Liquidity-Adjusted Capital Asset Pricing Model in Emerging Market : How is Ghana Faring?

Authors

  • Yao Hongxing  School of Finance and Economics, Jiangsu University, 301 Xuefu Road, Zhenjiang, P. R. China
  • Solomon Duduchoge  Koforidua Technical University, Koforidua,Box 981,Koforidua Ghana

Keywords:

Corporate Social Responsibility, Liquidity Risk, Asset Pricing, Emerging Market, Sub Sahara Africa

Abstract

Corporate Social Responsibility (CSR) with its many facets of definitions and practices is used to examine the effect of illiquidity risk on expected excess stock returns in Ghana. As a corporate social responsibility, the GSE recently engineered the operation of what it termed the Ghana Alternative Market in 2015 since one of the cardinal pillars of CSR is to drive change towards sustainability focusing on businesses with a high potential for growth. Evidence exists to show that liquidity risk can be measured using the conditional asset pricing model in Ghana. It is realize that systematic liquidity risk is priced in Ghana using the different risk premia. It emerge that though the size of market capitalization in Ghana is small with its small firm size, liquidity risk is priced systematically irrespective of the type of the market. Our evaluation concludes that under different market situation, the Ghanaian economy is more align to the downward market where stocks are priced during the period the last financial shock. Cross-listing of stock and regional market integration in Sub-Sahara Africa is a policy option managers of the economy should focus.

References

  1. Acharya, V.V. and L.H. Pedersen (2005), 'Asset pricing with liquidity risk', J.Financ. Econ., 77 (2), 375-41.
  2. Akotey,A.,J.(2007). Interview with Armah Akotey, Vice President of Investment, Data Brokerage Ltd,Accra,Ghana.23 December,2008.
  3. Amihud, Y. (2002), Illiquidity and stock returns: cross-section and time –series effects', Journal of Financial Markets, 5, 31-56.
  4. Amihud, Y., and H. Menendelson (1986), 'Asset pricing and the bid-ask spread', Journal of Financial Econnomics, 17, 223-249.
  5. Anthonisz, S. A. and J.Putni?š,T?lis (2014), 'Asset Pricing with Downside Liquidity Risks', SSRN eLibrary
  6. Brennan, M.J., W. Huh and A. Subrahmanyam(2011), 'An analysis of the Amihud Illiquidity premium',Working paper,UCIA.
  7. Brennan M.J., and A. Subrahmanyam (1996), 'Market microstructure and asset pricing:on the compensation for illiquidity in stock returns',J.Financ. Econ,41 (3), 441-464.
  8. Bowen,H.R.,and F.E., Johnson(1953),Social Responsibility of the businessman,Harper
  9. Databank (2004). Epack Investment Fund Limited Annual Report, Ghana.
  10. Datar, V.T., Y.N. Naik and R. Radcliffe (1998), 'Liquidity and stock returns: an alternative test ‘J.Financ.Mark,1 (2), 203-219.
  11. D., S. Hvidkjaer and M. O,Hara (2010), 'Factoring information into returns',Journal of Financial and Quantitative Analysis,45,293-309
  12. Fabre, J., and A. Frino (2004), 'Commonality in liquidity: Evidence from the Australian stock exchange ', Account. Financ. 44 (3), 357-368.
  13. Fama, E. F., and J. D. MacBeth (1973), 'Risk, return, and equilibrium: Empirical tests',Journal of Political Economy, 81,607–636.
  14. Hearn Bruce (2011)”Liquidity Estimation in African Emerging Markets’ School of Management, University of Leicester, and King’s College, London,
  15. Hearn, B., Piesse, J., & Strange, R., (2009) market Liquidity and stock size Premia in Emerging Financial Markets: the implications for Foreign Investment. International Business Review, 16, special issue
  16. , Lee,K.H.,van Dijk,M.,2012.understanding commonality in liquidity around the world.J.Financ.Econ.105,82-112
  17. Kyle, A.S. (1985), 'Continuous auctions and insider trading', Econometrica, 5 3(6), 1315-1335.
  18. Lee, K.H.(2011), 'The World price of liquidity risk', J.Financ.Econ.,99(1),136-161.
  19. Lesmond,D.A., J.P. Orden and C.A. Trzcinka (1999), 'A new estimate of transaction costs',Rev.Financ.Stud.,12(5), 1113-1141.
  20. Limkriangkrai,M., R.B. Duran and I. Watson(2008), 'Is liquidity the missing link? 'Account.Financ., 48, 829-845.
  21. Liu,W. (2006), 'A liquidity-augmented capital asset pricing model',.J.Financ.Econ.,82 (3), 631-671.
  22. McWilliams and Siegel(2001),Corporate Social Responsibility:a theory of the firm perpective,Acad.Manag.Rev,26(pp.117-127)
  23. Mosley, P.Subusat;and Weeks ,J.,(1995)Assessing “adjustment in Africa World Development 23(9),1473.
  24. Pastor, l., and R.F. Stambaugh (2003), 'liquidity risk and expected stock returns', Journal of Political Economy, 111,642-685.
  25. Paul C.M.,Siegel D.(2006)Corporate Social Responsibility and economic performance.J.Prod. Anal 3:207-211
  26. Sally,Farid(2013)Financial integration in African Emerging Markets.

International Journal of Scientific Research in Science, Engineering and Technology

Downloads

Published

2017-02-28

Issue

Volume 3, Issue 1, January-February-2017

Section

Research Articles

License

Copyright (c) IJSRSET

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite

[1]
Yao Hongxing, Solomon Duduchoge, " Liquidity-Adjusted Capital Asset Pricing Model in Emerging Market : How is Ghana Faring?, International Journal of Scientific Research in Science, Engineering and Technology(IJSRSET), Print ISSN : 2395-1990, Online ISSN : 2394-4099, Volume 3, Issue 1, pp.105-116, January-February-2017.