How Volatile is the Stock Exchange? A Look at the Ghana Stock Exchange

Abstract

The purpose of the study was to analyse how volatile the Ghana Stock Exchange is. The objectives and the research questions of the study were executed by employing GARCH model to generate volatility of returns of Ghana Stock Exchange Composite Index (GSE-CI). The study employed explanatory research design. Secondary monthly data from Ghana Stock Exchange was used in the achievement of the research objective. The quantitative approach was employed. Pertaining the specific objective of the study which sought to examine the nature of the evolution of volatility on GSE, the study shows that the return of GSE showed an upward trend starting from 2011 through to 2017. In analysing the effect of the periods of high or low volatility on Ghana Stock Exchange, the study found that high or low volatility could serve as a guide to investors to make informed decisions regarding investment in the Ghana Stock market. Also, the finding of the study established that the period of low or high volatility of stock returns of Ghana Stock Exchange is significant in influencing investors decisions as to whether or not they should put their money in the stock market. The findings of this study have some implications for both policy makers and investors on the Ghana Stock Exchange as volatility of return of a listed firms arise from the fact that returns on stocks may be captured as the true intrinsic value of a firm and thus the investors might develop interest in investing on the Ghana Stock Exchange.