Macroeconomic Variables, Volatility and Stock Market Returns: A Case of Nairobi Securities Exchange, Kenya

Evans Kirui · Nelson H. Were Wawire · Perez Ayieko Onono-Okelo

83 citations0/0 files storedInternational Journal of Economics and Finance

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Financial Risk and Volatility Modeling Financial Markets and Investment Strategies Market Dynamics and Volatility

Abstract

This study sought to evaluate the relationship between Gross Domestic Product, Treasury bill rate, exchange rate, inflation and stock market return in Nairobi Securities Exchange Limited. The study determined the response of the stock returns to a shock in each of the macroeconomic variables. The effect of changes in each of the macroeconomic variable on the volatility of stock returns in Nairobi Securities exchange limited was also determined. Engle-Granger two step method was used to establish the co integrating relationship between stock returns and the macroeconomic variables. Threshold Genaralized Autoregressive Conditional Heteroscedasticity (TGARCH) model was used to capture the leverage effects and volatility persistence at the NSE. Published time series quarterly data from 2000 to 2012 was sourced from the Central Bank of Kenya, Kenya National Bureau of Statistics. Empirical results of the regression model revealed that exchange rate showed a significant relationship with stock returns. For a one percentage increase in depreciation of a domestic currency, the model predicted stock returns to decrease by 1.4 percent. Gross Domestic Product, Inflation and the Treasury bill rate indicated insignificant relationships. The effects of one standard deviation shock on each of the macroeconomic variable on stock returns revealed that shock in exchange rate was negative but eventually reverted back to equilibrium thereafter. The results of the TGARCH model for exchange rate, Gross Domestic Product and Treasury bill rate revealed that the impact of news was asymmetric and there was presence of leverage effects. There was absence of volatility persistence among all the macroeconomic variables.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 83 citations exist upstream.

References

1964CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*1958The Cost of Capital, Corporation Finance and the Theory of Investment 2008The cost of capital, corporation finance and the theory of investment 1994Threshold heteroskedastic models 2008Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan 2000Stock Market Risk and Return: An Equilibrium Approach 1998On the relationship between stock returns and exchange rates: Tests of granger causality 2005Effects of macroeconomic variables on Istanbul stock exchange indexes

Cited by

2024Relationship among macroeconomic factors and stock prices: cointegration approach from the Indian stock market 2019The Effect of Macro Economic Variables on Stock Return of Companies That Listed in Stock Exchange: Empirical Evidence from Indonesia 2016The effect of Malaysia general election on stock market returns 2020PENGARUH NILAI TUKAR, KEBIJAKAN DIVIDEN DAN STRUKTUR MODAL TERHADAP RETURN SAHAM PADA PERUSAHAAN YANG TERDAFTAR DI JAKARTA ISLAMIC INDEX 2017

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.