Ghanaian Stock Market Research Articles

Navigating Ghana's economic waters: Exploring the impact of Fiscal and Monetary policies on stock market performance

This study leverages the Autoregressive Distributed Lag (ARDL) and Exponential Generalized Conditional Heteroscedasticity (EGARCH) models to conduct a thorough examination of the impact of fiscal and monetary policies on the Ghanaian stock market from 1990 to 2022. Key findings indicate that government spending and tax revenue, as components of fiscal policy, are positively associated with stock returns, contrasting with the negative influence of the industrial production index. On the monetary policy front, interest rates are found to negatively affect stock performance, while exchange rates and the money supply exert positive influences. In the short term, government spending enhances stock returns, although the effects of GDP and the industrial production index are inconsistent, with exchange rates and money supply demonstrating a negative impact. The study underscores the profound sway that policy decisions have on stock market dynamics, underscoring an urgent need for investors and policymakers to closely monitor policy shifts and their market reverberations. A pivotal policy recommendation emerging from this research is the strategic synchronization of fiscal and monetary policies by policymakers to underpin stock market stability and growth. Such harmonization can counteract the adverse effects of policy-induced volatility, cultivating an investment-friendly climate. Investors and policymakers are encouraged to draw upon a spectrum of credible sources, encompassing financial news, governmental releases, and market analyses, to remain abreast of policy evolutions. This research offers precious perspectives on the nexus between economic policies and market movements, offering value for academic inquiry and informing practical decision-making strategies.

The Institutionalization of Board Features and Ownership Structure on the Accuracy of Financial Reporting for Registered Customer Yields: Evidence from the Ghanaian Economy

The article looked at the evaluation of ownership structure and board features on the accuracy of financial reporting for registered customer products in Ghana. A correlational research design was used in the study. The population of this profound study comprise 20 customer products registered on the Ghanaian stock market as at December 2022. The study employed a purposive sampling strategy. Twelve (12) people make up the sample size. The investigation was conducted between 2011 and 2022. Because the observations include both time series and cross-sectional units, panel data were employed in this investigation. Panel multiple regressions are the result. Findings show that a registered firm’s financial reporting accuracy is positively impacted by board size, as well as foreign ownership, and management rights, although only marginally and statistically.

Stock market growth in Ghana: Do financial sector reforms matter?

Owing to the significant role of financial sector reforms in economic growth, several studies have examined its transmission channels. This paper focuses on the stock market channel by investigating the impact of financial sector reforms on stock market growth in Ghana from 1990 to 2019. A multidimensional index was constructed to measure the financial sector reforms. Employing fully modified least squares (FMOLS) and error-correction models, the findings reveal that financial sector reforms promote stock market growth in Ghana in the long run. By disaggregating the financial sector reforms, the findings reveal that competitive reform has the highest impact followed by behavioural and privatisation reforms respectively. Finally, the findings reveal a bi-causal relationship between financial sector reforms and stock market growth. The paper thus implores the Securities and Exchange Commission (SEC) to reinforce its supervisory role, policy implementation, and investor protection laws to ensure greater compliance with the reforms. In addition, macroeconomic policies that are helpful to the growth of the capital market must be deepened to stimulate expected growth in the Ghanaian stock market.

Overconfidence bias and stock market volatility in Ghana: testing the rationality of investors in the Covid-19 era

