Stock Market Indicators and Domestic Market Capitalization of Emerging Markets

Abstract

Market capitalisation plays a significant role in the performance of emerging
stock markets. This study, therefore, analysed the trend of Dar es Salaam Stock
Exchange’s (DSE) indicators on its domestic capitalisation. Specifically, the
study analysed trends of stock market indicators, namely, individual
participation, share volume, share turnover, and DSE All Share Index. Time
series monthly data from 2014 to 2020 were analysed using the ARMA model.
The study further examined how the stock market indicators influence the
domestic market capitalisation (DMC) of DSE using the ARMAX model. Results
indicated that individual participation, turnover, and the DSE All Share Index
significantly influenced DMC. However, the volume of shares traded did not
influence DSE's domestic market capitalisation. Hence, DSE's performance is
associated with share turnover, price, and public participation. Thus, the study
urges stock brokers to reduce transaction costs to attract individual investors. It
also recommends that DSE encourage new listings to trigger trading and
increase the market share index. This study's results can help the government
improve policies and plans to increase public participation, reduce income
inequality and improve the economy.

Keywords: Market Capitalisation, Share volume, DSEI, Individual participation