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LIQUIDITY AND VALUATION IN EAST AFRICAN SECURITIES MARKETS

Authors


  • The author wishes to thank the participants of the Centre for the Study of African Economies Annual Conference, St. Catherine's College, University of Oxford, UK, 2009 for useful comments.

Sir John Cass Business School and Department of Management, King's College London, London, UK. Tel: +44 207 848 4164, Fax: +44 207 848 4164. E-mail: bruce.hearn@kcl.ac.uk

Abstract

This study estimates liquidity premiums using the recently developed Liu measure within a multifactor capital asset pricing model 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.

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