1

An Assessment of Factors Influencing Stock Price Volatility of Shares Trading At DSE

CHAPTER ONE
1.0 Introduction This section explains the general picture of the study. It includes the background to the study, the statement of the problem studied, the objectives and research questions, its scope and the importance of the study. 1.1 Background of study In recent years there has been increased attention, by both the economics profession and the popular press, on the topic of stock price volatility. Interest peaked after the New Economy period when many high-tech stocks that were considered overvalued experienced a large drop in their share price. But still now there persists the idea that the knowledge economy (less unfashionable a term than the New Economy), has resulted in greater volatility, especially of small innovative firms which tend to go public earlier in their life-cycle than in previous times. Yet, in reality, there has been no trend increase of aggregate stock price volatility (Schwert 1989; 2002) . Particular periods have been characterized by high volatility, such as the 1970s and the 1990s, but the increase has not persisted. Firm specific volatility has, on the other hand, experienced a trend increase over the last 40 years (Campbell et al. 2001). Various works have highlighted technological change as one of the key factors responsible for this increase in firm specific risk, as well as the periodic increases of aggregate stock price volatility. For example, Shillers work (2000) has shown that excess volatility, i.e. the degree to which stock prices are more volatile than underlying fundamentals, is highest in periods of technological revolutions when uncertainty is greatest. Campbell et al. (2001) find that firm level idiosyncratic risk, i.e. firm specific volatility (as opposed to industry specific or market level), has risen

3 since the 1960s and claim that this might be due to the effect of new technologies, especially those related to the IT revolution, as well as the fact that small firms tend now to go public earlier in their life-cycle when their future prospects are more uncertain. And Pastor and Veronesi (2004) claim that the reason that high tech firms have prices that appear unjustifiably high (at the beginning of a bubble) is not due to irrationality, but due to the effect that new technology has on the uncertainty about a firms average future profits. The basic idea behind all these works (reviewed further below) is that innovation, especially when radical, leads to high uncertainty hence more volatility. One of the difficulties in predicting the stocks rate of return is the uncertainty and unpredictability of investors when making decisions about investing. The concept of behavioural finance becomes more popular and is taken into account in recent papers studying about the behaviour of stock prices. The conceptual theory of behavioural finance is on the grounds that human beings are not always rational; investors may make irrational decisions when it comes to investing. If investors are not rational, but instead they are inclined to behavioural biases, then we may need new models that incorporate this finding, Jirawattanakitja .A (2004).

1.2 Statement of the problem. Stock prices are characterized by volatility. When significant changes occur, investors tend to panic. Different factors influence the movement in stock prices. For example, when the events in Asia of 1998 occurred, the prices of stocks got really dynamic, which was reflected in a negative way even on investors that held high expertise. During the

4 following months the S&P 500 experienced one of its highest drops of 20% observed in recent times. This fall was later followed by a huge increase of 30%, which in itself represented a record climb. The media concentrated its attention to the Dow and spoke of stocks as if they were deprived of any volatility. What happened actually was that different companies experienced the events in different ways since they were affected in varying degrees1. Going back to the 1998 crisis, investors generally bought stocks of companies that have proven their consistency and were part of the Dow. They preferred them because they represented a higher degree of stability. On the other hand, negatively influenced were companies of a smaller size. Hull (2002) argued that the volatility of stock price measured how uncertain were about future stock price movents.As volatility increase the chance of the stock performed well or very poor also increase. For the owner of stock these two outcomes tend to offset each other

Stock market performance was measured by percentage change in the stock price or index value that was the return over a set period of time. One commonly used measure of volatility was standard deviation of returns which measure the dispersion of return from an average, Kisarika (2007).

The study of behaviour of stock prices has retained its interest to many researchers for a number of years and continues being a popular topic owing to its unclear and puzzled characteristics. Despite numerous endeavours and efforts of researchers and investment managers to discover the behaviour and characteristic of stock prices, no
1

http://www.stock-market-investors.com/stock-investing-basics/stock-price-volatility.html

5 apparent and well-matched results have ever been obtained. In like manner, various types of asset pricing models and statistical methodologies have been brought into the studies conducted by many researchers but still none of them could successfully reveal this information ,Jirawattanakitja A (2004).

There are many attitudes toward the movement in the price of a stock. For example some claim that if the price of the stock starts to fall it will continue to do so, whereas if the price of a stock starts to rise it will continue to do so as well. On the other hand, others hold the more optimistic view that every fall of a stock's price will be followed by a rise. Generally investors try to forecast the movement of stocks in a particular direction. Those who believe in the first claim will immediately try to purchase the stock when they see that it has experienced a significant increase in its price, thinking that it will continue to rise for the years to come. However, a failure to make a preliminary research may result in losses since the price of the stock may have been pushed well above its intrinsic value. As a result the investors who were the first to purchase the stock may sell it and enjoy their profits, leaving you with painful losses2.

Several questions remain to be answered. The examples of the cause of being unsuccessful in this effort are the nature of the stock market that is unpredictable, uncontrollable and unstable, the unknown factors that affect the rate of return of stock and the degree of investor attitude. This is what prompted the researcher of this study to assess the factors influencing stock price volatility at DSE in order to fulfil the gap
2

http://www.stock-market-investors.com/stock-strategies-and-systems/stock-priceforecast.html

6 of what other researchers have left, in accordance to the literature have been reviewed.

1.3 History of Dar es Salaam Stock Exchange. The Dar es Salaam Stock Exchange (DSE) was incorporated in September 1996 as a private company limited by guarantee and not having a share capital under the Companies Ordinance (Cap. 212). The DSE is therefore a non-profit making body created to facilitate the Government implementation of the economic reforms and in future to encourage the wider share ownership of privatized and all the companies in Tanzania and facilitate raising of medium and log-term capital.

The formation of the DSE followed the enactment of the Capital Markets and Securities Act, 1994 and the establishment of the Capital Markets and Securities Authority (CMSA), the industry regulatory body charged with the mandate of promoting conditions for the development of capital markets in Tanzania and regulating the industry. The governing organ of the DSE is the Council of the Exchange, which consists of 10 members representing various interest groups in the society.

Trading activities at the DSE commenced on 15th April 1998 after two years of background preparatory work under the stewardship of the Government through the Capital Markets and Securities Authority. The opening of the Trading Floor coincided with the listing of TOL Limited (formerly Tanzania Oxygen Limited), as the first company on the new Exchange. Till now there are 11 companies that have been listed and trading shares at DSE.Such companies are; TBL, TOL, TATEPA, TCC, SIMBA,

7 SWISSPORT, TWIGA, KA, EABL, and JHL.The first seven companies are domestic and the later three are cross listed companies3.

1.4 DSE Organisation Structure. The DSE is a body corporate incorporated in 1996 under the Companies Act, 2002 (Cap.212) as a company limited by guarantee without a share capital. The organ gram of the DSE is spelt out under the Articles of Association of the DSE. The DSE governance structure is built on three pillars. The apex pillar is the General Meeting of the members of the company. This is a forum of all subscribers to the Memorandum and Articles of Association of the DSE. This forum is the final organ in the governance ladder within the DSE.

The second pillar (below the General Meeting) is the Governing Council, which is duly appointed in accordance with the Articles of Association of the DSE. All the governing functions of the DSE are vested into the Council. The Council is accountable to the General Meeting4.

1.5 Trading Operation. 1.5.1 Official Trading Hours.

http://www.darstockexchange.com/history.asp http://www.darstockexchange.com/history.asp

8 Trading takes place throughout the week from Mondays to Fridays (except public holidays) starting from 10.00 a.m. to 12.00 noon. However due to the low level of activity, trading sessions ends before 12.00 noon5.

1.5.2

Trading System

Trading is conducted at the DSE Trading Floor through an Automated Trading System (ATS). This is an electronic system, which matches bids and offers using an electronic matching engine. LDMs converge at the trading room and post their orders in the ATS. Matched orders are displayed on the computer terminal in the trading room and projected in the public gallery. Currently, the ATS operates on a local area network (LAN). Future plans include operation in a wide area network (WAN), which can be accessed by brokers even out of Dar es Salaam. This system will enable the DSE to meet the potential growth expected to take place in the Tanzania securities industry (More details are found in the DSE Blue Print)6.

1.5.3

Market Surveillance.

Both the Capital Markets and Securities Authority (CMSA) and DSE monitor the market trading activities to detect possible market malpractices such as false trading, market manipulation, insider dealing, short-selling, etc. DSE is responsible for online/on-site surveillance and the CMSA for on-line/off-site surveillance. The CEO of the DSE has the authority to suspend anytime offers and bids that are deemed to be suspicious7.
5

http://www.darstockexchange.com/history.asp http://www.darstockexchange.com/history.asp http://www.darstockexchange.com/history.asp

1.6 Research objectives. The general objective of this research was assessing the factors affecting stock price volatility of shares trading at DSE.To attain general objective, research specific objectives were formulated and have included the following; (i) To assess whether the rate of changes in dividend payments per share to shareholders by companies trading shares at DSE have an effect on stock price volatility at DSE. (ii) To assess whether the transformation of information relating companies trading shares at DSE have an effect on stock price volatility. (iii) To assess whether changes in earnings of companies trading shares at DSE have an effect on stock price volatility at DSE. (iv) To assess whether changes in demand or supply of shares traded at DSE, have an effect on stock price volatility. (v) To assess whether changes in price for products or services offered as business by companies trading shares at DSE have an effect on stock price volatility.

1.7 Research questions. In order to accomplish the research target, some questions are asked. This research has the following questions;

10

(i)

Do the changes in dividend payments per share to shareholders by companies trading shares; have an effect on stock price volatility DSE? at

(ii)

Does the transformation of information relating companies trading shares; have an effect on stock price volatility at DSE?

(iii)

Do the changes in earnings of companies trading shares; have an effect on stock price volatility at DSE?

(iv)

Does the changes in demand or supply of shares traded at DSE, have an effect on stock price volatility?

(v)

Does the change in price for products or services offered as business by companies trading shares have an effect on stock price volatility?

1.8 Research Hypothesis. In order to test whether factors assessed affect stock price volatility, the test for existence of relationship between these factors and the stock price fluctuation was carried out. Severe hypothesis were tasted to verify the relationship. Those hypotheses are as follows;

(i)

For testing whether there is relationship between changes in dividend payments and stock price volatility.

Ho : There is no relationship between changes in dividend payments per share to shareholders and stock price volatility at DSE.

11

Ha : There is relationship between changes in dividend payments per share to shareholder and stock price volatility at DSE.

(ii)

For testing whether there is relationship between transformations of information relating companies trading shares and stock price volatility at DSE. Ho: There is no relationship between transformations of information relating companies trading shares and stock price volatility at DSE.

Ha: There is relationship between transformations of information relating about companies trading shares and stock price volatility at DSE.

(iii)

For testing whether there is relationship between changes in earnings of companies trading shares and stock price volatility at DSE. Ho: There is no relationship between changes in earnings of companies trading shares at DSE and their stock price volatility.

Ha: There is relationship between changes in earnings of companies trading shares at DSE and their stock price volatility.

12 (iv) For testing whether there is relationship between changes in demand or supply of share traded and stock price volatility at DSE. Ho: There is no relationship between changes in demand or supply of shares traded and stock price volatility at DSE. Ha: There is relationship between changes in demand or supply of shares traded and stock price volatility at DSE.

(v)

For testing whether there is relationship between changes in price for products or services offered as business by company trading shares and stock price volatility at DSE.

Ho: There is no relationship between changes in price for products or services offered as business by companies trading share and stock price volatility at DSE. Ha: There is relationship between changes in price for product or services offered as business by companies trading share and stock price volatility at DSE.

1.9 Significance of the study. As stock price volatility has proved to be the obstacle under which most investors have been victimised, example the crisis of TOL Company due to decrease of its share price from 500 during IPO to its current 330 Tanzania shillings as DSE quarter report shows, investors lost their capital. Therefore assessment on factors influencing stock price volatility is necessary in order to provide knowledge that will enable

13 various interested parties to be aware of what causes the stock price volatility, hence minimizing risks of their invested capital not to be subjected to unexpected losses.

The study is also relevant in sense that, one of the major ways to build portfolios is to invest in shares of stocks. As the share price has proven to fluctuate therefore it is necessary to identify what are the factors affecting share price. This study is aiming at assessing factors affecting share price, therefore it will provide a significant knowledge to those interesting in engaging ,or dealing with stock investment about what affecting share price which is the vital tool required since in order to succeed in stock investment it is important to know factors affecting their prices.

Also the findings of this research contribute to the partial fulfilment of requirements for the award of Bachelor of Business Administration (BBA) at TUDARCO. Lastly, the research report is relevant as library material that will be used as reference in further studies relating stock price movements

1.10

Scope of the study.