PurposeThe paper tests the overconfidence bias and volatility on the Ghana Stock Exchange (GSE) during the pre-Covid-19 pandemic and Covid-19 pandemic period.Design/methodology/approachThe study employs pairwise Granger causality to test the presence of overconfidence bias on the Ghana stock market as well as GARCH (1,1) and GJR-GARCH (1, 1) models to understand whether overconfidence bias contributed to volatility during pre-Covid-19 pandemic and Covid-19 pandemic period. The pre-Covid-19 pandemic period spans from January, 2019 to December, 2019, and Covid-19 pandemic period spans from January, 2020 to December, 2020.FindingsThe paper finds a unidirectional Granger causality running from weekly market returns to weekly trading volume during the Covid-19 pandemic period. These results indicate the presence of overconfidence bias on the Ghana stock market during the Covid-19 pandemic period. Finally, the conditional variance estimation results showed that excessive trading of overconfident market players significantly contributes to the weekly volatility observed during the Covid-19 pandemic period.Research limitations/implicationsThe empirical findings demonstrate that market participants on the GSE exhibit conditional irrationality in their investment decisions during the Covid-19 pandemic period. This implies investors overreact to private information and underreact to available public information and as a result become overconfident in their investment decisions.Practical implicationsFindings from this paper show that there is evidence of overconfidence bias among market players on the GSE. Therefore, investors, financial advisors and other market players should be educated on overconfidence bias and its negative effect on their investment decisions so as to minimize it, especially during the pandemic period.Originality/valueThis study is a maiden one that underscores investors’ overconfidence bias in the wake of a pandemic in the Ghanaian stock market. It is a precursor to the overconfidence bias discourse and encourages the testing of other behavioral biases aside what is understudied during the Covid-19 pandemic period in Ghana.

EXAMINING THE CONTEMPORANEOUS CAUSALITY BETWEEN CHINESE AND GHANAIAN STOCK MARKETS AMIDST THE COVID-19 PANDEMIC

Examining the contemporaneous causality between Chinese and Ghanaian stock markets before and amidst the coronavirus disease 2019 (COVID-19) pandemic is of immense interest to many stakeholders in making effective and efficient decisions. This study investigates why the two stock markets’ fluctuations seem to move in tandem despite a broader economic phenomenon. Shanghai Stock Exchange and Ghanaian Stock Exchange composite indices data were used for this study spanning 2011-2020. The Granger causality and transfer entropy are applied to investigate the mean transmission. The Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroscedasticity (DCC-GARCH) model portrays the dynamic correlation and the ARMA model is used to fit the log-returns of the two indices. Results show that the Chinese stock market has a substantial causal effect on the Ghanaian stock market based on transfer entropy with the second order of lag while there is a considerable causality from the stock market of Ghana to the Chinese stock market through the third and fifth orders of lags. This implies the asynchronous return transmission between Chinese and Ghanaian stock markets. Moreover, the long term volatility connection significantly impacts the two markets, but the short-term volatility pattern does not heavily affect the markets based on the DCC-GARCH model. The best-fitted model for the log returns of two stock markets is ARMA (1,1). This study recommends that policymakers and investors adopt diversification as a resort to financial management.

Investigating Financial Statement Fraud in Ghana Using Beneish M-Score: A Case of Listed Companies on the Ghana Stock Exchange

This quantitative research was conducted to detect the possibility of earnings manipulation by listed companies on the Ghana Stock Exchange, determine the relationship between company size and earnings manipulation and find out the existence of a correlation between share price and earnings manipulation. Using 22 companies out of a total of 41 listed companies, financial data gathered from published financial statements on the companies’ websites, Ghana Stock Exchange website and Annual Report Ghana website were examined from 2011 to 2016. Applying Beneish M-score model for the period 2011-2016, it was found that 26.2% of the sample size on the average were involved in creative accounting. The study also found that 28.4% of the small companies on the average were involved in earnings manipulation during the period 2011-2016 as compared to 25.4% of the big companies. However, the Mann-Whitney U test conducted revealed that there is no statistically significant difference between the level of earnings manipulation and company size. Spearman’s correlation analysis was conducted, firstly, on the entire sample and separately on the small and big companies. The results of the analysis showed that earnings manipulation and share price, statistically, were not significantly correlated. The quantitative research provides an insight into the level of earnings management amongst listed companies in Ghana and the appropriateness of the M-score model in detecting earnings manipulation. The evidence of incidence of creative accounting amongst the sampled companies is an indication of the need for more stringent measures to curb such practice to ensure the stability of the Ghanaian stock market and protect investor interest.

