Information efficiency of the Lusaka atock exchange and money supply in Zambia
type: CreativeWork
description: The purpose of this study is to determine the “informational efficiency of LuSE with respect to monetary policy and money supply. Capital market is said to be informationally efficient if the stock prices at any time “fully reflect” all available information regarding fundamental economic variables that include money supply. The main role of LuSE like any other capital market is to allocate scarce resources from savers to productive sectors of the economy. However, this role can best be performed if LuSE is informationally efficient. If LuSE is inefficient with respect to relevant information such as money supply, then this has important implications at both the micro and macro level. At micro level this implies an ability by certain individuals with the privileged information to earn consistently higher than normal rates of return, at the expense of those without “this privileged information”. At the macro level, it raises serious doubts about the ability of the capital market to perform its classical role of channelling funds to the most productive sectors of the economy. LuSE which opened for business on 21st February 1994 is a relatively new developing capital market which may not be informationally efficient. Therefore, there is need to determine the informational efficiency of LuSE empirically. The definitional statement that, “in an efficient capital market stock prices fully reflect available information” is so general that it has no empirically testable implications. To make the model testable, the informational efficiency of the LuSE is specified with respect to monetary policy. The money supply – stock market prices relationship has been widely tested. It is believed that money supply changes have important direct effects through portfolio changes and indirect effects through their effect on real economic variables such as GDP, consumption, investment, general price levels, earnings and so on, which are in turn postulated to be fundamental determinants of…
abstract: The purpose of this study is to determine the “informational efficiency of LuSE with respect to monetary policy and money supply. Capital market is said to be informationally efficient if the stock prices at any time “fully reflect” all available information regarding fundamental economic variables that include money supply. The main role of LuSE like any other capital market is to allocate scarce resources from savers to productive sectors of the economy. However, this role can best be performed if LuSE is informationally efficient. If LuSE is inefficient with respect to relevant information such as money supply, then this has important implications at both the micro and macro level. At micro level this implies an ability by certain individuals with the privileged information to earn consistently higher than normal rates of return, at the expense of those without “this privileged information”. At the macro level, it raises serious doubts about the ability of the capital market to perform its classical role of channelling funds to the most productive sectors of the economy. LuSE which opened for business on 21st February 1994 is a relatively new developing capital market which may not be informationally efficient. Therefore, there is need to determine the informational efficiency of LuSE empirically. The definitional statement that, “in an efficient capital market stock prices fully reflect available information” is so general that it has no empirically testable implications. To make the model testable, the informational efficiency of the LuSE is specified with respect to monetary policy. The money supply – stock market prices relationship has been widely tested. It is believed that money supply changes have important direct effects through portfolio changes and indirect effects through their effect on real economic variables such as GDP, consumption, investment, general price levels, earnings and so on, which are in turn postulated to be fundamental determinants of…
author: Simambwe, Fackson
language: en
keywords: Stock Exchange, Money Market
date published: 2012-01-20
date modified: 2026-07-27T22:06:42Z
provider: University of Zimbabwe
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: University of Zimbabwe