The part explain the range at which research will be possible to be conducted .Under this area researchers limitation of the study and delimitation are explained.

1.10.1 Limitations of the study. As time and financial factors are considered, this research study was conducted at Dar e s Stock Exchange only .The licensed Dealing Members, DSE staffs, and Investment Advisors form DSE were used as source of data collected where .The study could not make possible collect data from different financial analysts in the

14 country as finding them requires time and lots of fund on which this study could not afford to have had. Findings from research depended on reliability and validity of data based on the limited information from the sample and not the whole population. Also the sampling methodology falls under the non-probability methods and thus the extent to which the sample represents the population cannot be claimed with confidence.

1.10.2 Delimitations of the study. Selection of DSE as the case study was based on the fact that, it is the sole market that officially allows trading shares of stock for all the listed that are trading shares . Since the study was concerning with the factors influencing stock price volatility of shares trading at stock exchanges then at DSE,required information are easily found , as it is the sole stock exchanges that has been officially authorised to deal with capital marketing activities which also include stock exchanging in Tanzania.

1.11

Conclusion.

This chapter included the back ground of the problem, where it has discussed how different people were then came to deal with the issue of stock price volatility, then statement of the problem followed on which different events of stock volatility were shown, and how stock exchanges have been victimized with the issue of stock price volatility with the vivid example of different crisis faced large stock exchanges in the world. Then the chapter showed general objective which was to assess factors influencing the stock price volatility of shares trading at DSE. But, in order to accomplish the general objective, the specific goal of research was outlined .The research questions were then formulated and to answer those research question

15 tentative statement of truth were then established which were then tested to answer the research questions. After that importance of this study has been explained and what would make the study successful and those things that were assumed to act as factors that cause the study not successfully was the shown at end of this chapter one.

CHAPTER TWO
RELATED LITERATURE REVIEW

16 2.0 Introduction. In this chapter different works that relating the problem under study is reviewed from books, findings from other researches, and other material. 2.1 Theoretical Literature Review 2.1.1 Introduction to Stocks Stock represents a piece of ownership of a particular company. When you purchase a stock of a company you immediately become one of its owners. As a result you have right over the profits the company makes and some voting rights depending on the type of the stock. So, if you consider the stock profitable and beneficial you should strive to purchase as much shares of it as possible.

The price of the stock is set following certain rules. Generally, stocks are traded on the stock market, which tends to determine the value of the company on daily basis. The major factor that determines the value of a stock is its earnings. They are mostly in the focus of attention. Every company makes a report of the profits it has made every quarter. These numbers are of great interest to most investors, since they tend to base their investment decisions on them. Investors use earnings per share as an indicator of the current state of the company and its future position.

2.1.2

Bid and Ask Prices The stock exchanges are the places where the actual setting of the stock prices

happens. They are the places where bid and ask prices cross their ways and the exchange serves as the intermediary between the two. So, as an educated investor you should be acquainted with the meaning of bid and ask prices.

17 Bid price is the price announced by the buyer at which s/he is willing to purchase a stock. While, ask price, is the price announced by the seller at which s/he is willing to sell a stock. The major role of the stock exchange is to coordinate the bid and ask prices of buyers and sellers. This service, of course, is not for free.

Bid and ask prices are never the same. In fact, the price announced by the seller (the ask price) is always higher than the bid price. As a result you are required to pay the ask price in case you have decided to purchase a stock and pay a higher price. On the other hand, if you decide to sell a stock you will have to receive the bid price, which is of a lower amount than the ask price8.

2.1.2.1 Bid/Ask Spread The difference between ask and bid prices is referred to as the spread. The spread goes directly to the pockets of the broker or specialist who was responsible for the stock transaction. However, the spread is also used for the paying of other fees, not only the commission of the broker.

Unless you use specific market orders, it will be almost impossible to determine the price you will get as both a buyer and seller. This is especially true for the actively traded stocks, which are characterized by their extremely dynamic nature.

http://www.stock-market-investors.com/stock-investing-basics/bid-and-askprices.html

18 Even though the bid/ask spread eats up part of your profit its avoidance is not recommended since it has proven its benefits as a working system throughout the years9.

2.1.3Factors that may affect the stock price volatility In accordance with different sources, the stock prices volatility may be affected by variety of factors depending on the particular characteristics of stock exchange. In this research ,several factors that might contribute to stock price volatility at DSE are discussed in following paragraphs.

2.1.3.1 Company Market Capitalization or Company Size When you decide on the investment in a particular stock you should consider the size of the company that issues it. Additionally, you should decide on the amount of the money you would allocate. This is required since companies of different sizes react in a different way to market conditions and changes. Company size can be classified in one of the two ways: by revenue, and by market capitalization (also known as market cap)

The first classification, namely by revenue, is rarely used. This is so since the differences observed from one industry to another usually distort the size of the company.

http://www.stock-market-investors.com/stock-investing-basics/bid-and-askprices.html

19 On the other hand, the most commonly used measure is the second one - market capitalization. Market Capitalization calculation use the following formula to estimate market cap: Market cap = (number of outstanding shares) x (current stock price) Example: Company X possesses 200,000,000 shares of common stock outstanding. The current market price for one share is $40. So, company X's market cap is $8.0 billion (200,000,000 x $40 = $8.0 billion). By applying this formula to any other real company you will be able to measure its market cap10

2.1.3.2 Dividend Dividends are payments made by a company to its shareholders. When a company earns a profit, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders of the company as a dividend. Paying dividends is not an expense; rather, it is the division of an asset among shareholders. Many companies retain a portion of their earnings and pay the remainder as a dividend. Publicly-traded companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a special dividend to distinguish it from a regular one. Dividends are usually settled on a cash basis, as a payment from the company to the shareholder. They can take the form of shares in the company (either newly-created shares or existing shares bought in the market), and many companies offer dividend reinvestment plans, which automatically use the cash dividend to purchase additional shares for the shareholder11.

10

http://www.stock-market-investors.com/stock-investing-basics/company-marketcapitalization.html http://en.wikipedia.org/wiki/Dividend

11

20 2.1.3.2.1 Dividend Yield Explanation Different investors should use different fundamental analysis for the different stocks they target. For instance, it will be hard for an investor, who wants to invest in high growth technology stocks to find information on them into the various stock screens. This is true especially when the criteria selected are dividend paying indicators.

On the other hand, dividend investors, searching for a stock that will return them stable current income, should use Dividend Yield in their comparison of the different stocks available on the market, which fall under the investor's consideration. Dividend yield represents the percentage return by the company that goes to the shareholders in the form of dividends. Dividend Yield = Annual Dividend per Share / Stock's Price per Share Companies that are relatively young tend to pay less in dividends to their shareholders since their focus is on growth and thus they need funds to finance the growth. On the other hand, older companies tend to pay more dividends to their shareholders since they have reached their growth capacity12.

2.1.3.3 Fundamental analysis theory This theory is based on assumption that, a stocks intrinsic or real value is determined by the companys future earnings. The theory is explaining that, for any companys stock price to increase or decrease in value, it depends on the companys future earnings. If the company is expecting higher earnings than its presents earnings, the companys stock should increase in value .Also if the company is
12

http://www.stock-market-investors.com/pick-a-stock-guides/dividend-yieldexplanation.html

21 expecting fewer earnings than its present earnings, the companys stock should decrease in value, Dlabay (2004).

The mathematical model below is useful to support this fundamental theory. Jordan (2000) wrote this mathematical model which could be applied when determining the price of stock at different periods.

The mathematical is as follows;

Po =

D + P 1 + R

. Let be equation

P =

D + P 1 + R

. Let be equation

If P in equation 1 is substituted by D + P 1 D Then Po = (1 + D + P 1 + R . + R .

. of equation 2

+ R)

Po =

P . ( 1 + R )

( 1 + R )

Po =

P . ( 1 + R )

( 1 + R )

( 1 + R )

22 Since we to find the price in two periods, then we add,

P =

D + 1 + R

P .

D + P . Po = D + D + 1 + R . ( 1 + R )

( 1 + R )

( 1 + R )

Po = .

D . +

P .+

( 1 + R ) + R )

( 1 + R )

( 1 + R )

(1

According to this mathematical model ,the current price of stock is equal to present value of all future dividends .But since there are infinite future dividends ,then Jordan (2000) made three assumption that enable the determination of current price of stock. These assumptions are such as; ( a )Dividend has zero growth rate. ( b )Dividend grows at constant. ( c )Dividends grow at constant rate after some length of time.

( a ) The case of dividend has zero growth rate When dividend on a share has zero growth, it means paid do not increase over time and is therefore constant through out the life of dividend to be paid. When the dividend has zero growth rates, then a stock is termed or treated as preferred stock.

23 Back to mathematical model

Po =

D (1 + R )

D (1 + R )

D (1 + R )

For dividend grows at zero rate, then D = D = D = D

Therefore the value of Po can then be written as:

Po =

D (1 + R )

D (1 + R )

D (1 + R )

Because the dividend is always the same, the stock price Po can be viewed as an ordinary perpetuity with a cash flow equal to D every period. Then the value or price of stock is thus given by:

Po =

D . R

Where ,

Po Stock price D Dividend R Required rate of return or discount rate

24

If assumption is made that R is constant, then Po = D

. Then the mathematical

Constant model became the relationship model which can be written as Po D in other words it means ,stock price is directly proportional to dividend to be paid.

(b ) The case of dividend grow at constant rate If dividend grows at steady rate, it means the dividend paid increases at constant rate .In this case if we take Do to be the dividend just paid and g, to be constant

growth rate, then the value of future dividend Di can be written as

Di = Do ( 1 + g ) By taking the value of stock at present value Po as an ordinary perpetuity with a cash flow equal to D every period

Po =

D R

But, since the dividend is growing at constant growth then by considering the constant growth rate g, value of stock Po is treated as growing perpetuity and the formula is written as:

Po =

Di

25 ( Rg )

Di = Do ( 1 + g )

Where ,

Di Future or expected dividend Do Dividend paid or current dividend g Dividend growth rate R Discount rate or required rate of return

From above formula of Po when dividend is growing at constant growth, if assumption is made that discount rate R and growth rate are constant, then R g also is assumed to be constant as well. Therefore, value of stock Po is then written as:

Po =

Di Constant

Mathematically it also can be written as Po Di, which means that price of stock, is directly proportional to future or expected dividend to be paid.

( c ) The case of grows at constant rate after some length of time When the dividend grows after some length of time, then stock price at any time can be written as; Pt = Dt ( 1 + g ) . ( R g )

26

Then

Pt =

D (t+) ( R g )

Since

D (t+) = Dt ( 1 + g )

Where, D (t+) Future Dividend after some time t when last dividend Dt was paid Dt Dividend paid at time given time t. R Required rate of return or discount rate g Dividend growth rate If assumption is made that discount rate or required rate of return R, and growth rate g are constant, then, R g is also assumed to be constant.

Therefore

Po =

D (t+) . Constant

Mathematically

Po D (t+) which means stock price is directly proportional

future dividend after some time t .Time t can be hours , days ,weeks, months or years. In all three cases, the model has shown that when required rate of return or discount rate R and dividend growth rate g remain constant, then stock price is directly proportional to future or expected dividend to be paid.

27 Hence, the fundamental analysis theory is verified by these mathematical models since if future earnings are expected to be higher than present earnings, then future dividend will also expected to increase as the results the stock price will also tend increase, due to the fact from the model that stock price is directly proportional to the dividend to be paid in the future.

2.1.3.4 Technical analysis theory This theory is based on assumption that, a stock market value is by force of supply and demand in the market as whole. Unlike the fundamental analysis theory which based on expected earnings or the intrinsic value of an individual companys stock, technical analysis theory is based on factors found in the market as whole.

The technical factors described by this theory are such as; total number of share traded, number of buy orders, and number of sell orders over a period of time. Technical analysis or sometimes called chartists, construct charts that plot past price movements and other market averages. These charts allow to observe trends and for the market as whole that enable to predict whether a specific stocks market will increase or decrease in value, Dlabay (2004).

This technique is concerned with such relationships as between the price of the stock and the number of shares traded during a trading day (volume). Technical analysts tend to use different mathematical techniques in order to predict future trends in the prices of a target stock.

28 Charts are drawn that picture the direction of the price of the stock and its future changes. The terminology applied in technical analysis is somehow strange, but once you get used to it, it will make more sense to you. Making sound interpretations of the resulting form the technical analysis charts and graphs will result in more reliable decisions regarding the future rises and falls of the stock's price. Charts also include additional information which is accompanied by a price history. You will often find a moving average as part of charts. Technical analysis includes the daily calculations of the stocks price including a time period that may range from 90 to 200 days13.

