African Finance Journal - Volume 4, Issue 1, 2002
Volumes & issues
Volume 4, Issue 1, 2002
Author Joe Amoako TuffourSource: African Finance Journal 4, pp 1 –31 (2002)More Less
This study contributes to the search for ways to forge linkages between the formal and informal financial sectors in areas that banks alone are unable, or unwilling to serve. Emerging practices in Ghana suggest that this can be done through process and product innovations. Process changes involve the use of outreach services and mimicking successful practices of the informal sector. Product changes include the linking of savings and credit, building loans into non-rotational savings cycles, and the adoption of fixed ratio credit-saving schemes. Innovations aim at knocking down literacy barriers that deter demand for banking services and limiting the formality of when and where banking must take place. The thrift institutions have been the primary agents of change. Although some initiatives may be problematic, their local experimentation and self-reforming may be the best way to achieve financial deepening. Sound institutional support, increased supervision and field examinations are necessary to encourage innovations, ensure early corrective actions while guiding against excessive risk taking.
Does the revitalisation process really enhance stock market microstructure? Evidence from the Nairobi Stock ExchangeSource: African Finance Journal 4, pp 32 –61 (2002)More Less
This paper investigates the response of the market microstructure to revitalization of the Nairobi Stock Exchange, which comprised the establishment of a market regulator, shift to a new trading system and free entry of foreign investors. Econometric modeling of efficiency, volatility and liquidity, using the market index and firm level data 'before' and 'after' the introduction of the reforms, yields three main findings. First, the price discovery process shows efficiency gains, following the establishment of the market regulator and free entry of foreign investors, but not after the shift to an open out-cry trading system. Second, the revitalization period is characterized by a negative relationship between efficiency gains and volatility. Third, in general, the free entry of foreign investors has positive impact on market microstructure, including a temporary rise in liquidity, low volatility and efficiency gains.
Author Stephen S. KyeremeSource: African Finance Journal 4, pp 62 –77 (2002)More Less
The "cedi"/ "dollar" rate is studied. Interest rate parity results suggest better returns on US investments (and cedi overvaluation) in 41.4% of the sample years, while in 58.6% of the cases (reflecting cedi undervaluation), investing in Ghana would have yielded higher returns. Large gaps between the actual and the purchasing power and interest rate parity values of the cedi/dollar rate, and high asymmetric volatilities of these rates, suggest non-parity and continuous cedi weakening. Co-integration tests suggest no long run purchasing power parity (PPP) - as the large non-zero gaps also show - which is consistent with most PPP literature. Exchange rate policy options (i.e. flexible and fixed exchange rates, monetary union, and dollarization) that may strengthen the cedi - and their implications - are discussed.
An analysis of asymmetry in the conditional mean returns : evidence from three Sub-Saharan Africa emerging equity markets : finance letterAuthor George OgumSource: African Finance Journal 4, pp 78 –82 (2002)More Less
Asymmetric behavior of conditional volatility of stock returns has been widely documented. Conditional volatility of stock returns is asymmetric in the sense that negative shocks increase volatility more than positive shocks of an equal magnitude. Scant attention, however, has been given to possible asymmetries in the conditional mean. Using equity data from South Africa, Nigeria and Kenya, this paper examines the hypothesis that both the conditional mean and conditional variance of stock returns of the three markets respond asymmetrically to past shocks. The paper employs a time-varying asymmetric moving average threshold GARCH (asMA-TGARCH) model. The results indicate that both conditional mean and volatility are asymmetric functions of past innovations. However, conditional mean asymmetry is the reverse of that of volatility in the sense that good news has greater impact than bad news of equal magnitude.