Liquidity and Valuation in East African Securities Markets

South African Journal of Economics, Vol. 77, No. 4, 2009

25 Pages Posted: 22 Mar 2009 Last revised: 5 Nov 2009

See all articles by Bruce Allen Hearn

Bruce Allen Hearn

University of Southampton; University of Bradford - School of Management

Date Written: March 19, 2009

Abstract

This study estimates liquidity premiums using the recently developed Liu (2006) measure within a multifactor capital asset pricing model (CAPM) including size premiums and a time varying parameter model for the East African emerging markets of Uganda, Tanzania and Kenya together with London and South Africa. The evidence suggests that while size and liquidity effects are significant in the smaller emerging markets of Uganda and Kenya they are less important in explaining returns in South Africa and London. Costs of equity are highest in Uganda followed by Kenya, with industrial and consumer non-cyclical sectors being lowest, and then South Africa and London.

Keywords: Liquidity, Portfolio Diversification, Emerging Financial Markets, East Africa

JEL Classification: G11, G12, G15, O55

Suggested Citation

Hearn, Bruce Allen, Liquidity and Valuation in East African Securities Markets (March 19, 2009). South African Journal of Economics, Vol. 77, No. 4, 2009, Available at SSRN: https://ssrn.com/abstract=1365400

Bruce Allen Hearn (Contact Author)

University of Southampton ( email )

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Southampton SO17 1BJ, Hampshire SO17 1LP
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University of Bradford - School of Management ( email )

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Bradford, West Yorkshire Bd9 4JL
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