The Effect of Automation on Stock Market Price Volatility: A Case of Nairobi Securities Exchange

Abstract

This study investigated the effect of the automation on stock market price volatility of the Nairobi Security Exchange (NSE). Two study periods were considered, pre-automation (January 2002 to June 2006) and post-automation periods (July 2008 to December 2012). This study provides empirical analysisof price volatility before and after automation at NSE. The study adopted a longitudinal research design and considered data on monthly NSE 20 Share Index and the average share closing prices on 37 NSE listed firms from January 2002 to December 2012. Secondary data was used in this analysis. Descriptive statistics were used for analysis together with a chi-square test and t-test was used to test the significance. The results indicate that the introduction of the ATS had no statistically significant effect on price volatility at the NSE.