2.1.3.5 Efficient Market Hypothesis Pandey (2004) defined capital market efficiency as ability of securities to reflect and incorporate all information, almost instantaneously, in their prices. Levy H (1998 ) wrote about the efficient market theory. The argument was market is efficient, and in an efficient market no abnormal profit is available which means you can not beat the market. From Levy H (1998) the efficient market hypothesis (EMF) distinguishes among three level of efficiency; weak , semi strong ,and strong form of EMF. According to Levy H (1998) the weak form of EMF claims that, the stock market behave similarly to the tossing of a coin, and that it has no memory of past outcomes. The semi strong form of EMF states that a stocks current market price reflect all public available information, including the firms EPS ,its financial statement, and stocks past prices. The strong form of EMF states that the current stock price reflects all public and privately held information.
13

http://www.stock-market-investors.com/stock-investing-basics/technical-analysisbasics.html

29

According to Dlabay (2004 ) this theory is sometimes called random walk theory and is based on assumption that , stock price movements are purely random. Advocates of efficient market theory assumes the stock market is completely efficient ,Therefore buyers and sellers have considered all of available information about an individual stock in such a manner that ,any news whether affecting individual stocks in market or over all markets stocks. This information is quickly absorbed by all investors seeking profit thus the current stock price changes.

Gitman J L ( 2004 ) explained efficient market theory as it describe the behaviour of an assumed perfect market in which (a) security are typically in equilibrium which means that they are fairly priced and that their expected returns equal their required returns ,(b) security prices fully reflect all public information available and react swiftly to new information, therefore those market participants who have non public inside information may have an unfair advantage that enables them to earn an excess return , and ( c ) because stocks are fairly priced ,investors need ot waste time looking for mispriced ( undervalued or overvalued ) securities.

2.1.3.6 Supply and demand theories The law of supply states that quantity supplied is related to price. It is often depicted as directly proportional to price: the higher the price of the product, the more the producer will supply, ceteris paribus. The law of demand is normally depicted as an inverse relation of quantity demanded and price: the higher the price of the product, the less the consumer will demand. Everything else that could affect supply or

30 demand except price is held constant (ceteris paribus). The respective relations are called the supply curve and demand curve, or supply and demand curve for short14. Supply and Demand curve

Source: http://en.wikipedia.org/wiki/Supply_and_demand The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The graph depicts an increase in demand from D1 to D2, along with a consequent increase in price and quantity Q sold of the product.

In economics, supply and demand describes market relations between prospective sellers and buyers of a good. The supply and demand model determines price and quantity sold in the market. The model is fundamental in microeconomic analysis of buyers and sellers and of their interactions in a market. It is used as a point of departure for other economic models and theories. The model predicts that in a competitive market, price will function to equalize the quantity demanded by consumers and the quantity supplied by producers, resulting in an economic

14

http://en.wikipedia.org/wiki/Supply_and_demand

31 equilibrium of price and quantity. The model incorporates other factors changing such equilibrium as reflected in a shift of demand or supply.

The laws of supply and demand state that the equilibrium market price and quantity of a commodity is at the intersection of consumer demand and producer supply. Here, quantity supplied equals quantity demanded (as in the enlargeable Figure), that is, equilibrium. Equilibrium implies that price and quantity will remain there if it begins there. If the price for a good is below equilibrium, consumers demand more of the good than producers are prepared to supply. This defines a shortage of the good. A shortage results in the price being bid up. Producers will increase the price until it reaches equilibrium. If the price for a good is above equilibrium, there is a surplus of the good. Producers are motivated to eliminate the surplus by lowering the price. The price falls until it reaches equilibrium15.

The intersection of supply and demand curves determines equilibrium price (P0) and quantity (Q0). Source:http://en.wikipedia.org/wiki/Supply_and_demand

15

http://en.wikipedia.org/wiki/Supply_and_demand

32

2.1.3.7 Dividend Irrelevance: The miller Modigliani (MM) Theorem The Modigliani-Miller theorem (of Franco Modigliani, Merton Miller) forms the basis for modern thinking on capital structure. The basic theorem states that, in the absence of taxes, bankruptcy costs, and asymmetric information, and in an efficient market, the value of a firm is unaffected by how that firm is financed.[1] It does not matter if the firm's capital is raised by issuing stock or selling debt. It does not matter what the firm's dividend policy is. Therefore, the Modigliani-Miller theorem is also often called the capital structure irrelevance principle16.

2.2 Empirical Literature Review Murphy and Sabov (1992), were probably the first to study the efficiency of any transition capital markets. They analyzed the Hungarian market. This particular capital market has a longer history than others (among the transition economies), so they also had more data that enabled them to do a more detailed quantitative analysis. They studied the efficiency of the equity market, the bond market and the derivatives market. One of their interesting findings is that there is hardly any statistically significant relationship between the prices of these securities and so called fundamentals. The credit risk doesnt affect the prices of bonds, the net income and the dividend yields dont have a statistically significant impact on the prices of shares, and there seems to be no relation between the stock price volatility and the prices of the options. In spite of all this empirical evidence, they found no support for the

16

http://en.wikipedia.org/wiki/Modigliani-Miller_theorem

33 hypothesis that the investors could use these inefficiencies for designing some profitable trading rules. Trading on inside information also didnt result in above average returns. This indicates that the lack of experience and inefficient securities valuation does not necessarily imply above average rates of return on securities trading. Even though prices of securities behave as sub martingales and therefore dont contradict the weak-form efficiency hypothesis, that doesnt mean that they reflect the fundamentals, Murphy and Sabov (1992). Gordon and Rittenberg (1995), studied the efficiency of the Polish capital market. Due to the lack of information, necessary for the standard tests of efficient market hypothesis, they decided to do a more qualitative analysis. They tried to find a model that would best describe current and past movements of stock prices on the Warsaw stock exchange. They claim that the investors psychology plays a much more important role on this market then is usually acknowledged by the supporters of the efficient market hypothesis. They showed that there is a very strong relation between the investors behaviour (their confidence in the market, the public opinion and the fads) and the prices determined by the market. Further on, Gordon and Rittenberg claim that many measures, which were aimed at increasing the efficiency of the equity market on the Warsaw Stock Exchange, delivered the adverse results. Limited size of the orders and the daily price limits, for example, only precluded the market prices from reflecting all the information, according to them. Using the 10% rule (the market price of stock cannot change by more than 10% during a trading day) as a sort of trading rule, they showed that investors could realize abnormal returns just by using the information on historical prices. This contradicts the notion of the weak form efficiency of the Polish capital market.

34 Filer and Hanousek (1996), compared the informational efficiency of the Czech, Hungarian, Polish and Slovak capital markets, using the variance ratio and runs tests on the local stock exchange indices. Based on the test results for weekly and monthly returns they found evidence that equity markets in Central Europe are close to being weak form efficient. Further on, they tested the semi-strong form efficiency of the Czech market and had to reject the hypothesis. They concluded that, to the extent that it is possible to test conventional types of efficiency with the limited data available to date, the markets in these countries dont seem to be less efficient than the far more developed equity market. Ameer et al (1996), suggest that investments in environmental management and improved performance can be justified, in many cases, on purely financial grounds, and that the net financial impact of prospective environmental investments can now be evaluated more fully than before. Our results show that firms will increase shareholder value if they make environmental investments that go beyond strict regulatory compliance. How much further they should go will vary by company, though this question also may be addressed empirically.

Our work suggests that environmental improvements such as those we have evaluated might lead to a substantial reduction in the perceived risk of a firm, with an accompanying increase in a public companys stock price, of perhaps five percent. Investments in environmental management and performance may be costly. Nonetheless, when appropriately evaluated, many of these investments may be shown to provide substantial, positive returns and lasting value to the firm.

35 Campbell et al. (2001) study the idiosyncratic versus systematic nature of volatility by decomposing the return of a typical stock into three components: the market wide return, the industry specific residual and a firm specific residual. They use variance decomposition analysis to study the volatility of these components over time. The firm specific residual is the idiosyncratic component of risk, while the market wide return captures the systematic component of risk. They find that while aggregate market and industry variances have been stable (updating and confirming Schwerts 1989 finding that market volatility did not increase in the period 1926-1997), firm level variance displays a large and significant positive trend, actually doubling between 1962 and1997. They claim that this increase is related to the impact of the IT revolution on various factors including the speed of information flows.

Jirawattanakitja A (2004), on her study specifically to explores the degree of industry effect towards the stocks rate of return of Thai stocks. The based conceptual theories of this study were the Capital Asset Pricing Model (CAPM), the Arbitrage Pricing Theory (APT), and the Three Factor Model. The ability of the CAPM in explaining the stock price behaviour has been questioned by many researchers - King (1966); Meyers (1973) and Livingston (1977). The findings of these authors were that the market factor alone could not explain the return on stock and in some periods, the relationship between the rate of return of stock and beta seemed to disappear. In proceeding with effort to identify these factors that affect stock price Jirawattanaktja (2004) found the industry effect shows no significant effect towards the stocks rate of return in the Thai stock market during the period of January 1998 through December 2002. The revealed that, there was no strong evidence to show that the industry effect plays a significant role in a Thai stocks rate of return. In the light

36 of all these findings, the results definitely suggest that other factors, as representative for industry effect must be included in the model. It could be said that the industry index could not be solely representative for the industry factor but other industrial factors i.e. industry growth rate, any circumstances affecting a particular industry should be taken into account and added in the model. Based on the fact that the period chosen in the study falls in a highly volatile period where the SET index reached its highest and lowest point within the period of the study, this may turn away the result from what it should be if it is conducted under normal circumstances. It is not necessary that firms in the same industry have the same market effect. Hence, it is entirely possible that a common industry influence could be overpowered by each stocks unique market influence if the price movements are not adjusted for the differential market influence prior to testing for the intra-industry effect. The work of Pastor and Veronesi (2005) provides interesting insights on the relationship between innovation, uncertainty and both the level and volatility of stock prices. They claim that if one includes the effect of uncertainty about a firms average future profitability into market valuation models, then bubbles can be understood as emerging from rational, not irrational, behavior about future expected growth. Building on the result in Pastor and Veronesi (2004) that uncertainty about average productivity increases market value (because market value is convex in average productivity), they extend the model to explain why technological revolutions cause the stock prices ofinnovative firms to be more volatile and experience bubble like patterns. The basic idea is that when a firm introduces a new technology, its stock price rises due to the expectations regarding the positive impact of the new technology on its productivity. Volatility also rises because risk is idiosyncratic when

37 technology is used on a smallscale. But if/once the new technology gets adopted throughout the economy, then risk becomes systematic causing the stock price to fall and volatility to decrease. This bubble like behavior is strongest for those technologies that are the most uncertain (and the most radical).

Hale G et al (2006); found an empirical regularity that stronger creditor protection reduces the volatility of stock market prices. They analyze two distinct mechanisms that characterize equity price volatility: government guarantees and creditor protection. Using a Tobin q model, we demonstrate that weak creditor protection that gives rise to government guarantees and tightens credit constraints, increases stock price volatility. Empirically, accounting for the probability of financial crises, we find that government guarantees and weak institutions that tighten credit constraints increase aggregated stock price volatility.

2.3 Research Gap According to literature reviewed, most researchers findings did not reveal what was the reason for stock price volatility. Most researchers findings showed there was no statistically significance relationships between the price volatility of securities studied including stock, and the variables tasted to verify their relationship. For example Murphy and Sabov (1992), one of their interesting findings was that, the credit risk, the net income and the dividend yields dont have a statistically significant impact on the prices of shares, and there seems to be no relation between the stock price volatility and the prices of the options. In spite of all this empirical evidence, they found no support for the hypothesis that the investors could use these inefficiencies

38 for designing some profitable trading rules as the result these findings still leave a gap for other researcher to continue on searching foe factors influencing stock price volatility. Gordon and Rittenberg (1995), studied the efficiency of the Polish capital market. they showed that investors could realize abnormal returns just by using the information on historical prices. This contradicts the notion of the weak form efficiency of the Polish capital market hence it provide a gap for this study to test market efficiency on DSE to see how it support the market efficiency theory.

Filer and Hanousek (1996), compared the informational efficiency of the Czech, Hungarian, Polish and Slovak capital markets, using the variance ratio and runs tests on the local stock exchange indices. Due to their findings they showed that efficiency of capital Markey can be influenced by development level of stock exchange as they concluded that, to the extent that it is possible to test conventional types of efficiency with the limited data available to date, the markets in these countries dont seem to be less efficient than the far more developed equity market. which also give the gap for this research also to test the market efficiency theory as development level of DSE differ form other stock exchanges that already studied. Also Kisarika (2007) when assessing impact of holiday seasons on stock price, her findings revealed that there was no significant stock price volatility in holiday seasons compared to normal season, hence she recommended for further research on what are the factors influencing stock price volatility. Her recommendation has provided the gap that initialises this research to be conducted.

