Validating Trading Volumes on Malawi Stock Exchange

Investors’ confidence can be reliably measured through evaluation of trading volumes on the stock exchange. High trading volumes are usually construed as benchmark for investors’ trust in equity instruments as storage of value with substantial monetary rewards in form of dividends and capital gains if they get it right. The accuracy of the trading volumes is not an option as any deficiencies can have dire consequences to the individual investors as well as the entire economy. The results of the study have revealed significant underreporting of trading volumes in certain years and this problem might be widespread as it might be extremely difficult to investigate numerous insignificant shareholders which when aggregated can be very material. Worse still, there are disparities of shareholding percentage for some investors in the annual reports of listed banks and the Reserve Bank of Malawi on the other side which erodes the believability of the trading volumes. Government might be collecting lower capital gains tax and incorrect fiscal and monetary policies might be pursued using incorrect figures