Abstract: One of the biggest challenges that most African securities markets such as Zimbabwe face is illiquidity. This paper investigates the extent to which illiquidity affects stock returns on the Zimbabwe Stock Exchange. We used a cross sectional regression model and regressed illiquidity on stock returns for 28 listed companies on the Zimbabwe Stock Exchange for the period 2010-2013. The study found out that stock returns decline as illiquidity increases and there was a significant negative relationship between these two variables. The study also found the Amihud measure is an able measure of illiquidity on a developing market such as Zimbabwe as most stocks have higher values of ILLIQ of the Amihud measure of illiquidity.
JEL Classification: G11
Keywords: Zimbabwe stock market, illiquidity, dollarized economy.
Title: Illiquidity and Stock Returns in a Dollarized Economy: Evidence from Zimbabwe
Author: David Chisunga, Peter Mazuruse, Chrispen Chirume, J Muvingi, Bridgetah Tariro Gaadzikwa
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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