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Published: 2018-05-23

Page: 39-50


Methodist University College Ghana, P.O.Box DC 940, Dansoman, Accra, Ghana.


Kings University College, Accra, Ghana.

*Author to whom correspondence should be addressed.


This study sought to investigate the effect of macroeconomic variables on the Ghanaian stock market returns using monthly data over the period January, 1992 to December, 2010 which was collected from the Ghana Stock Exchange. Macroeconomic variables used in this study are the monthly consumer price index (as a proxy for inflation), monetary policy rate, exchange rate and Broad money supply collected from Bank of Ghana and Ghana Statistical Service web sites. The study employs the Auto Regressive Distributed Lag Model (ARDL) co-integration procedure. The empirical results reveal that there is co-integration between the macroeconomic variables chosen and stock returns in Ghana indicating short run equilibrium relationship. Further, the results reveal that; in the long run, Monetary Policy Rate significantly influences the stock returns, with an elasticity of -0.1345, implying that a 1% rise in the Monetary Policy Rate will lead to a 0.13% reduction in the stock returns. The inflation rate is also significant at 1% with elasticity 0.19315, implying that a 1% increase in inflation rate will increase stock returns by 0.19 %. In the short run, however, the stock returns are equally significant influenced by Inflation rate and Monetary policy rate, with elasticities of 0.00676, and -0.036147 respectively. Also a 1% increase in inflation rate increases stock returns by 0.007%; and a 1% rise in Monetary policy rate decreases stock returns by 0.036%.   In both the short run and the long run results, inflation rate appears to be the most influential macroeconomic variable affecting stock market returns in Ghana.  The results also reveal that investors are compensated for inflationary increases in both the short run and the long run and have implications for all players of the exchange especially the listed firms, to undertake viable projects to boost their performance overtime to give investors higher returns which will entice them invest heavily on the exchange even during inflationary periods.

Keywords: Equity returns, share price movement, stock returns determinants

How to Cite

NYARKO-BAASI, M., & FORSON, A. (2018). MACROECONOMIC DETERMINANTS OF STOCK RETURN: THE EVIDENCE FROM THE GHANA STOCK EXCHANGE. Journal of Global Economics, Management and Business Research, 10(1), 39–50. Retrieved from


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