An analysis of the effects of interest rate and exchange rate changes on stock market returns: Empirical evidence of Ghana Stock Exchange

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The study determines the effects of some macroeconomic factors that influence stock prices in Ghana, establish their relationship with stock prices and possibly use them to predict the likely changes in stock prices as a result of changes in these macroeconomic variables. The famous cointegration methodology is applied on monthly data of Ghana Stock Exchange All-share Index and the respective macroeconomic variables from January 2000 through December 2010 to determine the extent to which these macroeconomic variables influence the stock market returns. The study establishes that a long-run equilibrium and causal relationship exists between the dependent variable; GSE All-share index and the two independent variables under consideration namely, interest rate and exchange rate. It was also determined that in the short-run, effects of Interest rate and exchange rate volatility on Ghana Stock Exchange are nearly imaginary.
A Thesis submitted to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the degree of Commonwealth Executive Masters in Business Administration, June, 2011