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The Impact of Treasury Bill Rate and Interest Rate On The Stock Market Returns: Case Of Ghana Stock Exchange

Author

Listed:
  • Augustine Addo

    (Kumasi Polytechnic)

  • Fidelis Sunzuoye

    (Kumasi Polytechnic)

Abstract

Several studies have suggested that macroeconomic variables affect Stock market returns using Treasury bill rate as a measure of interest rate. The study examines the joint impact of interest rates and Treasury bill rate on stock market returns on Ghana Stock Exchange over the period between January 1995 and December 2011. Using Johansen’s Multivariate Cointegration Model and Vector Error Correction Model the study establish that there is cointegration between Interest rate, Treasury bill rate and stock market returns indicating long run relationship. On the basis of the Multiple Regression Analysis (OLS) carried out by Eviews 7 program, the results show that Treasury bill rate and interest rate both have a negative relationship with stock market returns but are not significant. These results lend support to the idea that interest rate and Treasury bill rate has both negative relationship but weak predictive power on stock market returns independently. The study conclude that interest rate and Treasury bill rate jointly impact on stock market returns in the long run. Understanding the effects of both Treasury bill rate and interest rate dynamics on stock market returns will help investors, fund and portfolio managers and firms make better investment decisions.

Suggested Citation

  • Augustine Addo & Fidelis Sunzuoye, 2013. "The Impact of Treasury Bill Rate and Interest Rate On The Stock Market Returns: Case Of Ghana Stock Exchange," European Journal of Business and Economics, Central Bohemia University, vol. 8(2), pages 3781:8-3781, July.
    • Handle: RePEc:aad:ejbejj:v:8:y:2013:i:2:p:378
    DOI: 10.12955/ejbe.v8i2.378
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    Cited by:

    1. Bamanga Umar & Sabri Nayan, 2018. "Does Regulatory Quality Matters for Stock Market Development? Evidence from Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 8(4), pages 10-15.
    2. Zhu, Haibin & Bai, Lu & He, Lidan & Liu, Zhi, 2023. "Forecasting realized volatility with machine learning: Panel data perspective," Journal of Empirical Finance, Elsevier, vol. 73(C), pages 251-271.
    3. Donald A. Otieno & Rose W. Ngugi & Nelson H. W. Wawire, 2017. "Effects of Interest Rate on Stock Market Returns in Kenya," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(8), pages 40-50, August.
    4. Nathan Mwenda Mutwiri & Job Omagwa & Lucy Wamugo, 2021. "Systematic risk and performance of stock market in Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(4), pages 204-214, June.
    5. Grace Ofori-Abebrese & Samuel Tawiah Baidoo & Peter Yaw Osei, 2019. "The Effect of Exchange Rate and Interest Rate Volatilities on Stock Prices: Further Empirical Evidence from Ghana," Economics Literature, WERI-World Economic Research Institute, vol. 1(2), pages 117-132, December.

    More about this item

    Keywords

    TREASURY BILLINTEREST RATE; STOCK MARKET RETURNS; GHANA STOCK EXCHANGE;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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