Performance evaluation of companies listed on the Ghana stock exchange

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November, 2015
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Given the attractive nature of stocks that outperforms the market, Efficient Market Hypothesis (EMH) proposed that in an efficient market, no investor is expected to consistently outperform or beat the market. However, the story was not different in the case of the Ghana Stock Exchange (GSE). The study evaluates the performance of twenty six (26) listed companies on the GSE coupled with the examination of the relationship between risk and returns. The study employed secondary data comprising of monthly share price, dividends, dividend yield, risk free rates and GSE composite index for the analysis. Using the regression and standard market model, the major finding was that majority of the stocks exhibited negative Jensen alpha indicating the underperforming nature of these stocks relative to the market. Additionally, the analysis indicates that, the beta of a stock positively predict the returns of the stock. The R2 or coefficient of determination was strong that was significant. The regression equation indicates a positive relationship between risk and returns which was significant at 0.05 p-values. This implies that, there was a 95 percent confidence that, the higher the risk of a stock the higher it returns when market is rising. The study finally recommended that, perspective investors especially the risk averse ones who do not want to take up risky investments because of the tendency of losing their investments to take on the risk to invest. Lastly, companies on the GSE are also expected to put in place measures that can help them improve on their performance with respect to dividend payments and the returns that the companies pose.
A Thesis submitted to the Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirement for the degree of Master of Business Administration (Finance) ,