Determinants of Variation in The Company’s Share Prices on The Stock Exchange Market. A Case Study of Uganda Securities Exchange.

ABSTRACT

This research sought to find out the determinants of variation in company share prices on the Uganda securities exchange. Data from Uganda securities exchange and the New vision Uganda limited website were used to establish the effect that these factors have on the company share prices. The data covers the period from 2006 to 2016.The data was run using

E-views sofiware which established a relationship between the share price and the determinants looked at in the research (exchange rate and inflation rate). This relationship was however found to be insignificant. The study found out that there is a positive effect between inflation rate and the company share price which implies that an increase in the inflation rate leads to an increase in the company share price. The research also found out that there is a negative effect between exchange rate and share price which means that an increase in the inflation rate leads to a reduction in the share price on the Uganda Securities Exchange. The study recommends eradicating the effect that speculation has on the stock exchange

market especially in relation to company share prices. The study also suggests that investors should have complete knowledge of the stock market and the factors that influence the activities on the stock market. The government through the capital Markets Authority and the Bank of Uganda should organize trainings to sensitive investors.

TABLE OF CONTENTS

DECLARATION

DEDICATION iii

ACKNOWLEDGEMENT iv

APPROVAL v

ABSTRACT vi

CHAPTER ONE 1

INTRODUCTION 1

1.1 Introduction 1

1.2 Background of the study 1

1.3 Statement of the problem 3

1.4 Research Objectives 3

1.4.1 General Objective 3

1.4.2 Specific Objectives 3

1.4.3 Research hypothesis 4

1.5 Scope of the study 4

1.6 Significance of the study 5

CHAPTER TWO 6

LITERATURE REVIEW 6

2.1 Introduction 6

2.2 Effect of profitability on share price 6

2.3 Effect of the Exchange rate on the share price 7

2.4 Effect of inflation on the share price 10

CHAPTER THREE 12

RESEARCH METHODOLOGY 12

3.1 Introduction 12

3.2 Research design 12

3.3 Data type and sources 12

3.4 Data Analysis 12

3.5 Assumptions about the error term 13

3.6 Limitations and Delimitations 14

CHAPTER FOUR 15

RESULTS AND DISCUSSION 15

VII

4.1 Introduction.15

4.2 Tabulation of data.15

4.3 Descriptive statistics 16

4.4.1 Regression results and interpretation 18

4.4.2 Specification of the model 18

4.5 Coefficient of determination 19

CHAPTER FIVE 20

CONCLUSION, SUMMARY AND RECOMMENDATIONS 20

5.1 Introduction 20

5.2 Summary 20

5.3 Conclusion 20

5.4 Recommendations 20

5.4.1 Areas of further study 21

References 23