Macroeconomic Factors and Stock Market Movement: Evidence from Ghana
26 Pages Posted: 26 Oct 2008 Last revised: 16 Mar 2009
Date Written: October 1, 2008
This study examines the effects of macroeconomic variables on the movement stock prices in Ghana. We analyze both long-run and short-run dynamic relationships between the stock market index and macroeconomic variables including inward foreign direct investments, Treasury bill rate, consumer price index, and exchange rate from 1991:1 to 2006:4 using Johansen's multivariate cointegration test and innovation accounting techniques. We established that there is cointegration between macroeconomic variables and stock prices in Ghana indicating long-run relationship. Further tests indicate that, in the short-run, inflation and exchange rates matter for share price movements in Ghana, however, interest rate and inflation prove very significant in the long-run.
Keywords: Cointegration, Innovation Accounting, Foreign Direct Investment (FDI)
JEL Classification: C22, E44, G10
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