Investigating Financial Statement Fraud in Ghana using Beneish M-Score: A Case of Listed Companies on the Ghana Stock Exchange (GSE)

This quantitative research was conducted to detect the possibility of earnings manipulation by listed companies on the Ghana Stock Exchange, determine which company size engages more in creative accounting and find out whether there is a correlation between share price and earnings manipulation. Using 22 companies out of a total of 41 listed companies, financial data gathered from published financial statements on the companies’ websites, Ghana Stock Exchange website and Annual Report Ghana website were examined from 2011 to 2016. Applying Beneish M-score model for the period 2011-2016, it was found that 26.2% of the sample size on the average were involved in creative accounting. The study also found that 28.4% of the small companies on the average were involved in earnings manipulation during the period 2011-2016 as compared to 25.4% of the big companies. However, the Mann-Whitney U test conducted revealed that there is no statistically significant difference between the level of earnings manipulation amongst small and big companies. Spearman’s correlation analysis was conducted, first on the entire sample and subsequently conducted separately on the small and big companies. The results of the analysis showed that earnings manipulation and share price, statistically, were not significantly related. The quantitative research provides an insight into the level of earnings management amongst public companies in Ghana and the appropriateness of the M-score model in detecting earnings manipulation. The evidence of incidence of creative accounting amongst the sampled companies is an indication of the need for more stringent measures to curb such practice to ensure the stability of the Ghanaian stock market and protect investor interest.

Adaptive Market Hypothesis: Evidence from the Ghanaian Stock Market

ABSTRACTThis study examines the return predictability of two indices – the GSEALSH index and the GSEFSII index on the Ghana stock market. We compare results from analyzing the return series between January 4, 2011 and August 28, 2015 using the generalized spectral test, the automatic portmanteau Box-Pierce test and the wild-bootstrapped automatic variance ratio test. A rolling window approach is used to track whether returns are predictable or not through time. It was observed that the GSEALSH index was more highly predictable than the GSEFSII index in all the three tests. The results obtained are consistent with the Adaptive Market Hypothesis.

An Empirical Analysis of Macroeconomic Variability on the Ghanaian Stock Market: A Vector Autoregression Approach

This study investigates the dynamic interrelationships among stock prices and selected macroeconomic indicators namely; economic activity, global commodity price index, inflation and interest rates in Ghana. By employing a Vector Autoregression (VAR) Model, the empirical results reveal that stock prices depreciate with an increase in global commodity prices and interest rates indicating a negative relationship. On the other hand, stock prices appreciate with an increase in inflation and economic activity indicating a positive relationship. Examining stock market variability on the selected macroeconomic variables also showed that inflation and interest rates respond negatively to changes in asset prices while the stock market itself is not found to be a leading indicator for economic activity. The evidence suggests that the listed equities on the GSE are a hedge against inflation in Ghana. Increasing economic activity over time is advantageous for the Ghanaian stock market.

An Empirical Analysis of Macroeconomic Variability on the Ghanaian Stock Market: A Vector Autoregression Approach

This dissertation investigates the dynamic interrelationships among stock prices and selected macroeconomic indicators namely; economic activity, global commodity price index, inflation and interest rates in Ghana. By employing a Vector Autoregression (VAR) Model, the empirical results reveal that stock prices depreciate with an increase in global commodity prices and interest rates indicating a negative relationship. On the other hand, stock prices appreciate with an increase in inflation and economic activity indicating a positive relationship. Examining stock market variability on the selected macroeconomic variables also showed that inflation and interest rates respond negatively to changes in asset prices while the stock market itself is not found to be a leading indicator for economic activity. The evidence suggests that the listed equities on the GSE are a hedge against inflation in Ghana. Increasing economic activity over time is advantageous for the Ghanaian stock market.

