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Author(s): Bruce Hearn, Cass Business School, City University London, Roger Strange, University of Sussex, Jenifer Piesse, King's College London
This study contrasts the ability of three liquidity constructs, the price-impact measure of Amihud (2002), the volume based turnover ratio, and the recently developed trading speed measure of Liu (2006) in explaining total trading costs for four large African emerging markets, Egypt, Morocco, Kenya and South Africa, as well as London and Paris. A new legal regime factor is also developed to capture the often substantial differences in returns between markets with either civil or common law origin. The evidence suggests that the Amihud construct outperforms other liquidity measures in Africa while the Amihud and Liu measures are better in London and Paris. Furthermore the incorporation of size, liquidity and legal regime valuation factors within a multifactor CAPM pricing model reveals that size and liquidity factors are significant in capturing the cross-section of returns across the sample universe. The legal regime factor offers improves performance with larger stocks. However, it is significant in capturing the cross section of returns in country portfolios. Costs of equity are found to be lowest for London, Paris and Morocco and highest for Egypt, Kenya and South Africa.
Updated: 03/09/2010 | Comments: 0 | Rating: Not yet rated | Views: 79
Author(s): Bruce Hearn, Cass Business School, City University London
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.
Updated: 03/09/2010 | Comments: 0 | Rating: Not yet rated | Views: 57
Author(s): Bruce Hearn, Cass Business School, City University London
This paper assesses the effectiveness of traded turnover, Amihud (2002) and Liu (2006) metrics in measuring illiquidity, as used in a multifactor CAPM. The performance of this model is contrasted with a simple stochastic drift model on a new sample of all of Africa's major equity markets: Morocco, Tunisia, Egypt, Kenya, Nigeria, Zambia, Botswana and South Africa, together with London and Paris. Costs of equity are found to be highest in Nigeria and Zambia and lowest in Tunisia, Morocco, Namibia and South Africa's blue chip stocks. Analysis of portfolio characteristics reveals that investment strategies based on either pan-African or Francophone markets outperform those of Anglophone markets in Africa, despite their lower mean returns.
Updated: 03/09/2010 | Comments: 0 | Rating: Not yet rated | Views: 58
Author(s): Bruce Hearn, Cass Business School, Roger Strange, University of Sussex, Jenifer Piesse, Kings College London
This paper estimates the cost of equity in four major African markets: South Africa, Kenya, Egypt and Morocco. These collectively represent the largest and most developed equity markets in Africa and also act as hub markets in their respective regions.
Updated: 06/09/2010 | Comments: 0 | Rating: Not yet rated | Views: 158
Author(s): Bruce Hearn, Cass Business School, Roger Strange, University of Sussex, Jenifer Piesse, Kings College London
This paper estimates the cost of equity in four major African markets: South Africa, Kenya, Egypt and Morocco. These collectively represent the largest and most developed equity markets in Africa and also act as hub markets in their respective regions.
Updated: 05/09/2010 | Comments: 0 | Rating: Not yet rated | Views: 264