39 2.4 Conclusion This chapter was used to discuss on some literature that relate to the topic under study. Various theories have been used to support the study, then findings from different researchers have also been discussed and then the gap was revealed that was then expected to be filled by the findings from this research study. Different sources of data such as books, internet, and journal have been used to provide all the information to this chapter.

CHAPTER THREE
RESEARCH METHODOLOGIES 3.0 Introduction

40 Under this chapter the arrangement and procedure on how the research was carried out is reviewed and presented .It explain where, how, and by which methods the research was conducted .It also shows how data was analysed and then presented.

3.1 Area of study Here the area under which the study was conducted, and the population that was involved for sampling purposes is explained.

3.1.1 Location This research was conducted at Dar e s Salaam Stock Exchange, as it is the sole authority given the responsibility of listing the business firms that are engaging in security market especially those companies issuing stocks to the public.

3.1.2 Unit of Inquiry / Population The population that was used as source of data collected on this study included three parties which were; DSE staffs, Licensed Dealing Members, and Investment Advisors registered with DSE. The population was chosen on the advantage that they are direct involving with stock exchanges ,therefore they are more familiar on the stock price movements and they are experienced with what influencing these price movements hence this population was best to assess the factors that could lead to volatility of stock price at DSE.

3.2 Research design

41 Selltez, C and others (1962)17 defined research designs as the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. Therefore in arrangement of conditions for collection and analysis of data, the researcher is expecting to use both case and descriptive research designs with the aim of identifying the various characteristics of the problem under study, assessing why the problem exist and what can be done to it.

By using both case and descriptive research design a researcher worked efficiently and effectively under constraints of time and cost as the research concentrating only on a single unit (i.e. Dar e s Salaam Stock Exchange) and studies the various factors that may influence stock price volatility.

3.3

Sampling Design

According to Kothari (2004), sample is the selection of some part of an aggregate or totality on the basis of which a judgement of inference about the aggregate or totality is made. In other words, sampling is the process of obtaining information about an entire population by examining the part of it.

3.3.1 Sampling Frame Among the population used on this study, the sample was selected based on some expertise. From DSE only staff working on finance department was used as part of sample, from Licensed Dealing Members only Authorised Dealer Representatives (ADR) were used as source of sample selected, and Licensed Investment Advisors
See in Kothari, CR, (2003): Research Methodology; methods and techniques;2nd Edition; New Age International Publishers; New Delhi.
17

42 registered . At DSE share are bought and sold by these licensed dealing members on behalf of all investors who are dealing with sock investments, and they are also bid for shares issued by the company during Initial Public Offering, therefore they are experiencing price movements for these shares at DSE.

3.3.2 Sampling Technique Krishnaswami and Ranganatham (2006), point out that, sampling techniques or methods may be classified into two generic types which are, probability or random sampling and non probability or non random sampling.

This research applied non probability sampling. Since using probability sampling might have led in selecting the sample that was not willingly to provide the information required on time hence due to time constrain, non probability sampling application was favoured in the advantage that sample selection was based on easily availability of information required with less time consumption.

3.3.3 Sample Size Studying the whole population is very difficult as the financial and time limit hinders the process. Therefore selecting some of units to represent the characteristics of the whole population is more feasible than inclusion of the whole population. The research had a sample of 20 respondents, among these 20 respondents, 12 were ADRs, 7 were Licensed Investment Advisors, and 1 respondent who is Finance Assistance at DSE. The sample size include % of ADR, % of total Licensed Investment Advisors. 3.4 Data types and sources.

43 3.4.1. Primary Data. These data were generated through questionnaire which was sent to DSE, ADRs when they were trading shares at DSE and at their offices, and DSE Licensed Investment Advisors. Also personal interview was then conducted regarding research findings in order to obtain data from financial expertise that was then used in discussion or conclusion part of the research.

3.4.2. Secondary Data. These are data that were employed in the research after being acquired from some other researches and data gatherers. They consist of some of the literature such as journals and publications and other documented sources relating to the case study. Also a DSE article was used as source of such data.

3.5 Data collection methods In collecting relevant data, basically the following methods were employed. These are questionnaire, interview, and documentation.

3.5.1. Questionnaire The study used structured questionnaire which comprised of closed questions, one open question, and rating scale questions that enabled the collection additional information on the subject concerned. According to Kothari (2004),questionnaire are less cost even when the sample is large and widely spread geographically, it also give enough time to provide well thought out answers which were advantageous to this research. Like any other data collection technique, the questionnaire also have some demerits as, possibility of late reply, and

44 mostly applicable when the respondents are educated and coorperating.To overcome the demerits, questionnaire sent to respondent were made sure that are filled on the same day they were sent and picked up by data collector, and to ensure no uneducated respondents will be included, the respondents were selected on the basis of their knowledge about the capital markets and stock price fluctuation since they are engaging in capital market and others are finance consultants.

According to Spalding (2005), questionnaire are shorter, and therefore easier to create .Because of this, they are inexpensive and can give quick, focused results. The participants know that their answer are completely anonymous, so they a more honest set of answer. On the other hand, because questionnaires are generally brief, some participants may not answer all of the questions or may misinterpret the questions. But to overcome this demerit, the questionnaire was constructed using the language that participants understood, and keep question clear and brief, and respondents were provided with the anonymous of some complex vocabulary found by them in questionnaire to ease them on answering the questionnaire.

3.5.2 Documentation Here information was collected through the past records of listed companies at DSE.Quarterly reports, and other documents such as price index provide helpful information that used during documenting. 3.5.3 Interviewing Interviewing involves presentation oral-verbal stimuli and reply in terms of oralverbal responses (Kothari, CR, 2003).The interview carried were based on the

45 findings on which the respondents interviewed were asked to give their opinion regarding the findings .Interview involved DSE Licensed Investment Advisors.

3.6 Data Analysis and presentation Methods Data collected was analysed quantitatively, reliability test was done to provide with how the questionnaire was consistency. The study involved multivariate analyses, where correlation and regression methods were applied to show the relationship between variables under study. And hypothesis test was applied for verifying existence of the relationship between variable, Chi Square test was used in hypothesis testing. The analysis and presentation of data collected was carried on by the help of SPSS as one of data analysis software.

3.7 Data Presentation The findings from data analysis are presented on tables and graphs.

3.8 Conclusion This chapter described how the research was carried out.It explain the place where the research was conducted,thereafter,explaining the population on which the respondents were chosen, then the number of respondents that were used as sample for data collection purposes. The type of design used under the research also has been described, with the technique used for sample selection. Then the data collection instruments applied on this research following with how the analyses were carried out and lastly how the research findings were presented. Chapter follow is concerning with how data were presented and analysed.

46

CAPTER FOUR
DATA PRESENTATION AND ANALYSIS 4.1 Introduction This chapter presents, analyse, and discuss the data collected. Data presentation and analysis tasks were done with the help of SPSS package. The chapter is organised in three parts, the first part describe reliability of instrument used for data collection, the second part describe respondents characteristics, the third part describe presentation and analyses of data collected here there are testing of research hypothesis that are used to answer the research questions in order to attain research objectives, and also there is analysis of correlation and regression used to show the nature of relationship existed between variables.

4.2 Measure of Reliability for research instruments used. To measure whether scale scores are relative reliable for respondents in the study, Cronbachs alpha was used. This measure the internal consistency of the responses. According to Nunnallys (1978),it was recommended that the minimal internal consistency should be 0.70,if Cronbachs alpha exceed 0.70 then the scale scores are relative reliable for respondents in the study.

The research questionnaire used for data collection was tested its reliability, and the results are presented below.SPSS was used as the tool for reliability test.

47

R E L I A B I L I T Y A N A L Y S I S - S C A L E (A L P H A)

Fluctuation Reason

has zero variance

N of Cases =

20.0

Reliability Coefficients

11 items

Alpha = .7362

According to the results it is shown that the questionnaire used for data collection was reliable since Cronbachs Alpha calculated is 0.7362 has exceeded the minimal alpha of 0.70 that was recommended by Nunnalys (1978). Therefore, it is concluded that the questionnaire used was reliable. .

4.3 Respondents characteristics This study comprised of 20 respondents who are people that have knowledge on stock price movements .Their selection was based on job they are current doing and experience they have on finance field. Professionally these 20 respondents included;12 respondents who are Authorised representative Dealers from DSE Licensed Dealing Members ,and 7 respondents who are Licensed Investment Advisors registered by DSE ,and 1 respondents who is Finance Assistant at DSE.

48

4.3.1 Respondents duration of experience on their profession To get assurance of data collected from sample selected is based on expertise and not anticipations, the respondents were asked to tell the number of years they have experiencing with their current job that fit to provide data required in this research.

Table 4.3.1: Respondents years of working experience. One year or less One up to three years Three up to five years Above five years Total Frequency 0 3 4 13 20 Percent 0 15 20 65 100 Cumulative Percent 0 15 35 100

From Table 1,results indicates that,65% of all respondents have experience in their current job for three up to five years, following 20% of respondents who have working in current job for one up to three years ,and 15% or respondents showing to have experience of more than five years in the job. According to the results, majority of respondents used in the research have enough experience in their field as they have three up to five years of working experience which is enough for them to gain familiar with stock price movements and what are the factors that affect stock price volatility.

4.4 Presentation and analysis of data collected.

49 This part involve with presentation, analyses, and discussion of research questions that were set in order to full the research objectives. This part included two sections, one was the analysis of correlation and regression among variable studied, and last was the hypothesis test which was used to verify statements used in answering research question that lead in attaining of specific and general objective of the research.

4.4.1 Correlation and Regression analyses The question number 3 fro part A was used to provide required data regarding the dependent variable under study, and all questions from part B of the questionnaire were used to provide data needed for analyses of independent variables under study.

The independent variables that were correlated and regressed with dependent variable are; the changes in dividend payments per share to shareholders by companies trading shares at DSE, the transformation of information relating to companies trading shares at DSE, the changes in earnings of companies trading shares at DSE, the changes in demand or supply of shares trading at DSE, and the changes in price for products or services offered as business by companies trading share at DSE.

The dependent variable that was used in correlation and regression analysis is frequency of stock price volatility.

50 The correlation and regression between the variables under study were analysed by the help of SPSS on which the results were then presented in Tables and graphs, with formulation of some equations that were established after the analyses as follows.

4.4.1.1 Correlation Analysis This analysis is considering to measure association between two variables, and determining the extent to which the variables are linearly related. And, whether such relationship exists or not. Correlation is used to provide a measure of the relative strength of the relationship between two variables. The Spearman rank correlation coefficient ,is used to measure the relationship between variables under this research because data analysed are in rank order(ordinal),and Spearman has been developed for the purpose of analysis ordinal data, Anderson et al, (2003). Correlation analysis has been used to show the extent and nature of relationship between independent variable and dependent variable. Correlation coefficient and level significance is calculated to verify whether the relationship exists is of significant or not. According to Anderson et al, (2003) the variables are significant related only if their calculated level of significance is not more than 5% or 0.05, therefore the critical value of significance level is 5% or 0.05 calculated significance levels above the critical value means there is no significant relationship between independent variable and dependent variable.

Each independent variable was separately correlated with dependent variable, and the results of the analysis are presented below as follows;

51 4.4.1.1.1 Correlation Analysis 1: The independent variable analysed is, the changes in dividend payments per share to shareholder by companies trading shares, and dependent variable is the frequency of stock price volatility at DSE. Question 5 from the questionnaire was used to provide data required for analysis of independent variable and question 4 from the same questionnaire was used to providing data required for analysing the dependent variable. The results from correlation analysis are presented on the table 4.4.1.1.1 below.

Table 4.4.1.1.1: Results of correlation analysis between the changes in dividend payments and frequency of stock price volatility. Spearmans Correlation Coefficient Value 0.471 ** 0.036** 2 Tails 20 Significance level Number Tails of N = Sample size

Correlation is significant at the .05 level (2-tailed).

Results from the table 4.4.1.1.1 above is shows that, the calculated significance level is 0.036, which is less than the critical value of 0.05.Therefore, the calculated results indicates there is significance relationship between the changes in dividend

payments per share to shareholder by companies trading shares , and the frequency stock price volatility at DSE. Also the table shows that the variables analysed gave the correlation coefficient with positive value of 0.471. This positive sign means that, increase of dividend payments per share to shareholders by companies trading shares

52 at DSE goes with increase in the stock price volatility, and decrease of dividend payments per share to shareholders by companies trading shares at DSE goes with decrease in the stock price volatility also increase as well. And, its corresponding value of 0.471 explains the strength of relationship existing between these two variables; changes in dividend payments per share and stock price volatility at DSE.