Interest rate, liquidity and stock market performance in Ghana

In this study, we examined the effect of interest rate and liquidity growth on stock market performance in Ghana using monthly data from the Ghana Stock Exchange and Bank of Ghana for the period 2010:12 to 2013:11. After employing robust linear regression (M-Estimation), there is a compelling evidence that performance of the Ghanaian stock market is highly influenced by liquidity growth, exchange rate and inflation; and that interest rate effect is insignificant though positive on the stock market index for the period under study.

Efficiency of Emerging Financial Markets in the Pre and Post Economic Crisis Era: A Case from the Models of the Ghanaian Stock Exchange

The study of stock market efficiency has been the objective of many finance researches across the globe since the last few decades. That notwithstanding, the evidence is mixed on whether the stock markets are efficient or not. While some studies conclude that the stock markets are efficient, other studies cast doubt on this conclusion. The Ghana stock exchange, is the only stock market in Ghana, and since its inception in 1989, it has witnessed radical transformation owing to the judicious policy measures implemented through the financial sector reforms. At this transformational stage of development, it is very important to assess the level of efficiency of the Ghanaian equity market in order to establish its long-term role in the process of economic development. This paper considers an overall trading period from 1989 to 2010, which is further divided into pre-crisis (1997-2001) and post-crisis (2002-2007) periods. The paper employed autocorrelation function tests (ACF) and run-test to draw a more concise conclusion about the efficient financial markets in emerging economies. The results of this research demonstrates that there exist an autocorrelation on the Ghanaian stock market which makes stock returns very predictable and hence the inefficiency of the Ghanaian stock market. The study recommends that Ghanaian financial policies especially those concerning liberalization, deregulation and privatization be revised and implemented with careful supervision to clear most of the financial and institutional imperfections in order to provide a fair play grounds for all players in the Ghanaian equity market.

Does interest rate matter to the Ghanaian stock market?

Stock market and interest rate are two vital factors for financial deepening and economic development of any country. Understanding the effects of interest rate on stock market performance provides important implications for policies towards financial market development. This paper investigates the impact of interest rate on stock market capitalisation in Ghana using monthly data for the period July 2011 to April 2015. The autoregressive distributed lag bounds test approach to cointegration was used for the estimation. The result reveals that, in the long run, interest rate improves stock market capitalisation whilst the opposite is true for the short run. Specifically, the results indicate that, in the long run, long term interest rate has greater impact on stock market capitalisation than short term ones. In the short run, however, long term interest rate has the least impact. The paper concludes that a considerable control of interest rate in Ghana will be of great benefit in the short term for stock market development.

Extreme value modelling of Ghana stock exchange index.

Modelling of extreme events has always been of interest in fields such as hydrology and meteorology. However, after the recent global financial crises, appropriate models for modelling of such rare events leading to these crises have become quite essential in the finance and risk management fields. This paper models the extreme values of the Ghana stock exchange all-shares index (2000–2010) by applying the extreme value theory (EVT) to fit a model to the tails of the daily stock returns data. A conditional approach of the EVT was preferred and hence an ARMA-GARCH model was fitted to the data to correct for the effects of autocorrelation and conditional heteroscedastic terms present in the returns series, before the EVT method was applied. The Peak Over Threshold approach of the EVT, which fits a Generalized Pareto Distribution (GPD) model to excesses above a certain selected threshold, was employed. Maximum likelihood estimates of the model parameters were obtained and the model’s goodness of fit was assessed graphically using Q–Q, P–P and density plots. The findings indicate that the GPD provides an adequate fit to the data of excesses. The size of the extreme daily Ghanaian stock market movements were then computed using the value at risk and expected shortfall risk measures at some high quantiles, based on the fitted GPD model.

