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Gillian Kimundi: Our undergraduate student research is remarkable

Gillian Nduku Kimundi is a teaching fellow at the Strathmore Institute of Mathematical Sciences. She recently graduated with a Master of Science in Mathematical Finance from Strathmore University. Her Bachelor’s degree was in Financial Economics from the same university. She is currently pursuing the Professional Options Level of ACCA with 12/14 papers completed. She speaks to us about getting undergraduate students interested in research.

Have you always enjoyed research?

While I was an undergraduate student, I didn’t like research at all. Perhaps it was the angle from which it was taught or introduced to us. Since then I’ve realized that it is hard to see the significance of research at that stage in life. That is why I am trying to change the attitude with the classes that I am teaching.

How did you get your students who presented papers at the 2018 Research and Innovation Conference interested in research?

Giving the students encouragement and impressing upon them that their work is good enough to be presented helped a lot. If you show them that they are doing something worthwhile, then they are more eager to present their work. And a notable thing is that our student research is remarkable. When they present at conferences, both local and international, people are convinced that these are Ph.D. students.

Do you now think that research is interesting?

Well, it is exciting when you get the idea and see the whole picture in your mind. It comes in phases; first, there is the excitement of having had the idea and sharing it with others, and then there is the exhausting stage, the hard work of carrying it out, and finally the euphoric feeling when you are through with it.

What was your study about?

The paper was titled ‘Bad Beta, Good Beta and Stochastic Volatility in an Inter-temporal Asset Pricing Model for the Kenyan Stock Market.’ The study made a distinction between three risk factors that drive the variations observed in stock returns. The commonly known “beta” (from the Capital Asset Pricing Model) has been known to capture the sensitivity of stock returns to market risk under certain conditions/assumptions. However, prior research has indicated that “beta, just like cholesterol, comes in bad and good varieties”. In this study “the beta” is now decomposed into three factors: a bad beta, a good beta, and a time-varying volatility component.

The study aimed at providing evidence on whether these three risk factors – bad beta (also known as cash-flow risk), good beta (discount rate risk) and time-varying volatility – are significantly priced in the stock returns in the Nairobi Securities Exchange. The results suggest that the bad beta (cash-flow risk) and time-varying volatility warrant a higher premium (price) than the good beta (discount rate risk).

How will your study impact society?

The study is based on an area in finance called asset pricing. It is closely linked to economics. The idea of an asset pricing studies is to help people understand how certain decisions made by economic forces and committees and the like affect investments. How do they affect stocks, bonds, and real estate? My study was to see if Kenyans are so risk-averse. If they are, how then can the Central Bank of Kenya (CBK) mitigate this risk aversion in such a way as to promote investments in the financial market?

What are Kenyans afraid of?

From what the study concluded, they are averse to any conditions that reduce their cash flows. They are more interested in regular income from their investments than in the value of their assets. For example, if someone has invested in a bond and they are getting interests rates every six months, that person is more interested in the value of the interest that they are getting than the value of the bond they hold.

Why did you specialize in Mathematics?

I have always loved maths. I had several career options: medicine, engineering or mathematical finance. I was not comfortable with medicine; my parents were not comfortable with the engineering landscape in Kenya at that time so the default was to go into finance. I combined finance and economics; I did financial economics but I preferred finance to economics. That is why I specialized in mathematical finance.

Are you interested in humanities?

I am trying to appreciate philosophy. I have discovered that there is a reason why a Ph.D. is a Doctorate in Philosophy. This is because one needs to learn to delve into the deepest questions of one’s subject area. I plan to pursue a Ph.D. but before doing that, I am trying to get into the philosophy which will then translate into my future studies.

This article was written by Wambui Gachari.

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