Impact of Macroeconomic Variables on Stock Market Volatility in Kenya

John Mugendi ()

American Journal of Finance, 2024, vol. 10, issue 1, 59 - 71

Abstract: Purpose: The aim of the study was to assess the impact of macroeconomic variables on stock market volatility in Kenya. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The impact of macroeconomic variables on stock market volatility in Kenya reveals several key findings. Firstly, studies suggest that variables such as inflation rate, exchange rate fluctuations, and interest rates significantly influence stock market volatility in the country. Specifically, an increase in inflation tends to amplify stock market volatility, while fluctuations in exchange rates contribute to increased volatility, especially in the short term. Additionally, interest rate movements affect stock market volatility, with lower interest rates generally associated with higher stock market volatility. Furthermore, factors like GDP growth rate and oil price fluctuations also exhibit varying degrees of influence on stock market volatility in Kenya. Implications to Theory, Practice and Policy: Efficient market hypothesis, behavioral Finance Theory and Asset Pricing Models may be use to anchor future studies on assessing the impact of macroeconomic variables on stock market volatility in Kenya. Investors can benefit from a deeper understanding of how macroeconomic variables impact stock market volatility by incorporating this knowledge into their risk management strategies. Policymakers should consider the implications of macroeconomic policies on stock market volatility when formulating economic strategies.

Keywords: Macroeconomic; Variables; Stock Market; Volatility (search for similar items in EconPapers)
Date: 2024
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