Model Behavior Analysis of Stock Market Indicators and Listed Companies: Evidence from the Ghana Stock Exchange: Automated versus Floor Trading

This article studies the model behavior analysis of stock market indicators and listed companies on the GhanaStock Exchange (GSE) over a five year period. The Ghana Stock Exchange transferred from floor trading toautomation in June 2009. The GSE operates an up to date market for recurrently traded securities and an auctioncall for rarely traded securities. Data for this study was extracted from GSE’s profile of listed companies (factbook) for the period under investigation. The study results show a significant progress on stock marketindicators within 2007 to 2011 in dividend yield, volume traded, share price, market capitalization and marketreturns following the automation in mid 2009, equity premium however, decreased and no significant effects onliquidity were detected. The study further revealed that, the introduction of the electronic trading system hassignificantly increased the tempo of trading activities on the Ghanaian Stock Market. The study recommends theGSE to accommodate all quoted securities as this will promote and improve fund raising for investors.

Oil price fluctuation, volatility spillover and the Ghanaian equity market: Implication for portfolio management and hedging effectiveness

This study attempts to contribute to the literature on stock markets and energy prices by examining the dynamic volatility and volatility transmission between oil and Ghanaian stock market returns in a multivariate setting using the recently developed VAR–GARCH, VAR–AGARCH and DCC–GARCH frameworks. In turn, the models' results are used to compute and analyze the optimal weights and hedge ratios for oil-stock portfolio holdings. For comparison purposes and to put the paper more in the perspective of West Africa, the Nigerian stock market is also included in the analysis. Our findings point to the existence of significant volatility spillover and interdependence between oil and the two stock market returns. While spillover effects are stronger for Nigeria, the transmission of volatility is much more apparent from oil to stock than from stock to oil in the case of Ghana. Also, the study demonstrates evidence of short-term predictability in oil and stock price changes through time and reveals that conditional volatility changes more rapidly as result of substantial effects of past volatility rather than past news/shocks for all market returns. Moreover, we show that there is a slightly more effective hedge in the two stock markets under the DCC–GARCH framework (our preferred model) compared to the other two models, although hedging effectiveness is much greater for Ghana. On the whole, our findings for optimal hedge ratios are consistent with other studies and particularly the view that oil assets should be an integral part of a diversified portfolio of stocks and suggest that a better understanding of volatility links is crucial for portfolio management in the presence of oil price risk. Finally, the existence of multivariate asymmetric effects and dynamic conditional correlations as revealed by the VAR–AGARCH and DCC–GARCH models make it clear that the assumptions of symmetric effects and constant conditional correlations are not supported empirically.

The Impact of Investors’ Sentiment on the Equity Market: Evidence from Ghanaian Stock Market

Investor’s Sentiment plays a major role in choosing which stocks we invest. Investors’ sentiment can be defined as investors’ attitude and opinion towards investing in the Stocks. The aim of this research is to analyse the individual investor’s sentiment and also to analyse the influence of Market Specific Factors on investors’ sentiment. The investor’s attitude towards investing is influenced by rumours, intuition, herd behaviour among investors and media coverage of the stock. 100 investors in Ghana were chosen for the study. These investors were administered a Structured Schedule, containing pre-validated scales to measure the investor sentiment. Once the constructs were found to be both reliable and valid, the impact of Herd Behaviour, Internet Led Access to Information and Trading, Macro Economic Factors, Risk and Cost Factors, Performance Factors and Confidence Level of Institutional Investors, Best Game in Town Factors were tested by using the Bootstrapping method. Few Market Specific Factors had a significant impact on the investors’ sentiment in Ghana.

Speed of Adjustment to Macroeconomic Information: Evidence from Ghanaian Stock Market (GSE)

This study examines the speed of adjustment of stock prices to macroeconomic information using monthly Databank stock Index (DSI) from November 1990 to December 2007. We use Granger-Causality test to show unidirectional causality from macroeconomic information to stock prices. Our findings suggest slow adjustment of stock prices to macroeconomic information with exchange rate being the slowest. We argue that the speed of adjustment of exchange rate reflects the behaviour of foreign investors.