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.