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Browsing Finance by Author "Mazviona, Batsirai Winmore"

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    An Analysis of the Impact of Demutualization on Stock Market Liquidity
    (OMICS Publishing Group, 2014) Nyangara, Davis; Mazviona, Batsirai Winmore
    This paper analyzes the impact of demutualization on stock market liquidity using annual data available from 24 demutualized and 26 mutual stock exchanges for the period 1990 to 2011. We use a panel data regression model to examine the nature and significance of the relationship between stock exchange demutualization and two measures of stock market liquidity (turnover rate and the value of volume traded relative to Gross Domestic Product (GDP). The findings indicate that demutualized exchanges exhibit significantly greater liquidity compared to mutual exchanges after controlling for age, size, trading technology, and level of economic development. We also observe that, world-wide, the trend has been that automation of trading precedes demutualization, and that the time between automation and demutualization has a positive but statistically insignificant effect on liquidity. The study is a remarkable departure from the traditional focus on the exchange governance effects of demutualization. Furthermore, it contributes to the literature on financial market development by documenting some of the key drivers of stock market liquidity, which in itself is a widely acknowledged driver of economic growth.
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    Does Firm Size Affect Stock Returns? Evidence from the Zimbabwe Stock Exchange
    (Academy of Business and Retail Management, 2014-11) Mazviona, Batsirai Winmore; Nyangara, Davis
    The objective of the study is to investigate the relationship between firm size and stock returns for firms listed on the Zimbabwe Stock Exchange (ZSE) between June 2009 and July 2013. We adopt the regression model employed by Banz in 1981, with innovations. The regression is based on constructed portfolios, with market capitalization as the basis for portfolio construction. The portfolios comprise at most 5 stocks, and stocks are sorted in ascending order by market capitalization for selection into portfolios. The sample period spans from June 2009 to July 2013. We select the sample period beginning from 2009 because that is when the government of Zimbabwe demonetized the Zimbabwean dollar and adopted a basket of foreign currencies as legal tender. The data prior to 2009 is also distorted by hyperinflation and therefore is not reliable. The sample size covers 64 companies listed on the ZSE, of which 60 are industrial and 4 are mining companies. We find that the estimated coefficient for the firm size factor is not significant at the 5% level of significance. Therefore, firm size has a positive yet insignificant effect on stock returns for companies listed on the ZSE for the period June 2009 to July 2013. Contrary to the general empirical findings, larger firms on the ZSE tend to exhibit higher risk-adjusted returns than smaller firms.
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    Enhanced Index Tracking-an Extension of the Elton and Gruber (1976) Model
    (SCIENCEDOMAIN international, 2014-05) Nyangara, Davis; Mazviona, Batsirai Winmore; Chowa, Taonaziso
    Aims: The purpose of the study is to make a case for the development of middle-range models for use in developing markets by modifying the Elton and Gruber (1976) model to come up with semi-optimized index-tracking models with desirable tracking and excess return features. Study Design: Non-experimental empirical design. Place and Duration of Study: Zimbabwe, Department of Finance and Department of Insurance and Actuarial Science, covering the period between February 2009 and June 2010. Methodology: We use weekly data of 71 industrial closing prices from the Zimbabwe Stock Exchange (ZSE) for the period starting February 2009 to June 2010 to compare the return and tracking performance of the adapted models against simple capitalization- based tracking models. Results: We find that the semi-optimized models yield tracking and excess return results that are not statistically significantly different from simple capitalization-based models, at the 1% significance level, yet only utilizing about half as many stocks. Conclusion: The use of semi-optimized index-tracking models has potential to significantly reduce transaction costs while keeping tracking error within reasonable limits. However, their use results in inferior excess return performance on a risk-adjusted basis when compared to simple capitalization-based models. The use of the correlation coefficient in filtering stocks to include in a tracking portfolio yields superior tracking error results but inferior excess return results compared to the use of the ratio of beta to idiosyncratic risk. Portfolios with higher Active Share measures produce poorer tracking error and excess return results compared to lower Active Share portfolios. The use of passive portfolio management strategies on the ZSE is supported by our findings.
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    An Essay on the Ethical and Corporate Governance Issues in the 2003/4 Zimbabwean Banking Crisis
    (OMICS Publishing Group, 2014) Nyangara, Davis; Nyangara, Melody R.; Mazviona, Batsirai Winmore
    This paper reviews the ethical and corporate governance issues that characterized the 2003/4 Zimbabwean banking crisis. There are contrasting views on the legal and moral roots of the crisis, and consequently, different analysts have come up with different assessments of the morality and professional propriety of measures adopted by the Reserve Bank of Zimbabwe (RBZ), as bank regulator, in response to the developments in the banking industry. While there is an almost universal acknowledgement among analysts that corporate governance and ethical shortcomings contributed to the crisis, there appears to be no universal theory justifying the response of the regulator. A critical review of the events surrounding the crisis, with some benefit of hindsight, points to a form of collective responsibility among bankers, regulators, and politicians. This analysis draws on deontological and teleological ethical theories to assess the resolution of the myriad of ethical dilemmas that characterized the period before and during the crisis. The analysis also relies on legal and prudential guidelines on good governance in banking institutions, in particular the Banking Act (Chapter 24:20).
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    A Test of the Weak Form Efficiency of the Zimbabwe Stock Exchange After Currency Reform
    (2013-06) Mazviona, Batsirai Winmore; Nyangara, Davis
    The Zimbabwean dollar lost its value and purpose as a medium of exchange as a result of the hyper inflation which had its greatest impact on the Zimbabwean economy between 2007 and 2008. The introduction of the multi-currency system, which entails the use of various foreign currencies to transact, resulted in the Zimbabwe Stock Exchange (ZSE) adopting the United States dollar (USD) as its main currency. The researchers investigated the weak form efficiency of the ZSE after introduction of the multi-currency system by testing if it is possible to create an excess return by the use of technical trading rules. According to the efficient market hypothesis (EMH) and the random walk theory, in an efficient market it is not possible to predict the future stock prices by analysing historical stock prices. The profitability of technical analysis and technical trading rules has been researched and debated extensively, but researchers are yet to reach a consensus. This article focuses exclusively on the ZSE. The purpose of this article is to test whether the ZSE exhibits weak form market efficiency. The data used to carry out the empirical study was obtained from the ZSE for the period 19 February 2009 to 28 June 2012. The efficiency of the ZSE is tested using the daily closing prices and indices over the aforementioned period. The data was then subjected to a number of tests namely auto-correlation, the runs test and the Q-statistic test. The results of the study provide evidence that the ZSE is not weak form efficient. This article adds to the existing body of knowledge and offers for the first time an investigation of the weak form efficiency on the ZSE following currency reform.