The Effect of Macroeconomic Variables on Stock Market Returns in Ghana (2000-2013)

The Effect of Macroeconomic Variables on Stock Market Returns in Ghana (2000-2013) by Charles Barnor MBA-Professional Accountancy, University of Canberra, Australia, 2000 MBA-Finance, University of Canberra, Australia, 1999 BSc. Administration, Banking and Finance, University of Ghana, Ghana, 1994 Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Management Walden University December 2014 Abstract Variations in macroeconomic indicators affect the performance of the stock markets. In Ghana, although the performance of the Ghana Stock Exchange (GSE) has been affected by macroeconomic variables from January 2000 to December 2013, the mechanisms of these relationships have not been studied. The purpose of this research was to examine the relationships between selected macroeconomic variables and their effect on the stock market returns on the Ghana stock market. The research questions addressed whether macroeconomic variables had significant effect on stock market returns in Ghana within the specified period. The target sample was all 36 listed firms on the Ghana stock market. Data were obtained from the Bank of Ghana bulletins, the Ghana Statistical Service website, and the GSE website. Time-series data analysis was used to determine whether there was a statistically significant relationship between stock market returns and inflation rate, exchange rate, interest rate, and money supply. The findings revealed that interest rates and money supply had a significant negative effect on stock market returns; however, exchange rates had a significant positive effect on stock market returns. Moreover, inflation rate did not significantly affect stock market returns in Ghana. The implications for positive social change include improved knowledge about the effects of macroeconomic variables on stock returns that could guide policy makers and household agents to improve investment decisions, thus increasing the net worth of these economic agents.Variations in macroeconomic indicators affect the performance of the stock markets. In Ghana, although the performance of the Ghana Stock Exchange (GSE) has been affected by macroeconomic variables from January 2000 to December 2013, the mechanisms of these relationships have not been studied. The purpose of this research was to examine the relationships between selected macroeconomic variables and their effect on the stock market returns on the Ghana stock market. The research questions addressed whether macroeconomic variables had significant effect on stock market returns in Ghana within the specified period. The target sample was all 36 listed firms on the Ghana stock market. Data were obtained from the Bank of Ghana bulletins, the Ghana Statistical Service website, and the GSE website. Time-series data analysis was used to determine whether there was a statistically significant relationship between stock market returns and inflation rate, exchange rate, interest rate, and money supply. The findings revealed that interest rates and money supply had a significant negative effect on stock market returns; however, exchange rates had a significant positive effect on stock market returns. Moreover, inflation rate did not significantly affect stock market returns in Ghana. The implications for positive social change include improved knowledge about the effects of macroeconomic variables on stock returns that could guide policy makers and household agents to improve investment decisions, thus increasing the net worth of these economic agents. The Effect of Macroeconomic Variables on Stock Market Returns in Ghana (2000-2013) by Charles Barnor MBA-Professional Accountancy, University of Canberra, Australia, 2000 MBA-Finance, University of Canberra, Australia, 1999 BSc. Administration, Banking and Finance, University of Ghana, Ghana, 1994 Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Management Walden University December 2014 Dedication This dissertation is exclusively dedicated to Charles Barnor (Jnr.), Tiffany Barnor, Trixie Barnor, Rebecca Nkrumah Barnor, and my adorable wife, Joyce Akyaa Barnor. The study is also dedicated to my late mother, Theodora Joannah Barnor, whose timely decisions on my education and insistence on being brought up in a mission house exposed me to the meaning of life, discipline, hard work, and a spirit-filled environment during my stay in Tut Nel Villa Missionary house at Adabraka, Accra. Acknowledgments This part cannot be written perfectly without mentioning firstly Almighty God, the role of Dr. Mohammad Sharifzadeh, Dr. Javier Fadul, and Dr. William H. Brent for the invaluable time they reposed in me throughout the dissertation journey. To Professor Joshua Alabi and Professor Goski Alabi, to whom I owe a great many thanks, to a great family, friends, and faculty members of the University of Professional Studies, Accra, I render my sincere gratitude for the support throughout the doctoral journey.