4.4.1.1.2 Correlation Analysis 2: The independent variable analysed is, the transformation corporate information relating to companies trading shares, and dependent variable is the frequency of stock price volatility at DSE. Question 6 from the questionnaire was used to provide data required for analysis of independent variable and question 4 from the same questionnaire was used to providing data required for analysing the dependent variable. The results for correlation analysis are presented on the table 4.4.1.1.2 below.

Table 4.4.1.1.2: Results of correlation analysis between the transformation of information, and frequency of stock price volatility. Spearmans Correlation Coefficient Value 0.579 * 0.007* 2 Tails 20 Significance level Number of Tails N = Sample size

Correlation is significant at the .01 level (2-tailed).

It is observed from the table 4.4.1.1.2 above that, the significance level calculated is 0.007, which is less than 0.01 and critical value 0.05.Therefore,for such results; the

53 analysis then indicates that, there is significance relationship between the

transformation information relating to companies trading shares at DSE, and the frequency of stock price volatility . Moreover the table shows that the variables analysed gave the correlation coefficient with positive of valued 0.579.The positivity of such value conclude that, increase in rate of transformation of information relating to companies trading shares at DSE lead to more frequencies of stock price volatility, and decrease in rate of transformation of information relating to companies trading shares at DSE lead to fewer frequencies of stock price of shares traded at DSE.According to the analysis, the value of 0.579 portrays the strength of such relationship relating independent, and dependent variable respectively.

4.4.1.1.3 Correlation Analysis 3: The independent variable analysed is, the changes in earnings of companies trading shares at DSE, and dependent variable is frequency of stock price volatility. Question 7 from the questionnaire was used to provide data required for analysis of independent variable and question 4 from the same questionnaire was used to providing data required for analysing the dependent variable.

The results for correlation analysis are presented on the table 4.4.1.1.3 below.

Table 4.4.1.1.3: Results of correlation analysis between the changes in earnings, and frequency of stock price volatility. Spearmans Significance Number of Tails N = Sample size

54 Correlation Coefficient Value 0.500 ** level 0.025** 2 Tails 20

Correlation is significant at the .05 level (2-tailed).

Findings from the table 4.4.1.1.3 above shows that, the calculated significance level is 0.025, which is less than the critical value of 0.05.Thus the calculated results indicates that there is significance relationship between the changes in earnings of companies trading shares at DSE , and the frequency of stock price volatility. In addition the table shows that the variables analysed gave the correlation coefficient with positive value of 0.500.Considering the positive sign of calculated spearman correlation coefficient, these two variables are said to have direct proportional relationship with each other. The sign means that, increase in earnings of companies trading shares at DSE cause these companies stock prices to increase and decrease in earnings of these companies trading shares at DSE lead to decrease in their stock price of shares trading at DSE as well. When the changes in earnings are increasing, the stock price volatility increases also, and when the changes in earnings reduced then the volatility are reduced unless other factor are constant. The strength of the relationship between these two variables is given by spearman correlation coefficient value, and the strength is 0.500.

4.4.1.1.4 Correlation Analysis 4: The independent variable analysed is, the changes in demand or supply of shares traded at DSE, and dependent variable is frequency of stock price volatility at DSE.

55 Question 8 from the questionnaire was used to provide data required for analysis of independent variable and question 4 from the same questionnaire was used to providing data required for analysing the dependent variable. The results for correlation analysis are presented on the table 4.4.1.1.4 below.

Table 4.4.1.1.4: Results of correlation analysis between the changes in demand or supply of shares traded, and frequency of stock price volatility at DSE. Spearmans Correlation Coefficient Value 0.660 * 0.002* 2 Tails 20 Significance level Number of Tails N = Sample size

Correlation is significant at the .01 level (2-tailed).

It can be observed from the table 4.4.1.1.4 above that, the Spearman correlation coefficient value calculated is 0.660 and the association between these variables is significance at 0.002 level, which is less than 0.01 the critical value of 0.05.Therefore the calculated results indicates that, there is significance relationship between the changes in demand or supply of shares traded at DSE, and the frequency of stock price volatility. The positive value of correlation coefficients displayed in the table 4.4.1.1.4 indicates that, when changes of demand or supply of shares at DSE increase, the frequencies of stock price increase. And when the changes of demand or supply of shares at DSE decreases, the frequency of stock price volatility decreases also. The spearman correlation shows that the changes in demand or supply of shares at DSE have strong positive relationship with frequency of stock price volatility, and such strength is valued 0.660.

56

4.4.1.1.5 Correlation Analysis 5: The independent variable analysed is, the changes in price for products or services offered as business by companies trading shares at DSE, and dependent variable is frequency of stock price volatility. Question 9 from the questionnaire was used to provide data required for analysis of independent variable and question 4 from the same questionnaire was used to providing data required for analysing the dependent variable. The results for the analysis are presented on table 4.4.1.1.5 below.

Table 4.4.1.1.5: Results of correlation analysis between the changes in price for products or services offered as business by companies trading shares, and frequency of stock price volatility Spearmans Significance Correlation Coefficient Value 0.312 level 0.181*** 2 Tails 20 Number of Tails N = Sample size

*** Correlation is significant at the level greater than 0.05 (2-taied).

The summary of results from the table 4.4.1.1.5 above shows that ,calculated Spearman correlation coefficient value is 0.312, and the significance level is 0.181, which is greater than the critical value of 0.05.Therefore, the calculated results indicates that the relationship exist between the changes in price for products or

57 services offered as business by companies trading shares , and the frequency of stock price volatility at DSE, is not significance. This means that changes of prices for products or services offered as business by companies trading shares at DSE does not imply that, there are also changes to these companies stock prices as well. Although it can be observed from the table 4.4.1.1.5 analysed variables have correlation coefficient with positive value of 0.312, such strength has also been found by the analysis not to cause significance relationship between these two variables. Therefore, the results then conclude that, when there are changes in prices for products or services offered as business by the companies trading shares at DSE, the changes have no influential power to cause these companies stock prices of their share to change as well.

4.4.1.2 Regression Analysis This is statistical procedure that can be used to develop a mathematical equation showing how variables are related. In regression terminology, the variable that is being predicted by the mathematical equation is called the dependent variable. The variable or variables being used to predict the value of the dependent variable are called the independent variables, Anderson et al (2003).

In this analysis the mathematical relationships between independent variables and dependent variable are established, and then extent in terms of percentage to show how the independent variable can affect the dependent variable and afterwards to draw charts showing the mathematical relationship exists between the variable.

58 The analyses involved in formulate such relationship between one independent variable and one dependent variable that approximated by straight line, is called simple linear regression analysis. And Least square method has been used to establish the mathematical relationship. The goodness of fit of the estimated regression equation to the data or the percentage of extent to which the independent variable affect the dependent variable has been measured by Coefficient of determination, R.

According to Anderson et al (2003), by the least square method the mathematical relationship exist between independent and dependent variable is expressed as follows, Y= Where; b1 X + b o

b o = y- intercept of the line b1 = slope of the line Y = estimated value of the dependent variable X = value of independent variable

All procedure for regression analysis was performed and by the help of SPSS and the results from the analyses is present separately in each analysis as follows.

4.4.1.2.1 Regression Analysis One: The independent variable which is, the changes in dividends payments per shares to shareholders by companies trading shares at DSE was regressed with dependent variable which is the frequency of stock price volatility.

59 Question 5 from the questionnaire was used to provide data required for analysis of independent variable and question 4 from the same questionnaire was used to providing data required for analysing the dependent variable.

The results for analysis are presented on the table 4.4.1.2.1 below as follows;

Table 4.4.1.2.1: Results of regression analysis between the changes in dividend payments and frequency of stock price volatility. N 20 ** Df=N-2 18 R Beta 0.471 or R 0.222 Significance level 0.036** bo (y-intercept) 1.7333 b1 (slope) 0.5333

Regression is significant at the .05 level (2-tailed).

Outcome of the analysis in Table 4.4.1.2.1 shows coefficient of determinant 0.222.This coefficient imply that among factors assessed, 22.2% of stock price volatility is influenced by changes in dividends payments per shares to shareholders by companies trading shares at DSE. Also, analysis results helped in establishment of estimated regression line denoted by Y= 0.5333X + 1.7333. This mathematical expression can be applied in estimating the frequency of stock price volatility in a given value of rate of changes in dividend payments per share to shareholders. This mathematical relationship between independent and dependent variable can be represented graphically in straight line on the graph 2 in Appendix 5.

4.4.1.2.2 Regression Analysis Two:

60 The independent variable analysed is, the transformation corporate information relating to companies trading shares at DSE, and dependent variable is the frequency of stock price volatility. Question 6 from the questionnaire was used to provide data required for analysis of independent variable and question 4 from the same questionnaire was used to providing data required for analysing the dependent variable. The results for correlation analysis are presented on the table 4.4.1.2.2 below.

Table 4.4.1.2.2: Results of regression analysis between the information, and frequency of stock price volatility. N 20 * Df=N-2 18 R Beta 0.579 or R 0.335 Significance level 0.007* bo (y-intercept) 0.9762

transformation of

b1 (slope) 0.6190

Regression is significant at the .01 level (2-tailed).

Results from the table 4.4.1.2.2 above, shows coefficient of determinant value between the variables is 0.335.This value imply that the transformation information relating to companies trading shares at DSE explain only 33.5 % of the stock price volatility at DSE, while the remaining percent of stock price volatility is explained to be affected by other factors assessed on this research. For any value of changes in independent variable, the corresponding value on estimated regression line is denoted by Y= 0.6190X + 0.9762 which established using the results from table 4.4.1.2.2. This mathematical relationship between independent and dependent variable can be represented graphically in straight line on the graph 3 in Appendix 5.

61 4.4.1.2.3 Regression Analysis Three: The independent variable analysed is, the overall rate of changes in earnings of companies trading shares at DSE, and dependent variable is frequency of stock price volatility. Question 7 from the questionnaire was used to provide data required for analysis of independent variable and question 4 from the same questionnaire was used to providing data required for analysing the dependent variable.

The results for correlation analysis are presented on the table 4.4.1.2.3 below.

Table 4.4.1.2.3: Results of regression analysis between the changes in earnings, and frequency of stock price volatility. N 20 ** Df=N-2 18 R Beta 0.500 or R 0.250 Significance level 0.025** bo (y-intercept) 1.8947 b1 (slope) 0.3743

Regression is significant at the .05 level (2-tailed).

From table 4.4.1.2.3 above, it is seen that, coefficient of determinant value between the variables is 0.250.This value imply that, the changes in earnings of companies trading shares at DSE, explain only 25.0 % of the stock price volatility at DSE, while the remaining percent of stock price volatility is explained to be affected by other factors assessed on this research. For any value of changes in independent variable, the corresponding value of stock price volatility on estimated regression line is denoted by Y= 0.3743X + 1.8947 which established using the results from table 4.4.1.2.3.

62 This mathematical relationship between independent and dependent variable can be represented graphically in straight line on the graph 4 in Appendix 5.

4.4.1.2.4 Regression Analysis Four: The independent variable analysed is, the changes in demand or supply of shares traded at DSE, and dependent variable is frequency of stock price volatility at DSE. Question 8 from the questionnaire was used to provide data required for analysis of independent variable and question 4 from the same questionnaire was used to providing data required for analysing the dependent variable.

The results for correlation analysis are presented on the table 4.4.1.2.4 below. Table 4.4.1.2.4: Results of regression analysis between the changes in demand or supply of shares traded, and frequency of stock price volatility at DSE. N 20 * Df=N-2 18 R Beta 0.660 or R 0.436 Significance level 0.002* bo (y-intercept) 1.6452 b1 (slope) 0.5806

Regression is significant at the .01 level (2-tailed).

Results from the table 4.4.1.2.4 above, the analysis shows coefficient of determinant value between the variables is 0.436.This value imply that, the changes in demand or supply of shares traded at DSE explain only 43.6 % of the stock price volatility at DSE, while the remaining percent of stock price volatility is explained to be affected by other factors assessed on this research. For any value of changes in independent variable, the corresponding value on estimated regression line is denoted by Y= 0.5806X + 1.6452 which established using the results from table 4.4.1.2.4 after

63 regressing the changes in demand or supply of shares traded and frequency of stock price volatility. This mathematical relationship between independent and dependent variable can be represented graphically in straight line on the graph 5. in Appendix 5.

