The Effect of Exchange Rate and Interest Rate Volatilities on Stock Prices: Further Empirical Evidence from Ghana

Grace Ofori-Abebrese (), Samuel Baidoo and Peter Yaw Osei ()
Additional contact information
Grace Ofori-Abebrese: Department of Economics, Kwame Nkrumah University of Science and Technology
Peter Yaw Osei: Republic Bank Investments, Accra-Ghana

Economics Literature, 2019, vol. 1, issue 2, 117-132

Abstract: Studies have proven that volatilities in the rates of exchange and interest influence the performance of institutions and the values of their shares. This study investigates empirically the effect of exchange rate and interest rate volatilities on stock prices of financial institutions listed on the Ghana Stock Exchange using monthly data spanning the period January 2000 to October 2016. The generalized auto regressive conditionality heteroskedastic (GARCH) model is employed for the analysis. The results show that exchange rate volatility exerts positive effect on stock prices whereas interest rate volatility impacts on stock prices negatively. These results imply that the trade-off between risk and return can be predicted so industry players and stakeholders can manage risk to ensure a vibrant financial market. It is also suggested that there is the need for stakeholders and policy makers to ensure that these variables are stable or the volatilities are minimized in the economy. This will go a long way to enhance the performance of the stock market activities in the country.

Keywords: Exchange rate; stock prices; volatility; financial markets; GARCH model (search for similar items in EconPapers)
JEL-codes: C32 E30 E44 G10 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://elit.weri.eu/index.php/elit/article/view/15/11 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ana:elitjr:v:1:y:2019:i:2:p:117-132

DOI: 10.22440/elit.1.2.3

Access Statistics for this article

Economics Literature is currently edited by Yilmaz Kilicaslan

More articles in Economics Literature from WERI-World Economic Research Institute Contact information at EDIRC.
Bibliographic data for series maintained by Unal Tongur ().