3. Research methodology 3.1 Introduction
The researcher would personally obtain the secondary data from the following sources: Nairobi Securities Exchange, Institute of statistical Kenya and Central Bank of Kenya. The data would be on stock market indices,
weighted interest rate and inflation rate.
3.2 Research Design
This research study adopted a descriptive case-based study design that allowed quantitative approach to data analysis. The population comprising the companies quoted on Nairobi Securities Exchange was selected for the
study. Reference [47] used Theoretical modeling to investigate the effect of the determinants of exchange rate on the performance of commercial banks in Kenya.
The Theoretical model helps the researcher to logically isolate and sort out complicated chains of cause and effect and influence between the numerous interacting elements in an economy or any other phenomenon.
Through the use of a model, the economists and other researchers in social sciences can experiment, at least logically, producing different scenarios, attempting to evaluate the effect of alternative policy options, or testing
various hypotheses. The Theoretical Model is set below:
Y = a + b
1
X
1
+ b
2
X
2
+ b
3
X
3
+ b
4
X
4
+ ἐ
Where: Y measures the variability of stock price index, the data set will consist of monthly observations of the average
stock price index for the Nairobi Securities Exchange NSE ALL SHARE INDEX. X
1
is exchange rate of the US Dollar defined as the average monthly exchange rate for this hard currency. X
2
is exchange rate of the Euro defined as the average monthly exchange rate for this hard currency. X
3
is the interest rate defined as the average annual lending interest rate. X
4
is the inflation rate defined as the annual inflation rate. This is expected to have a negative effect on stock price. a is the constant or intercept and
ἐ is the error correction term. The data was entered into the Statistical Package for Social Sciences SPSS and analysed using descriptive,
correlation and regression analyses.
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The regressions were performed to show the effect whether positive or negative of the independent variables, separately first and jointly thereafter on the dependent variable.
3.3 Target population
The population comprised all the companies listed on the Nairobi Securities Exchange in Kenya numbering 62 grouped into 11 segments.
3.4 Sample size and sampling Technique