4.4.1.2.5 Regression Analysis Five: The independent variable analysed is, the changes in price for products or services offered as business by companies trading shares at DSE,and dependent variable is frequency of stock price volatility. Question 9 from the questionnaire was used to provide data required for analysis of independent variable and question 4 from the same questionnaire was used to providing data required for analysing the dependent variable.

The results for the analysis are presented on table 4.4.1.2.5 below.

Table 4.4.1.2.5: Results of regression analysis between the changes in price for products or services offered as business by companies trading shares, and frequency of stock price volatility at DSE. N 20 Df=N-2 18 R Beta 0.312 or R 0.097 Significance level 0.181*** bo (y-intercept) 1.8333 b1 (slope) 0.3333

*** Regression is significant at the level greater than 0.05 (2-taied)

64 Results from the table 4.4.1.2.5 above, shows coefficient of determinant value between the variables is 0.097.This value imply that, the changes in price for products or services offered as business by companies trading shares at DSE explain only 9.7 % of the stock price volatility at DSE, while the remaining percent of stock price volatility is explained to be affected by other factors assessed on this research. For any value of changes in independent variable, the corresponding value on estimated regression line is denoted by Y= 0.3333X + 1.8333 which was established using the regression analysis results summarised in the table 4.4.1.2.5.

This mathematical relationship between independent and dependent variable can be represented graphically in straight line on the graph 6 in Appendix 5.

4.4.2 Hypothesis Test Findings This study used non parametric tests during its hypotheses testing. Specifically Chi Square test was applied when testing research null hypothesis. Each hypothesis was tested separately, and acceptance or rejection of null hypothesis was based on the critical values of significance level of the tested hypothesis. According to Anderson et al (2004), 0.05 or 5 % of significance level is treated as critical values for hypothesis testing. Hypothesis was accepted only after they show to have significance level that was not more than 5% or 0.05.in opposite to that hypothesis were rejected and therefore alternative hypotheses was taken instead. Also if calculated Chi- square value is not greater than the Chi square value from the Chi - square table, the null hypothesis is accepted. And if the calculated Chi square value is greater than the Chi- square value from the table then the null hypothesis is rejected and take its alternative hypothesis instead.

65 This research used SPSS as tool for testing research hypothesis, each hypothesis was tested separately and summary of results for each hypothesis tested is presented below as follows;

4.4.2.1 Research Hypothesis Test One: The research was assessing whether changes in dividend payments per share to shareholders have influence the stock price volatility of share trading at DSE.The null hypothesis was then formulated and it stated that, there is no relationship between the changes in dividend payment per share to shareholder by companies trading shares , and their stock price volatility at DSE. And alternative hypothesis stated that, there is relationship between the changes in dividend payment per share to shareholder by companies trading shares, and their stock price volatility at DSE

Question 10 from questionnaire was used as tool for data collection regarding the analysis for first hypothesis testing.SPSS was used as data analysis tool and results of the analysed data is presented on the table 4.4.2.1 below.

Table 4.4.2.1: Results of first research hypothesis testing relationship between changes in dividend payment per share to shareholder by companies trading shares at DSE, and their stock price volatility. Calculated Chivalue AssympChi-Square Value Table at Chi-Square from Value 0.01 Table at Degree of from Freedom 0.05

Square significance level (2 sided)

significance 7.200 0.007 level 6.635

significance level 3.841 1

66

According to the table 4.4.2.1,the results shows that calculated Chi- square from data analysed has value of 7.200 which is greater than Chi-square value at 0.01 and 0.05 significance levels which are 6.635 and 3.841 respectively , from Chi- square table. These results imply that null hypothesis tested is rejected and the alternative hypothesis is taken instead. From this hypothesis test, it is confirmed that there is relationship between the changes in dividend payments per share to shareholder by companies trading shares, and their stock price volatility at DSE.

4.4.2.2 Research Hypothesis Test Two: The research aimed at assessing whether transformation of corporate information relating to companies trading shares at DSE affect the companies stock price volatility. The null hypothesis formulated stated that, there is no relationship between the transformation of information relating to companies trading shares at DSE, and their stock price volatility. And the alternative hypothesis stated that, there is relationship between the transformation of information relating to companies trading shares, and their stock price volatility at DSE.

Question 11 from questionnaire was used as tool for data collection regarding the analysis for first hypothesis testing.SPSS was used as data analysis tool and results of the analysed data is presented on the table 4.4.2.2 below.

Table 4.4.2.2: Results of second research hypothesis testing relationship between transformation of information relating to companies trading shares at DSE, and their stock price volatility.

67 Calculated Chivalue AssympChi-Square Value Table at Chi-Square from Value 0.01 Table at Degree of from Freedom 0.05

Square significance level (2 sided)

significance 12.800 0.000 level 6.635

significance level 3.841 1

From the table 4.4.2.2 above, the results shows that calculated Chi- square from data analysed has a value of 12.800 which is greater than Chi-square value at 0.01 and 0.05 significance levels which are 6.635 and 3.841 respectively , from Chi- square table. These results entail that null hypothesis tested is rejected and the alternative hypothesis is taken instead. From this hypothesis test, it is confirmed that there is relationship between the transformation of information relating to companies trading shares at DSE, and their stock price volatility of shares trading at DSE.

4.4.2.3 Research Hypothesis Test Three: To answer the research question three which asked if changes in earnings of companies trading shares at DSE does affect the stock price volatility, a null hypothesis was formulated and it state that, there is no relationship between changes in earnings of companies trading shares at DSE and stock price volatility. And alternative hypothesis stated that, there is relationship between changes in earnings of companies trading shares at DSE and stock price volatility.

Question 12 from questionnaire was used as tool for data collection regarding the analysis for first hypothesis testing.SPSS was used as data analysis tool and results of the analysed data is presented on the table 4.4.2.3 below.

68

Table 4.4.2.3: Results of third research hypothesis testing relationship between changes in earnings of companies trading shares at DSE and stock price volatility Calculated Chivalue AssympChi-Square Value Table at Chi-Square from Value 0.01 Table at Degree of from Freedom 0.05

Square significance level (2 sided)

significance 7.200 0.007 level 6.635

significance level 3.841 1

Outcome of the table 4.4.2.3,shows that calculated Chi- square from data analysed has value of 7.200 which is greater than Chi-square value at 0.01 and 0.05 significance levels which are 6.635 and 3.841 respectively , from Chi- square table. These mean that, null hypothesis tested is rejected and the alternative hypothesis is taken instead. From this hypothesis test, it is confirmed that there is no relationship between overall changes in earnings of companies trading shares at DSE and stock price volatility of shares trading at DSE.

4.4.2.4 Research Hypothesis Test Four: The research question four asked, if do demand or supply or shares traded at DSE. It then was asked if overall demand or supply of shares traded at DSE, does affect the stock prices of shares traded at DSE. To answer this research question, a null hypothesis was then formulated and it states that, there is no relationship between the changes in demand or supply of shares traded at DSE , and stock price volatility . And alternative hypothesis stated that, there is relationship between the overall changes in demand or supply of shares traded at DSE, and stock price volatility.

69

Question 13 from questionnaire was used as tool for data collection regarding the analysis for first hypothesis testing.SPSS was used as data analysis tool and results of the analysed data is presented on the table 4.4.2.4 below.

Table 4.4.2.4: Results of fourth research hypothesis testing relationship between changes in demand or supply of shares traded at DSE, and stock price volatility Calculated Chivalue AssympChi-Square Value Table at Chi-Square from Value 0.01 Table at Degree of from Freedom 0.05

Square significance level (2 sided)

significance

significance

level level 16.200 0.000 6.635 3.841 1 Summary of results from table 4.4.2.4,shows that calculated Chi- square from data analysed has value of 16.200 which is greater than Chi-square value at 0.01 and 0.05 significance levels which are 6.635 and 3.841 respectively , from Chi- square table. These results demonstrate that null hypothesis tested is rejected and the alternative hypothesis is taken instead. From this hypothesis test; then it is confirmed that, there is relationship between the overall changes in demand or supply of shares traded at DSE, and stock price volatility of shares trading at DSE.

4.4.2.5 Research Hypothesis Test Five: To answer research question five which concerns if the overall changes in price for products or services offered as business by companies trading shares at DSE, does affect the stock price volatility. The fifth null hypothesis was then formulated and it states that, there is no relationship between changes in prices for products or services

70 offered as business by companies trading shares at DSE, and their stock price volatility. And alternative hypothesis stated that, there is relationship between overall changes in prices for products or services offered as business by companies trading shares at DSE, and their stock price volatility.

Question 14 from questionnaire was used as tool for data collection regarding the analysis for first hypothesis testing.SPSS was used as data analysis tool and results of the analysed data is presented on the table 4.4.2.5 below.

Table 4.4.2.5: Results of fifth research hypothesis testing between changes in prices for products or services offered as business by companies trading shares and Stock price volatility at DSE. Calculated Chivalue AssympChi-Square Value Table at Chi-Square from Value 0.01 Table at Degree of from Freedom 0.05

Square significance level (2 sided)

significance 3.200 0.074 level 6.635

significance level 3.841 1

According to the table 4.4.2.5,the results shows that calculated Chi- square from data analysed has value of 3.200 which is greater than Chi-square value at 0.01 and less than Chi square value at 0.05 significance levels which are 6.635 and 3.841

respectively , from Chi- square table. As the calculated value is less than Chi square value at critical values 0.05 and 0.01 significance level from table. Tthese results made obvious that, null hypothesis tested is accepted and the alternative hypothesis is

71 rejected instead. Therefore from this hypothesis test, it is confirmed that there is no relationship between overall changes in prices for products or services offered as business by companies trading shares at DSE, and stock price volatility of shares trading at DSE. 4.5 Conclusion

CHAPTER FIVE
CONCLUSION AND RECOMMENDATION 5.0 Introduction This chapter is involving the discussion of conclusion made regarding the findings for research conducted. Then the problem arose during the research are explained, following thereafter are; recommendations and the area where a further study is advised to be done.

5.1 Conclusion The general purpose of this study was to assess the factors influencing the stock price volatility of shares trading at DSE. The study was carried out at DSE. ADR, Licensed Investments Advisors, and DSE staffs were used as sample frame. After analysis the research findings lead to several conclusions upon the issue of factors influencing stock price volatility of shares trading at DSE.

72 To attain the general objective of research, five specific objectives were formulated. Then from these specific objectives, five research questions were generated, due to findings from data collected and analyses, these research questions were answered and as the results the specific objectives were technically attained. Each research question of the study is used separately to conclude about how factors assessed have an effect on stock price volatility as follows;

In first research question it was asked whether do the changes in dividend payments per share to shareholders by companies trading shares have an effect on stock price volatility at DSE. Due to the findings from data analysed, it has been observed that, the changes in dividend payments per shares to shareholder by companies trading shares influencing stock price volatility at DSE. These two factors have shown to have positive relationship between each other with the strength of 0.471 Spearman correlation coefficient. The findings also show that among factors assessed, 22.2% of stock price volatility are influenced by changes of dividend payments per share to shareholder.

Even during interview it was revealed that when companies trading shares at DSE announce to pay more dividends to shareholders, their share price tends to increase. Since, the target of shareholders is capital gain, therefore, the announcement of increase in dividends payments attracts these shareholders to invest more in company announce to increase the dividends payments ,hence market value of company changes as the results the share price changes to reflect new market value of the company.

73 These findings has criticised the Miller and Modigliani as they do not agree from their theorem that dividends affect the market value of shares ,Pandey (2004) .According to them if the investments policy of the firm is given, then the dividend policy is a trade off between cash dividends and issue of ordinary shares. The share price will be adjusted by amount of dividend distributed. Thus, the existing shareholder is neither better off nor worse off .His wealth remains unchanged. For their view M-M assume perfect capital market that is no transaction costs, and no taxes.

The second research question asked if does the transformation of information relating companies trading shares have an effect on stock price volatility at DSE. The aim for this question is to attain the second specific objective of this research study. Due to findings from data analysed, it has been seen that transformation of information relating companies trading shares at DSE affect their stock price volatility. The results also show that these two variables have positive relation with strength of 0.5779 Spearman correlation coefficient. The study also indicated that among factors assessed, 33.5% of stock price volatility is influenced by transformation of information reaching buyers and seller of shares trading at DSE.

Generally, it is claimed that every investor has equal access to the available information. However, this is not always the case. On the other hand, most investors expect that the stock market is efficient enough to be able to predict events and news in a timely manner so that it can quickly and effectively respond to conditions that has aroused.

