THE EFFICIENCY OF UGANDA’S STOCK MARKET
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Date
2012-09-22
Authors
SSEMUYAGA, EMMANUEL
Journal Title
Journal ISSN
Volume Title
Publisher
Makerere University
Abstract
This study explored the efficiency of Uganda’s stock market and under this; the study focused on
determining the degree of efficiency and estimation of the liquidity level and derived
implications towards market efficiency. This was due to high volatility and puzzle in the debate
of efficient market hypothesis. Finding the nature of stock market efficiency is important for
investors who seek to find out whether they can get an opportunity of making excess returns
from the market.
The study used the GARCH model to determine the randomness of the distribution of the stock
returns with a combination of tools that were used to analyze the results. Secondary data were
obtained from Uganda securities exchange and Uganda bureau of statistics from the year 2006 to
2010. For determination of the degree of efficiency, the study used daily observations and for
liquidity the study used annual data. Among the tools that were used for analysis include the
Auto correlation test, Runs test, Kolmogrov – Smirnov (K – S) goodness of fit test and JarqueBera test.
The results from the GARCH Model rejected the randomness of the distribution and indicated
high volatility in the expected returns and this was again confirmed by low levels of liquidity.
These indicated inefficiency of the market at weak form. This was also again confirmed by other
tests mentioned above. Much as ALSI and NIC results were randomly distributed, the USE was
still inefficient at weak form and thus the EMH was rejected. It was noted that New Vision
printing company limited was weak form efficient. This study calls for use of modern technology
like instant sending of SMS to market participants, increasing trading sessions and general
awareness to improve on the flow of information.