THE EFFECT MACRO-ECONOMIC FACTORS ON STOCK PRICE VOLATILITY OF FIRMS LISTED AT NAIROBI SECURITIES EXCHANGE

Stock price volatility is both an international and local problem that affects losses result from the stock market's unsteadiness, which is caused by investors' lack of trust. In the past few years, the Nairobi Securities Exchange has experienced drastic volatility in its performance. The purpose of the study was to establish the effect of macro-economic factors on stock price volatility of companies listed at Nairobi Securities Exchange, Kenya. The study was guided by the following specific objectives; to ascertain how money supply, rates of interest, rate of inflation and rates of exchange on the volatility of prices of stock among corporations quoted at Nairobi Securities Exchange. The target population of the study was 65 companies listed at Nairobi Securities exchange as of December 2018. The period of study was 10 years from January 2009 to December 2018. The study adopted descriptive research design. Monthly secondary data was collected from the Central Bank of Kenya, Kenya National Bureau of Statistics and Nairobi Securities Exchange and analyzed quantitatively and presented descriptively. The findings indicated that money supply had a positive and substantial impact on volatility of prices of stock; inflation had a negative and non-substantial impact on prices of stock; interest rate had a negative and substantial impact on volatility of prices of stock; and exchange rates had a negative and non-substantial impact on stock price volatility. The study concluded that macro-economic factors significantly contribute to stock price volatility of NSE quoted corporations in Kenya. Investors should factor in the impact of money supply fluctuations when making investment decisions, especially during periods of significant changes in money supply growth. Investors and policymakers should remain vigilant about broader economic consequences of inflation, even if its direct impact on stock prices is not pronounced. Investors should consider interest rate shifts when constructing investment portfolios and managing risk exposure. Investors with global exposure should assess currency risk, considering that exchange rate volatility can affect firms' revenues and profitability.