74 Different unexpected events, such as economic news or war may take the market out of balance, which may lead to serious financial depression. On the other hand, events with positive light will have a reverse effect by increasing the prices. Unfortunately, today what moves most of the time the stock prices are bad news. At DSE not all information seems to have an effect on stock price movements. It was revealed from interview that, For countries that depends much on stock exchanges as one of their tool for economic development, any information related to countrys wellbeing tend to affect the stock price movements, this can be verified by drop of many companies stock price in USA stock exchanges when they were hit at World Trade Centre in September 11, 1999.But,in case of DSE it act different, information that relate with company stability are seem to have more effect to these companies stock price movement than any other information as it is claimed that DSE is not well developed and so became dependant to the country economic development or stability.

According to respondents interviewed, information are either good such as companies announces for acquisition of new investments, taken over of company management by reputable executive leader which reflect to company reputation or image as the results shareholder are psychologically positive affected with such information that cause them to feel secured to invest more shares to the concerned company which then lead to company market value hence affect share price.

Information are turn bad to investors when there is transformation of news such as sudden death of company respectable leader who was believed to manage the company to its success, that may results to some investors to reduce their trust on company performance because they doubt the new management, hence the withdrew

75 themselves from the company as the results the company loose its market value and so decrease in its share price as well. Also information such as court decisions that lead to company proven guilty of any cases on which may affect the company future performance, an auditors report declaring the going concern of the company is at risk are kind of information that are term bad information that may cause the shareholder to withdrew from holding shares as a results reducing of company market value that, ends at affecting the share price by decreases its value.

Therefore, it is concluded from the research finding that, overall transformation of corporate information relating to companies trading shares is also a factor that affecting the stock price volatility at DSE which means that DSE is the market efficiency stock exchange.

The third research question asked if the changes in earnings of companies trading shares have an effect on stock price volatility at DSE. Through data collected and analysed, it has been found that changes in earnings of companies trading shares at DSE affect the stock price volatility. Also the findings show that these two variables have positive relationship with correlation coefficient 0.500 as the strength of the relationship existing between the variables. In addition the results of analysis revealed that 25.0% of stock price volatility is influenced by changes in earnings of companies trading shares at DSE.

Changes in earnings affects the stock price volatility in manner that, performance of company is measured by its earnings and no dividend shall be paid to investors if

76 there are no earnings. It has been witnessed that when companies trading shares at DSE experiencing loss, their stock price tend to drop down, as it was even revealed during research interview that TOL experienced a major drop of its share price from 500 Tsh during its IPO up to its current share price of 330 Tsh because it experience number of losses. Also changes in earnings affect stock price volatility due to the reason that, investor use high growth rates as one of the factors that greatly attract investors to a

particular stock. As a result of the increased attention, the price of the stock may hit the skies. However, this doesn't indicate an overvaluation of the stock, because if a company is experiencing higher than the average growth it deserves the attention and the subsequent higher prices18.

A ratio that manages to explain this attention is the price/earnings growth ratio (PEG). In order to calculate it you should divide the P/E by the projected earnings growth rate. If the value of the PEG is above 1, you should approach this stock with caution, because this higher value may indicate a company that trades above its growth rate allows. The value you should look for is 1 or below it. Since PEG calculation involve earnings therefore changes to company earnings lead to changes in PEG as the results investors attention to particular stock changes which lead to changes in its stock price as well. Hence, the findings support the fundamental analysis theory which states that, This theory is based on assumption that, a stocks intrinsic or real value is determined by the companys future earnings.

18

http://www.stock-market-investors.com/stock-investing-basics/price-to-earningsgrowth-ratio-peg-explanation.html

77 The fourth research question asked if does the changes in demand or supply of shares traded at DSE, have an effect on stock price volatility. The findings from data analysed revealed that changes in demand or supply of shares traded affect stock price volatility at DSE.The results has then indicate that these variables have positive relation with correlation coefficient 0.660.Furthermore the outcome indicated that among factors assessed, 43.6% of stock price volatility can be explained by changes in demand or supply of shares traded at DSE.

According to people interviewed, stock behaves similarly like other products or services at their market therefore demand or supply of shares of stock does affect the stock price movement at stock exchange. Also by following the law of demand and supply which states that the more demand of product or services the higher the price and vice versa, and the law of supply which states that, the more the supply of products or services the lower the price and vice versa. Therefore when order are placed to buy shares exceed the volume of shares at stock exchange, demand for the particular share rises, as a results investors who are willing to sell their shares also increase the bid price for any investor that is willing to buy such share. This also happens when there are more selling orders than number of bid placed by investors that are willing to purchase the shares. As the results shares are supplied in excess of demand hence they became invaluable due to their availability in bulky quantity. The technique of changes in demand or supply of shares has been used in many stock exchanges by speculator who their businesses are to buy shares and then sell at profit. These speculators have been practiced what is called in technical jargon as short selling. Short selling is the practice of borrowing stock, then selling it in hopes that the price will go down and it can be bought back at a lower price, generating profit

78 and allowing one to return like shares for the borrowed ones19.Speculators apply the law of demand and supply when they are practising short selling. As they take shares either by borrowing or not, they sell these shares in large volume at the stock market in response to bulky of such sold share the price for those sold shares then drop in value. Speculators then buy these shares at low price than they sold and returned the shares if are borrowed shares. The difference between the selling price and buy back price is profit to them. Even though short selling is risky but it has been used to cause changes in demand or supply of shares that results in stock price volatility at many stock exchanges. Therefore, it is concluded that overall changes in demand or supply of shares traded is one of the factor that affecting stock price volatility of shares trading at DSE. This research findings support the technical analysis theory states that, a stock market value is by force of supply and demand in the market as whole

The fifth and last research question was asked if do the changes in price for products or services offered as business by companies trading shares at DSE have an effect on stock price volatility. The results show that this factor do not affect the stock price volatility at DSE.Despite the fact that findings show that changes in prices for products or services offered as business by companies trading shares at DSE do influence stock price volatility, the results indicated there is positive relation between these two variable with correlation coefficient of 0.312 but analysis identified it as insignificant relationship, and acceptance of fifth research null hypothesis after the
19

http://www.stocks.gl/Naked-short-selling.html

79 hypothesis testing, was the final confirmation that, changes in products or services prices do not affect the stock price volatility.

Price for products or services offered as business by companies trading shares at DSE has not found to affect stock price volatility as the findings show that the positive relation exist between changes in prices for products or services offered as business by companies trading shares and stock price volatility is not significant one to affect the stock price volatility at DSE.

As stock price movement at stock exchanges are caused by events that seem to affect the performance of the companies. Changes in price for these products or services do not meant that these company are performing better, instead there are some factors which lead to such products or services price changes; such as inflation rate and increase in fuel gas price which is the major economic problem the world is current facing that causing the increases in many products or services prices. But, there are some special cases that it was accepted that individual stock price movement was caused by products or services price changes and example was dramatic changes of stock price for cement industry. But it was concluded that these stock price movement for cement industry was due to the fact that currently there is high demand of cements that lead to scarcity cements as a results cements price move higher and cement industry became operating in above profit which reflect to the company better performance hence the industry also became attractive for people to invests in which led to the increase in price for cement industry shares.

80 But, as the aim of the research was to assess if the changes in prices for products or services offered as business by companies trading share at DSE have an effect on stock price volatility, then it was concluded that changes in price of products or services offered by companies trading shares at DSE do not influence stock price volatility at DSE. Since changes in products or services prices may be caused by other factors such as inflation therefore, it is not preferred as determinant of better performance for these companies trading shares at DSE.

Stock exchanges are facing the issue of stock price volatility that lead to many practitioners to search for the reasons behind the volatility. As one of the stock exchange, DSE is facing similar problem of stock price volatility as graph number one (DSE index) which shows the overall stock price volatility at DSE. The general objective of this research was to assess the factors affecting the stock price volatility of shares trading at DSE in order to add more knowledge on factors influencing the stock price volatility. From research findings and above explanation, the changes in dividends payments per shares to shareholders by companies trading shares, the transformation of information relating companies trading shares, the changes in earnings of companies trading shares, and the changes in demand or supply of shares traded at DSE are the factors that have been found to have an influence in stock price volatility at DSE. With changes in demand or supply or shares traded at DSE being the strongest factor affecting stock price volatility with strength relationship of 0.660 and 43.5 % of total influence among the assessed factors affecting stock price volatility, following transformation of information relating companies trading shares at DSE with relationship strength of 0.579 and 33.5% influencing stock price

81 volatility, then changes in earnings of companies trading shares at DSE with relationship strength of 0.500 and 25.0% influencing stock price volatility at DSE,thereafter is changes in dividend payments per shares to shareholders with relationship strength of 0.471 and 22.2% influencing the stock price volatility at DSE. Leaving the changes in price for products or services offered as business by

companies trading shares at DSE to have insignificant relationship with stock price volatility at DSE, and acceptance of fifth research alternative hypothesis confirmed that this factor has no effect on stock price volatility at DSE.

5.2 Recommendations

Due to the findings observed among all factors assesed,demand or supply of shares traded at the market appeared to show the strongest influence toward stock price volatility ,followed by information, earnings, and dividends payments then recommendation are provided as follows .

5.2.1 Recommendation to Companies Trading Shares at DSE. From the analysis it has been found that demand or supply of shares traded at DSE is the strongest factor that influencing the stock price volatility. The correlation coefficient gave a value of 0.660 which is the greatest among all factors assessed. Also by regression it was revealed that 43.6% of stock price volatility can be explained by changes in demand or supply of shares traded at DSE .As this is the

82 largest percent among all factors assessed then it the most determinants of stock price volatility as well.

The main factor determining the demand for a stock is the quality of the company itself. If the company is fundamentally strong, that is, if it is generating positive income, its stock is less likely to lose value. Companies trading shares then are recommended to ensure that they build positive image by creating more investment opportunities that will boost their financial performance hence attract more shareholders as a result increase demand of shares and thereafter, the rise in share price and company market value. Also these companies should do the following in order to improve their market value; (a) Companies should provide financial reports to the public that reveal their financial performance since such information will avoid the shareholder not to be manipulated by false information about the performance of companies trading share and also it will enable the shareholder becoming familiar with the management team and the future plans of the companies which are the good information that causing shareholder to trust the management.

(b)

Since payments of dividends seem to affect the stock price volatility, then it recommended that, when these companies decide to retain all of its earnings ,shareholders should made aware of the importance for the retaining of their cash, but if they persist to get their dividends ,then the decision to invests must have special consideration on forward effects of drop in their share price if the

83 company decide to retain all the earnings before the decision is made on whether to pay dividend or to invest all earnings.

(c)

To ensure better financial performance which is the most determinants of company earnings ,and the dividend policy that has been shown to have an effect on stock price movements, companies are advised to make a careful decision on what financial techniques should be applied in valuating their investment opportunities to avoid engaging in investments that are not profitable.

(d)

Also, changes in dividends have been found to influence stock price volatility, therefore, i recommend for companies trading shares at DSE to apply stability of dividends of which is considered by most of companies in practice. According to Pandey(2004),shareholders seem generally to favour this policy, and values stable dividends higher than the fluctuations dividends over the years. This technique is difficult to follow when the companies show wide of range of fluctuations of its earnings.Therefore,it is essential for companies which want to follow this policy to build up a surpluses in a year of higher earnings to maintain dividends in a year below average earnings. The retained earnings by companies for this purpose of building surpluses are called dividend equalisation reserves.

84 Also dividend rate should be fixed at a conservative figure so that it may be possible to maintain it even in lean periods of several years.

5.2.2 Recommendations to People Invest in Stock of Shares Trading at DSE. The stock volatility has much contributed by the effect of changes in demand or supply of shares at stock exchanges. The most factors that lead to the changes in demand or supply is how these shareholders react on a these shares of stocks. And it is also said that speculator deals with shareholders psychology as they tend to provide the environment that allows these shareholder to see what these speculator wished to be seen. Therefore it is necessary for these shareholders to be carefully with the stock price movements and then critically but quick, analysed the reason behind the movements since the strongest factor for these price movements are buyer and seller who create demand or supply.

Shareholders are encouraged to have personal involvement in stock market and in companies that they hold shares in order to gain familiarity with activities and future plans of these companies as this will enable the shareholder to know stock price movements this will avoid massive loss when stock are dropping values as they will be able to act quick and avoid over loss, example is TOL shares which dropped from 500 to current price of 330 Tanzania shillings, if the shareholders were following the

85 price trends most of them could have sold these shares quick to avoid the losses they incurred due to drop of TOL share prices.

People should be careful when making decision on what shares to buy and they should not be influenced with media since false information are used when share are at their Initial Public Offerings (IPO) in order to attracts many buyer. It is advised to make financial analysis in these companies trading share before making any purchase to know their real performance currently and in future as well analysing their financial plans.

