Stock Market Development: Evidence from Market Capitalization Trends
DRJ's Journal of Economics & Finance, Volume 4, Issue 3, pp. 41-52.
12 Pages Posted: 12 Nov 2019
Date Written: October 31, 2019
In this paper stock market development as proxied by market capitalisation is examined. The study period is January 2010 to May 2019. The data frequency is monthly. The paper concentrates on the Zimbabwe Stock Market, but briefly walks through Stock Markets in Africa. Examining stock market development is critical, as evidenced by growing number of debates on the dual link of economic growth and stock market development. The study applied the ARIMA model to examine the predictability of stock market development. Using the selection criteria for forecasting, two models have been found to be efficient, ARIMA (7, 1, 2) and ARIMA (12, 1, 2). Both models indicated the significance of past values of market capitalisation to determine current and future values. This implies that a previous level of stock market development determines the future levels of development. Forecasted values indicated a positive fluctuating growth in the near future. The study recommends policies that should aim at significantly raising the levels of stock market development to trigger economic development. Stock market development should not only be noticed in rise in market capitalisation, liquidity or index performance, but also in the quality of services rendered in the stock market.
Keywords: Africa, ARIMA Model, Economic Growth, Financial Markets, Liquidity, Market Capitalisation, Stock Exchange, Stock Market Development, Zimbabwe.
JEL Classification: C22, C53, C58, E21, E22, E44, F21, G14, G15, N27, O16.
Suggested Citation: Suggested Citation