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Do macroeconomic variables play any role in the stock market movement in Ghana?

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  • Adam, Anokye M.
  • Tweneboah, George

Abstract

This study examines the impact of macroeconomic variables on stock prices. We use the Databank stock index to represent the stock market and (a) inward foreign direct investments, (b) the treasury bill rate (as a measure of interest rates), (c) the consumer price index (as a measure of inflation), (d)Average crude oil prices , and (e) the exchange rate as macroeconomic variables. We analyse quarterly data for the above variables from 1991.1 to 2007.4. employing cointegration test, vector error correction models (VECM). These tests examine both long-run and short-run dynamic relationships between the stock market index and the economic variables. The paper established that there is cointegration between macroeconomic variable and Stock prices in Ghana indicating long run relationship. The VECM analyses shows that the lagged values of interest rate and inflation has a significant influence on the stock market. The inward foreign direct investments, the oil prices , and the exchange rate demonstrate weak influence on price changes. In terms of policy implication, the establishment of lead lag relation indicate that the DSI is not informational efficient with respect to interest rate, inflation inward FDI, Exchange rate and world Oil prices.

Suggested Citation

  • Adam, Anokye M. & Tweneboah, George, 2008. "Do macroeconomic variables play any role in the stock market movement in Ghana?," MPRA Paper 9357, University Library of Munich, Germany, revised 2008.
    • Handle: RePEc:pra:mprapa:9357
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    2. Maku, Olukayode E. & Atanda, Akinwande A., 2009. "Does Macroeconomic Indicators exert shock on the Nigerian Capital Market?," MPRA Paper 17917, University Library of Munich, Germany.
    3. Arturo Lorenzo Valdés & Leticia Armenta Fraire & Rocío Durán Vázquez, 2016. "A copula-TGARCH approach of conditional dependence between oil price and stock market index: the case of Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 31(1), pages 47-63.
    4. Abdulazeez Y. H. Saif-Alyousf & Asish Saha & Rohani Md-Rus, 2017. "Shareholders' Value of Saudi Commercial Banks: A Comparative Evaluation between Islamic and Conventional Banks using CAMEL Parameters," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 97-105.
    5. Athambawa Jahfer & Tohru Inoue, 2017. "Solving Stock Price-Gross Domestic Product Puzzle: Evidence from Sri Lanka," International Journal of Economics and Financial Issues, Econjournals, vol. 7(5), pages 465-474.
    6. Mihovil An?elinovi? & Livija Valenti? & Ana Pavkovi?, 2020. "Equity Fund Performance and Sector Diversification," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 9(1), pages 25-43, June.
    7. Nigar Huseynli, 2023. "Analyzing the Relationship between Oil Prices and Gold Prices before and after COVID-19," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 373-378, March.
    8. Saliu Mojeed Olanrewaju & Ogunleye Edward Oladipo, 2021. "Asymmetric Macroeconomic Shocks and Asset Price Behaviors in Selected African Countries," Business and Economic Research, Macrothink Institute, vol. 11(2), pages 90-122, June.
    9. MAKU, Olukayode E. & ATANDA, Akinwande Abdulmaliq, 2010. "Determinants of stock market performance in Nigeria: long-run analysis," MPRA Paper 35838, University Library of Munich, Germany.
    10. Prempeh, Kwadwo Boateng, 2016. "Macroeconomic Variables and Stock Price Volatility in Ghana," MPRA Paper 70545, University Library of Munich, Germany.

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    More about this item

    Keywords

    Stock Market; Cointegration; Toatl derivative; Stock duration; partial differentiation;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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