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Please use this identifier to cite or link to this item: http://hdl.handle.net/123456789/4811

Title: Effect of Macroeconomic Variables on Stock Market Returns Ghana: An Analysis Using Arbitrage Pricing Model
Authors: Adu, Douglas Akwasi
Issue Date: 24-Jun-2012
Abstract: This work attempts to use Arbitrage Pricing Theory framework to explain the variations on returns on the Ghana Stock Exchange. Ordinary Least Squares Regression and cointegration analysis were employed to model both the short- and long-run relationships. In addition, granger causality tests were used to examine the causality between the GSE All-Share index and seven macroeconomic variables namely money supply, rate of inflation, treasury bill rate, exchange rate, world crude oil prices, world cocoa prices and gold prices. Results from the Ordinary Least Squares regression analysis showed that four out of the seven macroeconomic variables possess statistically significant power for stock returns on the Ghana Stock Exchange: inflation rate, the treasury bill rate, money supply and world crude oil prices. On the other hand, the Foreign exchange rate, world cocoa prices and world gold prices do not appear to have a statistically significant effect on stock prices in Ghana. However, while the Engle and Granger cointegration test results signal the existence of an overall long-run relationship between stock returns and the observed variables on the GSE, the same could not be said of the long-run relationship between individual macroeconomic variables and stock returns. On the contrary, the Johansen and Juselius cointegration test shows the existence of at least two cointegrating relationships between stock returns and the macroeconomic variables. Additionally, the Engle and Granger causality test points to uni-directional causality between stock returns and the foreign exchange rate and the money supply. In the light of the above findings, Industry and academia should partner each other to conduct research which focuses on different aspects of the market and the findings should be made available to industry and the government should set realistic macroeconomic targets to limit chronic deviations which normally render fundamental analysis almost impossible in order to improve public confidence in government decisions.
Description: A thesis to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirement for the degree of COMMONWEALTH EXECUTIVE MASTER OF BUSINESS ADMINISTRATION,2012
URI: http://hdl.handle.net/123456789/4811
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