between profitability, measured by EPS, PE and ROE and idiosyncratic Volatility of stock returns, amongst NSE listed firms, is negative and significant (EPS: ? = -0.010357, p = 0.0056; P_E: ? = -0.017284, p = 0.0000 & ROE: ? = -0.033448, p = 0.0000). Therefore, it is concluded that profitability, measured by EPS, PE and ROE, significantly and negatively affect stock returns volatility amongst NSE listed companies in Kenya.
|