Asset pricing and information efficiency of the Ghana Stock Market
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Date
2002-03-28
Authors
Kofi A. Osei
Journal Title
Journal ISSN
Volume Title
Publisher
AERC
Abstract
The study looks at two main objectives, the asset pricing characteristics and the response
to annual earnings announcements of the Ghana Stock Market (GSM).
The study hypothesizes that the GSM, as a typical African emerging stock market, is
not efficient with respect to annual earnings information releases to the market.
The assessment of the market response to information is done by measuring abnormal
returns over a 17-week event window when the annual earnings information is released.
Analysis of cumulative abnormal returns (CAR) is also carried out.
The study establishes that 13 out of the 16 stocks studied have systematic risk lower
than the market risk. Three stocks have betas greater than the market beta of one. Five
out of the 13 stocks with systematic risk lower than the market risk have negative betas.
Their t-values are also not significant. There are considerable intra-industry differences
in systematic risk values of the listed stocks.
On the market response to earnings information, the analysis of CAR shows that the
market learns about the impending annual earnings announcements. The market drifts up
for good news and down for bad news over the period before the event announcement
date. The study establishes that the market continues drifting up or down beyond the
announcement week, i.e., week zero. This is inconsistent with the efficient market
hypothesis (EMH). The conclusion is that the Ghana Stock Market is inefficient with
respect to annual earnings information releases by the companies listed on the exchange.
Description
HC 800.A1
Keywords
Stock exchanges - Ghana