5.3 Problem encountered during undertaking Research study. Though the research is complited.There were some issues arose that hindering early completion of this research study. Some respondents were hardly available on time for the participation in data collected.Also,some information was not willingly provided until the extra effort to persuade the responsible people for release of the information which was believed to be confidential, example of such information was number of staffs among which the respondents were selected. Also others were not willing to corporate after they discovered that data collector was not a client instead the purpose was just to collect required information. This happened to the Brokerage companies (licensed Dealing Members) and Investment Advisors. Detailed explanation was done to inform the necessecity of the study and they were then corporative.

5.4 Area for further study.

86 The findings from this research indicate that information disclosure has influence on stock price volatility at DSE .But, the findings failed to identify the market efficiency of DSE. Therefore, further study is recommended on testing the form of market efficiency DSE is experiencing by testing each form: weak form, semi strong form, and strong form market efficiency at DSE as a case study. The aim for further study is
to discover which of the above three cases is most likely to occur in the Dar es Salaam Stock Exchange.

Stock price volatility is influenced by many factors; therefore the findings from this research are not enough to explain completely the full causes of stock price volatility. Therefore, other factors should be assessed to know how they affect stock price volatility, such factors are changes inflation rate, and time value of money since they are also determinants of monetary value.

87

6.0 Reference

Ameer P, Feldman J S, and Sokya A P, Does Improving a Firms Environmental Management System and Environmental Performance Result in a Higher Stock Price? ICF Kaiser International, 1996.

Campbell, J.Y, Lettau, M, Malkiel, B.G, and Yexiao, X. (2001). Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk, Journal of Finance, 56: 1-43.

Dlabay, Hughes , Kapoor, Personal Finance,7th edition ,Irwin Mc Graw Hill,2004 ,New York . FILER, R.K. and J. HANOUSEK, 1996, The Extent of Efficiency in Central European Equity Markets, CERGE-EI working paper No. 104. Gitman J. L, Principles of Managerial Finance, 10th edition, Pearson Education Inc,2004,India.

88 Hale G,Razin A,Tong H,Institutional Weakness and Stock Price Volatility,

NBER

Working Paper No.12127, Issued in March2006 NBER Program(s): retrieved on 3/4/2008 from: < http://papers.nber.org/papers/w12127

Hull,John ,Introduction to Future and Options Futures,2nd Edition,Prentice Hall ,India.

Jordan, Ross, Westerfield, Fundamental of Corporate Finance, 5th edition, Irwin Mc Graw Hill, 2000, United States of America.

Jirawattanakitja A,(2004):Some Investigations of the Relationship between the Industry Effect and the Rate of Return of Thai Stocks ;A Ph.D thesis in Business Administration; The Institute of International Studies of Ramkhamhaeng University

King, Benjamin F. (1966). Market and industry factors in stock price behavior. Journal of Business, 39,139-190.

Kisarika. F, (2007): The Effect of Holiday seasons on Stock Price,Research Report ;Tumain University Dar es Salaam College Kothari ,C.R, Research Methodology ,2nd edition, New Age International (P) Ltd,2004,New Delhi. Krishnaswami O. R, and Ranganathan M, 2006, Methodology of Research in Social Sciences, Himalaya Publishing House, India.

Levy H, Principles of Corporate Finance ,International Thomson Publishing ,1998, United States of America.

89 Livingston, Miles. (1977). Industry movements of common stocks. Journal of Finance, 32, 861-874.

Meyers, Stephen L. (1973). A re-examination of market and industry factors in stock price behavior. Journal of Finance, 28,695-705.
Nunnally, J. C. (1978). Psychometric theory (2nd Ed.). New York: McGraw-Hill.

Pandey, I. M.(2004).Financial Management ,9th edition,Vikas Publishing House, New Delhi.

Pastor, L. and Veronesi, P. (2004). Was There a NASDAQ Bubble in the Late 1990s, Journal of Financial Economics, 81 (1): 61-100.

Pastor, L. and Veronesi, P. (2005). Technological Revolutions and Stock Prices, National Bureau of Economic Research w11876.

Schwert, G.W. (1989). Why Does Stock Market Volatility Change Over Time? Journal of Finance, 54: 1115-1153.

Schwert, G.W. (2002). Stock Market Volatility in the New Millenium: How Wacky is Nasdaq?, Journal of Monetary Economics, 49: 3-26.

Shiller, R.J. (2000). Irrational Exuberance Princeton University Press, Princeton.

90 Spalding, Cathy. A Guide to Writing Research Papers. Adam Media Publication Company, 2005, United States of America

Endnotes 1 http://www.stock-market-investors.com/stock-investing-basics/stock-price volatility.html

2 http://www.stock-market-investors.com/stock-strategies-and-systems/stock-priceforecast.html

3 http://www.stock-market-investors.com/stock-investing-basics/bid-and-askprices.html

4 http://www.stock-market-investors.com/stock-investing-basics/bid-and-askprices.html

5 http://www.stock-market-investors.com/stock-investing-basics/company-marketcapitalization.html

6 http://www.stock-market-investors.com/pick-a-stock-guides/dividend-yield-

91 explanation.html

7 http://www.stock-market-investors.com/stock-investing-basics/technical-analysisbasics.html

8 http://en.wikipedia.org/wiki/Supply_and_demand

9 http://en.wikipedia.org/wiki/Supply_and_demand

10 http://en.wikipedia.org/wiki/Dividend

11 See in Kothari, CR, (2003): Research Methodology; methods and techniques; 2nd Edition; New Age International Publishers; New Delhi.

12 http://www.stock-market-investors.com/stock-investing-basics/price-to-earningsgrowth-ratio-peg-explanation.html 13 http://www.stocks.gl/Naked-short-selling.html 14 http://www.darstockexchange.com/history.asp 15 http://en.wikipedia.org/wiki/Modigliani-Miller_theorem

92

Appendix 1 RESEARCH QUESTIONNARE The purpose of this questionnaire is to collect primary data that is then used in the research carried on, assessing the factors influencing stock price volatility of shares trading at DSE.Respondents are requested to use your expertise and experience in your field of works in order to provide the information required.

SECTION A General Question 1. Occupation . 2. Years of working experience on specified occupation (a) One year or less. (b) One up to three years. (c) Three up to five years. (d) Five years and above. 3. Frequency of stock price volatility of shares traded at DSE (a) High frequency.

93 (b) Medium frequency. (c) Low frequency. 4. Reasons for stock price volatility of shares traded at DSE. (a) Stock price volatility occurs naturally. (b) Stock price volatility occurs due to some factors affecting stock price of shares traded at DSE.

SECTION B

In regarding to your expert and experience, please select one of the answers by its number from answers list that you know is correct, and then tick on blank space by comparing similar number at the top of columns.

Answers list 1= High rate 2= Medium rates 3= Low rates

Question Questions numbers 5 What is the overall rate of changes in dividend payments per share to shareholders by 6 companies trading shares at DSE? What is the overall rate of transformation

94 corporate information relating to companies 7 8 9 trading shares at DSE? What is the overall rate of changes in earnings of companies trading shares at DSE? What is the overall rate of changes in demand or supply of shares traded at DSE? What is the overall rate of changes in price for products or services offered as business by companies trading shares at DSE?

SECTION C The following statements are tested to verify their relationship with stock price fluctuation if exists on not. Therefore due to your expert and experience, please select one answer from answers provided that you think is correct and corresponding with the statement and then tick to only one of blank cells for each statement by similar number appear at the top of columns.

Answer provided. 1= strongly disagrees. 2= disagree. 3= agree. 4= strongly agree.

Statement Statements numbers There is no relationship between the changes in dividends payments per

95 10 share to shareholders by companies trading shares and their stock price volatility at DSE. There is no relationship between the transformation of information relating 11 companies trading shares and their stock price volatility at DSE. There is no relationship between the o 12 changes in earnings of companies trading shares at DSE and their stock price volatility. There is no relationship between the 13 changes in demand or supply of shares traded at DSE and stock price volatility. There is no relationship between the 14 changes in price for products or services offered as business by companies trading shares at DSE.

Thank you very much for your corporation.

96

Appendix 2 STRUCTURED PERSONAL INTERVIEW.

The aim of this interview is to gain view points from different experts on finance field regarding the finds from the data collected through questionnares.Data collected by this interview will be useful in the research on helping the researcher to get more points when discussing the research findings and recommendations and not for any other purposes.

According to data collected from research under study the analyses have shown that there is significant relationship between the factors mentioned below and stock price volatility of shares traded at DSE. Factors tested were as follows; (1) Overall changes in dividends payments per shares to Shareholders of shares traded at DSE. (2) Overall transformation of information relating

companies trading shares at DSE. (3) Overall changes in earnings of companies trading shares at DSE. (4) Overall changes in demand or supply of shares traded at DSE.

97 But the analyses have also showed that there is also no significant relationship between one of the factor tested and stock price volatility. The factor showed no significance relationship is as follow.

(1) Overall changes in price for products or services offered as business by companies trading shares at DSE.

INTERVIEW QUESTIONS

1 .According to your expert and experience on finance field what are the reasons for existence of significance relationship and what are the reason for existence of insignificance relationship between the factors mentioned and stock price volatility.

2. What are you recommending to these people: investors engaging in trading shares of stocks, and people who invested in these traded shares of stock ?

End of interview .

98

Appendix 3

4.0 Cost Budget Stationery services: Printing Photocopy Binding 120,000/= 30,000/= 15,000/= 165,000/=

Transport costs Meal allowance Communication Contingent TOTAL

90,000/= 400,000/= 60,000/= 90,000/= 805,000/=

Appendix 4 5.0 Time Budget

99 The Gant Chart, showing time budget ACTIVITIES 1 One Two Three Four Key: Activity One Orientation. Activity Two Data collection. Activity Three Data analysis and evaluation Activity Four Documentation and submission of a research report.
st

nd

rd

th

th

th

th

WEEKS 8th 9th 10th 11th 12th 13th 14th

Appendix 5

Graph 2: Changes in dividend payments per shares to shareholder vs. Frequency of Stock Price Volatility at DSE.
Dependent Mth PRICFLUC LIN Rsq .222 d.f. 18 F 5.14 Sigf .036 b0 1.7333 b1 .5333

Y Axis

100

3.2

3.0

2.8

2.6

2.4

2.2

2.0 Observed 1.8 .8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 Linear

X Axis

Key Y Axis Frequency of stock price volatility at DSE. X Axis The overall rate of changes in dividends payments per shares to shareholders by companies trading shares at DSE .

Graph 3. Changes in transformation of information relating Companies trading shares vs.Frequence of Stock Price Volatility at DSE.
Dependent Mth PRICFLUC LIN Rsq .335 d.f. 18 F 9.08 Sigf .007 b0 .9762 b1 .6190

Y Axis

101

3.2

3.0

2.8

2.6

2.4

2.2

2.0 Observed 1.8 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 Linear

X Axis Key Y Axis Frequency of stock price volatility at DSE X Axis The overall rate of transformation of corporate information relating to companies trading shares at DSE.

Graph 4: Changes in earnings of companies trading shares vs. Frequency of Stock Price Volatility at DSE.
Dependent Mth PRICFLUC LIN Rsq .250 d.f. 18 F 5.98 Sigf .025 b0 1.8947 b1 .3743

Y- Axis

102

3.2

3.0

2.8

2.6

2.4

2.2

2.0 Observed 1.8 .5 1.0 1.5 2.0 2.5 3.0 3.5 Linear

X Axis Key

Y Axis Frequency of stock price volatility at DSE. X Axis The overall rate of changes in earnings of companies trading shares at DSE.

Graph 5: Changes in demand or Supply of shares traded vs Stock Price Volatility at DSE.
Dependent Mth Rsq d.f. F Sigf b0 b1

103
PRICFLUC LIN .435 18 13.89 .002 1.6452 .5806

Y Axis
3.4

3.2

3.0

2.8

2.6

2.4

2.2

2.0 1.8 .5 1.0 1.5 2.0 2.5 3.0 3.5

Observed Linear

X Axis

Key Y Axis Frequency of stock price volatility at DSE X Axis The overall rate of changes in demand or supply of shares traded at DSE.

Graph 6: Changes in price for products or services offered as business by companies trading shares vs. Frequency of Stock Price Volatility at DSE.

104

Dependent Mth PRICFLUC LIN

Rsq .097

d.f. 18

F 1.94

Sigf .181

b0 1.8333

b1 .3333

Y Axis
3.2

3.0

2.8

2.6

2.4

2.2

2.0 Observed 1.8 .8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 Linear

X Axis

Key Y Axis Frequency of stock price volatility at DSE X Axis The overall rate of changes in prices for product or services offered by