Stock market volatility in Uganda: A case of the Uganda Securities Exchange

Abstract

The study was looking at the stock market volatility in Uganda, case study of the Uganda Securities Exchange. The purpose of the study was to assess the volatility of stock markets in Uganda and the factors that affect the stock market volatility in Uganda. The objectives of the study were to establish the volatility of stock markets on the Uganda Securities Exchange, identify the factors that affect stock market volatility on the Uganda Securities Exchange and strategies that can be used to minimize the effect on stock market volatility on the Uganda Securities Exchange. The researcher used the pooled cross sectional research design. In this study a generalized GARCH (1, 1) model was utilized to model volatility of the stock returns, the goal of this model is to provide a volatility measure that can be used in financial decisions concerning risk analysis and portfolio selection. The sample size used was 17 respondents as per Morgan and Krejcie table which helped determining the sample size. Instrument of study was the questionnaire tool and secondary data from the Uganda Securities Exchange website. This is because it comprehensively covered the variable under study. The response rate was 59%. The study revealed that the stock market volatility on the Uganda Securities Exchange had been relatively higher in the long term (monthly) compared to the short-term (weekly). Macroeconomic variables and changing risk premiums are some of the factors that have the most influence on stock market volatility on the Uganda Securities Exchange. Trading limits and enhanced regulations and strict monitoring of these are some of the strategies that can be used to minimize the effect of stock market volatility on the Uganda Securities Exchange.