Returns on the stock market in Uganda.

Abstract

The study examined the relationship between investor sentiment, shareholder base and stock returns of Uganda Securities Exchange. The study was prompted by the declining trading volume of stock at the Uganda Securities Exchange (USE) resulting into low returns to the investors. The study thus aimed at enhancing the understanding of investor behaviors and decision making while speculating the stock market trend. A cross sectional survey design was used, Statistical tools such as cross tabulations and factor analysis, and inferential statistics such as regression; correlation coefficients were used to establish the relationship between the variables of study. Frequency distribution tables and percentages were used to examine the investor’s characteristics like gender, level of education, investor category including their professional bodies. The findings of the study revealed a significant and positive relationship between investor sentiment, shareholder base and stock returns of investors trading on the Uganda Securities Exchange (USE). Shareholder base was the most significant predictor of stock returns showing that when investors speculate more returns from shares, the more they buy shares from companies trading on the Uganda securities exchange to increase their shareholder base. The study recommended that Uganda Securities Exchange should engage investors at both individual and institutional level, the fundamental need to be informed and integrity of market players while analyzing the market trend to improve on the trading volume and stock returns. In conclusion Uganda Securities Exchange should promote mass education through training of investors and market players on the stock market trend, risk involved in order to make right investment products.