The Impact of Commodity Prices, Interest Rate and Exchange Rate on Stock Market Performance: Evidence from Zambia

Musawa, Nsama; Mwaanga, Clement

doi:10.4236/jfrm.2017.63022

Cited by 11 publications

(6 citation statements)

References 9 publications

(7 reference statements)

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“…However, they observe that the interest rate channel in Germany has no significant effect, while the U.S. money supply affects interest rates; this negatively affects stock markets. Musawa and Mwaanga (2017) use empirical methods such as the autoregressive distributed lag (ARDL) model, cointegration test, and vector error correction. Their results indicate that the stock price index has a long-term (co-integrated) and short-term relationship with the interest rate, exchange rate, copper, and oil prices.…”

Section: Literature Reviewmentioning

confidence: 99%

Time-varying influence of interest rates on stock returns: evidence from China

Wang

2021

Economic Research-Ekonomska Istraživanja

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Whether a stock market should matter or not when monetary policy is concerned seems to be a controversial issue. The purpose of this study is to indicate whether the central bank should use monetary policy to help the stock market or not. Based on macroeconomic data such as interest rate and the stock market, we adopt a novel Bayesian time-varying regression model and determine that the impact of interest rate changes on stock returns varies over time in China, after controlling various macroeconomic factors. Although on average interest rates negatively impact stock price returns, they tend to have an abnormal positive effect at market high points, following a time-varying dynamic pattern. Surprisingly, during periods of overheated economic development, an increase in interest rates cannot suppress the rise in stock prices. Therefore, policymakers need to pay attention when accelerating the marketisation of interest rates and initiating the preventive role of timely and strategic adjustment of interest rates.

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Section: Literature Reviewmentioning

confidence: 99%

Time-varying influence of interest rates on stock returns: evidence from China

Wang

2021

Economic Research-Ekonomska Istraživanja

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“…This conclusion therefore highlights the importance of the position of the Ghanaian economy (whether an importer or exporter) in respect of a commodity in the nexus between commodity price volatility/changes on the returns of stocks on the GSE. In a study focused on the Zambian economy, Musawa and Mwaanga (2017.) could not confirm any significant correlation between price of oil and return of stocks in both the short and long run when the price of oil is considered alone, but when considered jointly with interest rate, exchange rate, and copper, there was a significant impact exerted on stock returns. Using EGARCH modelling technique, Adjasi (2009) found out that volatility in cocoa prices lead to increase in volatility in prices of stocks whilst volatility in gold and oil prices adversely impact volatility of stock prices for stocks on the Ghana Stock Exchange.…”

Section: Literature Reviewmentioning

confidence: 92%

Commodity price volatility and stock market returns in an emerging economy

et al. 2022

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The paper examined commodity price volatility and stock returns on the Ghana Stock Exchange (GSE). Utilising Threshold Generalised Autoregressive Conditional Heteroskedasticity (TGARCH) estimation technique, the study also evaluated the likely leverage effect on the stock market and further interrogated if autocorrelation existed in the daily stock returns series, for how many days and on what day does it disappear by specifying an autoregressive model as a mean equation. The study concludes that changes in commodity prices and their volatilities on the international market exert a significant level of diverse impact on daily stock returns and return volatility on the GSE. For instance, whilst coffee price changes result in reduction in daily stock returns, changes in crude and gold prices result in an increment in returns on the GSE. The study also confirms the existence of autocorrelation in the daily stock returns for up to seven days, fading out on the eighth day as well as the existence of the leverage effect on the GSE. This result should influence investment decisions in respect to trading on the GSE. Observance of changes in price of these key commodities could enhance predictions and lead to the formulation of strategies to maximise revenues on the GSE 1

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“…In another study, Musawa and Mwaanga (2017) indicate that the stock price index has a long-term (co-integrated) and short-term relationship with the interest rate, exchange rate, copper and oil prices in Zambia. They emphasize the fact that only interest rates and copper prices have a long-term impact on stocks.…”

Section: Interest Rates and The Nexus Between Oil Prices And Stocksmentioning

confidence: 95%

Oil price shocks and sectoral stocks in Nigeria: how relevant are asymmetry and structural breaks?

Fasanya

Adekoya

Ajayi

2022

IJESM

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Purpose This paper aims to model the relationship between oil price and stock returns for selected sectors in Nigeria using monthly data from January 2007 to December 2016. Design/methodology/approach The authors use both the linear (symmetric) autoregressive distributed lag (ARDL) by Pesaran et al. (2001) and non-linear (asymmetric) ARDL by Shin et al. (2014), and they also account for structural breaks using the Bai and Perron (2003) test that allows for multiple structural changes in regression models. Findings The results indicate that the strength of this relationship varies across sectors, albeit asymmetric and breaks. The authors identify two structural breaks that occur in 2008 and 2010/2011, which coincidentally correspond to the global financial crisis and the Arab spring (Libyan shutdowns), respectively. Moreover, the authors observe strong support for asymmetry and structural breaks for some sectors in the reaction of sector returns to movement in oil prices. These findings are robust and insensitive when considering different oil proxies. While further extensions can be pursued, the consideration of asymmetric effects as well as structural breaks should not be jettisoned when modelling this nexus. Originality/value This study is one of the very few studies that have investigated the sectoral behaviour of stocks to oil price shocks, particularly in Nigeria. This paper contributes to the oil stock literature using the recent technique of asymmetry and also considering the role structural breaks play in the relationship between oil price and stock returns.

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The Impact of Commodity Prices, Interest Rate and Exchange Rate on Stock Market Performance: Evidence from Zambia

Cited by 11 publications

References 9 publications

Time-varying influence of interest rates on stock returns: evidence from China

Time-varying influence of interest rates on stock returns: evidence from China

Commodity price volatility and stock market returns in an emerging economy

Oil price shocks and sectoral stocks in Nigeria: how relevant are asymmetry and structural breaks?

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