Browsing by Author "Chiwanza, Washington"

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Stock Liquidity and Returns: Evidence from the Zimbabwe Stock Exchange
(Interdisciplinary Journal of Contemporary Research In Business, 2014-07-01) Chikore, Runesu; Gachira, Walter; Nkomo, Dingilizwe; Chiwanza, Washington
This study extends the literature on the relationship between stock liquidity and returns by presenting evidence from the capital market of a developing economy. Using data from the Zimbabwe Stock Exchange, we apply a vector autoregression model in examining the impact of stock liquidity on returns over the period February 2009 to December 2012. The study employs four proxies as stock liquidity measures, namely; trading volume, turnover, relative bid-ask spread and relative spread. The analysis also applies Granger causality tests from the VAR models. We also enhance the robustness of the analysis by considering the impulse response functions and variance decompositions. Results from the study show that stock liquidity variation plays an important role in stock returns because investors tend to price liquidity premium in stocks. The main finding is that liquidity negatively affects stock returns for stocks listed on the ZSE.
Zimbabwe Stock Exchange (“ZSE”)’s Exposure to Global Crude Oil Price Volatility
(Zimbabwe Stock Exchange (“ZSE”)’s Exposure to Global Crude Oil Price Volatility, 2014-12-08) Chiwanza, Washington; Gachira, Walter; Nkomo, Dingilizwe; Chikore, Runesu
The major aim of this paper is to investigate Zimbabwe’s Stock Exchange indices’ exposure to global oil price volatility for the period 2009-2012.To determine the relationship between volatility of crude oil returns and volatility of stock returns of the ZSE indices using econometric GARCH models. Also to investigate the correlation of the global oil price in the form of Brent Crude oil prices index and Western Texas Intermediate (WTI) oil prices index with ZSE Industrial Index and the ZSE Mining index between 2009 and 2012. A GARCH approach is employed to analyse data from ZSE and Chicago Mercantile Exchange, OPEC and Datastream® Data. Daily data for crude oil prices and Zimbabwe stock exchange indices were collected for the period 2009-2012 and analysed. The variables of the Zimbabwe stock exchange are ZSE Industrial Index; and ZSE Mining index. Variables on Crude oil prices comprised of Western Texas Intermediate (“WTI”) spot prices index; and Brent Crude oil spot prices index. Returns of stock on all the four indices were calculated. It was assumed that returns on stocks would mirror stock price movements. Volatility of returns on ZSE industrial index was very low with standard deviations ranging between -.01 to +.01. Volatility of returns on the ZSE Mining index was significant relative to the industrial index with standard between-0.1 to -0.1. Volatility of stock returns on Brent Crude spot price index was very high with standard deviations ranging between -0.6 to +0.6, while stock returns on Western Texas Intermediate (“WTI”) spot prices index displayed high volatility, standard deviations ranged from - 0.1 to +0.1. Standard deviation indicates the level of dispersion from the the mean. GARCH coefficients indicated that the mean of stock returns as represented by were generally negative for the two domestic stock indices while the means of global oil stock returns were positive. Parameters ∝ and of the four indices were statistically significant. The coefficients of all the indices were highly significant ranging between 0.6300 to 0.9300 indicating that volatility was persistent in the period under investigation and that volatility was to a large extend driven by the prices and values of the previous time period (past performance).There was a positive correlation between industrial index and Brent crude with a correlation coefficient of 0.505 as well as a positive correlation between the ZSE Industrial index and the WTI oil price index with a coefficient of 0.520. There was a negative correlation coefficient of -0.332 between the Mining index and the global Brent crude oil prices as well as a negative correlation coefficient of -0.201 between Mining index and WTI Crude. The results of the study confirmed the hypothesis that the ZSE stock markets are indeed exposed to significant exogenous risks emanating from rising global crude oil price movements. There are however, moderating factors as the standard deviations on ZSE stock returns are much lower compared to standard deviations of stock returns on the global oil indices. Also the correlation coefficients are on the low side. Increases in crude oil prices have the potential to subdue any favourable factors to share price increases.