The determinants of the Harare Stock Exchange (HSE) market capitalisation

Ilmolelian, Peter (2005): The determinants of the Harare Stock Exchange (HSE) market capitalisation. Published in: EconPapers No. http://econpapers.repec.org/paper/wpawuwpem/0511016.htm

Abstract

This is an exploratory study that attempts to identify and provide empirical evidence on the possible determinants of the market capitalisation of the Harare Stock Exchange (HSE) with the view of understanding the development prospects of the HSE and other similar markets. The study used 1976-1996 quarterly data from the International Finance Corporation (IFC) and Microfit was used to analyse the data. Using the assumption that market size is positively correlated with the ability to mobilise capital and diversify risk, the study findings suggest that share price and the exchange rate are the most important determinants of the HSE market capitalisation. The study suggests that further in-depth research into the determinants of market capitalisation for the African and other emerging stock markets is required to identify best ways of developing these markets within the global financial system while at the same time promoting local economic growth. The paper begins with an introduction about the HSE followed by short description of stock markets in developing countries. The second part of the paper outlines the theory behind market capitalisation, the development of of the general econometric model and specific cointegrating regression model and the results from the analysis. The third section provides conclusions and policy implications associated with encouraging the stock markets in the emerging stock markets with particular reference to the HSE.

• Item Type: MPRA Paper
• Language: English
• Keywords: Zimbabwe; Harare Stock Exchange; Stock Markets; African Stock Markets; Developing Countries; Cointegration; Econometrics; Error Correction Models (ECM); Time Series; Third World Stock Markets; Stock Exchange
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C46 - Specific Distributions ; Specific Statistics; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C87 - Econometric Software; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C82 - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data ; Data Access; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes

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