La faiblesse de la bourse du Ghana est-elle efficace ? (document en anglais)

There is an old joke among economists which goes like this: “two economists were walking along the street. One of them saw a note of GHc 10 cedis lying down at the middle of the road and leans down to retrieve it. The second one said” don’t be ridiculous because if that were a genuine GHc 10 someone would have picked it up

ABSTRACT

This paper is an attempt to investigate the validity of weak form efficiency market hypothesis on Ghana stock exchange. A study conducted by frimpong Joseph Magnus concluded that Ghana stock exchange is weak form inefficient and another study conducted by Kofi A. Osei also confirmed that GSM is inefficient with respect to annual earnings information releases by the companies listed in the GSE.This paper provides a brief description of the Ghana stock exchange and gives the meaning of efficient market. The regression coefficient is applied on the Ghana stock exchange all-share index to carry out the test.

If a capital market is efficient the price of the stock should reflect the knowledge and expectation of the investors and consequently no investor should be able to receive an abnormal return since there is no way that he could know something that has not been already reflected in the price of the stock. The main findings of this project do not support the weak form efficient market hypothesis in the Ghana stock exchange. The GSE is weak form inefficient which means that some investors are able to predict the price of the security and get excess returns.

Chapter 1

INTRODUCTION

RESEARCH QUESTION

This paper aims at investigating the weak form efficiency of the Ghana stock exchange and also to determine whether the theoretical ideas are pertaining to the real life. In this context the Ghana stock exchange will be tested and the results obtained would be used to answer the following questions:

Is Ghana stock exchange weak form efficient?

How far does the weak form efficiency hold true in the functioning of the Ghana stock market?

Can the security prices be predicted in the Ghana stock market?

4-can there be investors with information which is not reflected in the security prices?

5-Is Ghana stock market fully reflecting the information?

6-How is the Ghana stock exchange reacting to new information?

MOTIVATIONS OF THE RESEARCH

As stated earlier, the objective of this study is to test the weak form of efficiency in Ghana stock exchange which has not been deeply investigated and studies about the weak form are very few. This study will help the investors to know how the Ghana stock market works, how to invest in the Ghana stock exchange and the importance of an efficient market such as encouraging share buying, giving correct signals to managers and allocating the resources. In the objective of testing the weak form efficiency some theories will be tested and some aspects of the Ghana stock market will be looked at in order to achieve the stated objective.

JUSTIFICATION OF THE RESEARCH

This project will be added to the body of knowledge by making a special case on GSE on the subject of efficiency hypothesis of the stock market in its weak form. This study attempts to investigate the weak form efficiency and ways of improving the GSE to become a world class exchange.

This study will inform the investors about how to invest in the stock market, the benefits that they can derived from the stock market and also roles of the government in improving the efficiency of the stock market.

The Ghana stock market has been operating for some years now. The movement of the market is measured by the GSE-All share index.

The GSE is an emerging capital market where many of the investors do not have adequate education about investing in the stock exchange. Investing is not a game of luck or chance but it requires knowledge about securities, the stock market and the economic indicators. So there is a need for them to understand how the stock exchange works and how its responds to the changes in the economic variables such inflation, GDP, interest rate and others. Also arouse investors’ awareness about the opportunities available in the stock market and how to exploit them.

LIMITATIONS OF THE STUDY

The aim of this study is to investigate the weak form efficiency of the Ghana stock exchange. Other forms of the market efficiency have not been taken into account. The time for this study is limited to the period of January 2007 to December 2008 excluding the holidays and non-working days.

THE OUTLINE OF THE PROJECT

This project work consists of seven chapters. Chapter 1 is the introduction which deals with abstract, research question, motivation, justification, methodology, background of the study, previous studies, underlining assumption, performance of the GSE, importance of the stock market in the developing countries and the political situation in Ghana.

Chapter2 deals with history and development of the financial market in Ghana, structure of the GSE, role of the GSE in the Ghanaian economy and challenges face by the GSE. Chapter 3 deals with the trading system, legal regulatory framework, the listing requirement and clearing and settlement. Chapter4 deals with literature review where we define the EMH, talk about the forms and types of efficient market, market conditions consistent with efficiency and the early models. Chapter 5 describes other techniques like fundamental and technical analysis, market anomalies and behavioral finance. Chapter 6 deals data and research methodology, reasons behind inefficiency and the solutions for efficiency and chapter 7 deals with conclusion and recommendation for further research.

METHODOLOGY

The primary data was collected through interview and questionnaires sent to the various brokerage houses and interview with the staff and management of the GSE.

The secondary data was collected

...