Drivers of Stock Prices in Ghana: An Empirical Mode Decomposition Approach

• Main Authors: Emmanuel. N. Gyamfi, Frederick A. A. Sarpong, Anokye M. Adam
• Format: Article
• Language: English
• Published: Hindawi Limited 2021-01-01
• Series: Mathematical Problems in Engineering
• Online Access: http://dx.doi.org/10.1155/2021/2321042

This study utilized the empirical mode decomposition (EMD) technique and examined which group of investors based on their trading frequencies influence stock prices in Ghana. We applied this technique to a dataset of daily closing prices of GSE Financial Stock Index for the period 04/01/2011 to 28/08/2015. The daily closing prices were decomposed into six intrinsic mode functions (IMFs) and a residue. We used the hierarchical clustering method to reconstruct the IMFs into high frequency, low frequency, and trend components. Using statistical measures such as Pearson product moment correlation coefficient and the Kendall rank correlation, we found that the low frequency and trend components of stock prices are the main drivers of the GSE stock index. These low-frequency traders are the institutional investors. Therefore, stock prices on the GSE are affected by real economic growth but not short-lived market fluctuations.