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Macroeconomic Variables and the Kenyan Equity Market: A Time Series Analysis

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  • Cyrus Mutuku
  • Kirwa Lelei Ng¡¯eny

Abstract

The study investigates the dynamic relationship between stock prices and four macroeconomic variables in Kenya using cointegration and vector autoregressive framework. The VAR and VECM analysis reveals that macroeconomic variables drive equity market in the long run. The variables in the VAR model are co integrated with 3.8% disequilibrium being corrected quarterly. Notably, inflation has a negative effect on equity market suggesting that policy authorities in Kenya should design polices that mitigate inflation for stock market to develop. The results confirm that stock market is not an avenue for perfect hedge against inflation.

Suggested Citation

  • Cyrus Mutuku & Kirwa Lelei Ng¡¯eny, 2015. "Macroeconomic Variables and the Kenyan Equity Market: A Time Series Analysis," Business and Economic Research, Macrothink Institute, vol. 5(1), pages 1-10, June.
    • Handle: RePEc:mth:ber888:v:5:y:2015:i:1:p:1-10
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    References listed on IDEAS

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    Cited by:

    1. Gil-Alana, Luis A. & Mudida, Robert, 2017. "CPI and inflation in Kenya. Structural breaks, non-linearities and dependence," International Economics, Elsevier, vol. 150(C), pages 72-79.

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    More about this item

    Keywords

    Stock market; VAR; VECM; Macroeconomic variables;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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