The impact of inflation rate on stock market returns: evidence from Kenya

Otieno, Donald A.; Ngugi, Rose W.; Muriu, Peter

doi:10.1007/s12197-018-9430-5

Cited by 14 publications

(6 citation statements)

References 24 publications

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“…In contrast, the study's findings differed with the findings of [26] - [28] outside Kenya, and [29] - [31] in Kenya, who found a positive influence of inflation rate on securities market returns. Table 9 presents the results of the determination of the effect of public debt on securities market returns against the null hypothesis that public debt does not statistically significantly affect securities market EM-2018-832 returns at the Nairobi Securities Exchange, that is, .…”

Section: Effect Of Inflation Rate On Securities Market Returnscontrasting

confidence: 99%

“…In Kenya, some studies found that inflation rate had a positive and significant bearing on securities returns [29] - [31], with [32] reporting a negative short-run co-integrating relationship between inflation and securities market performance. Other studies found that inflation rate negatively influenced returns [33] - [38].…”

Section: Inflation Rate and Securities Market Returnsmentioning

confidence: 99%

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Does Public Debt Moderate the Effect of Inflation Rate on Securities Market Returns in Kenya?

Kapchanga

Owili

Onyuma

2018

int.jour.sci.res.mana.

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While in the last one two decades, Kenya has witnessed increasing levels of public borrowing, both domestic and foreign, economic growth has slowed down and the performance of the securities market has been subdued with falling stock prices. This has prompted stock investors to review and/or realign their investment portfolios. While the inflation rate has been drastically fluctuating, public debt – which is strongly inflationary – has had an exponential increase of about 461 percent between 2008 and 2018. Although Kenya’s level of public debt is approaching unsustainable levels, massive borrowing still continues. Using secondary monthly data obtained from government and securities market databases, this paper analyzed whether public debt moderates the relationship between inflation rate and securities market returns at the Nairobi Securities Exchange. Time series multiple linear regression results show that whereas inflation rate has a statistically significant negative effect on securities market returns, public debt had an insignificant negative effect on securities market returns. More importantly, public debt does not statistically affect the relationship between inflation rate and the securities market in Kenya. Putting in place strategies aimed at reducing inflation as well as public debt can however have the effect of improving securities market performance.

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Section: Effect Of Inflation Rate On Securities Market Returnscontrasting

confidence: 99%

Section: Inflation Rate and Securities Market Returnsmentioning

confidence: 99%

Does Public Debt Moderate the Effect of Inflation Rate on Securities Market Returns in Kenya?

Kapchanga

Owili

Onyuma

2018

int.jour.sci.res.mana.

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“…Recent studies such as (Ashraf, 2020: Liu et al , 2020a) have studied the impact of the mentioned variables on investors' behavior. We further control the effects of the following variables on stock market performance: National Culture (Ashraf, 2021) , Lag of stock returns (Irshad, 2017), Real GDP growth (Ramraika, 2015), Interest (Martinez et al , 2020), Inflation rate (Otieno et al , 2019) and Investment Freedom (Ashraf, 2021). The descriptions of each variable are presented in Table 2.…”

Section: Methodsmentioning

confidence: 99%

Stock market reactions to COVID-19 shocks: do financial market interventions walk the talk?

Marobhe

Kansheba

2022

CFRI

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PurposeFollowing the COVID-19 outbreak, various economies imposed different financial interventions as part of initiatives to cushion their stock markets from deteriorating performance. Our article examines the effectiveness of these interventions in protecting stock markets during the pandemic.Design/methodology/approachThe authors employ Panel Vector Autoregression to model the magnitude and timing of shocks from COVID-19 to stock markets. The fixed effects regression is then utilized to assess the role of financial interventions in protecting stock markets during COVID-19. The study uses daily stock index returns as well COVID-19 containment measures stringency index data from 39 countries ranging from 2nd January 2020 to 30th September 2021.FindingsOur findings firstly reveal a significant positive stock market reaction to country-level containment measures stringency but only during the first wave of COVID-19. We secondly show that stock market functioning interventions that include short selling bans and circuit breakers amplify the positive effects of COVID-19 containment measures stringency on stock market performance.Research limitations/implicationsThe authors stress the need for policymakers and regulators to timely intervene in protecting economies and stock markets during crises such as COVID-19 in order to reduce panic among investors. Moreover, investors should adjust their portfolios by investing in stocks from countries that have proper financial market interventions in place.Originality/valueDespite growing body of literature on COVID-19 and stock market performance, there is limited evidence on the role of financial sector interventions to cushion stock markets during tumultuous conditions caused by the pandemic.

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“…, 2005; Rapach et al. , 2005; Ang and Bekaert, 2007; Narayan and Gupta, 2015; Otieno et al. , 2019).…”

Section: Introductionmentioning

confidence: 99%

“…Many scholars, however, have used standard macroeconomic variables or valuable commodities as predictors to estimate the changes in stock returnsthey often find mixed results (see, e.g. Miller et al, 1976;Geske and Roll, 1983;Burbidge and Harrison, 1984;French et al, 1987;Kaul, 1987;Cochrane, 1992;Jones and Kaul, 1996;Allen and Jagtiani, 1997;Chen et al, 2005;Rapach et al, 2005;Ang and Bekaert, 2007;Narayan and Gupta, 2015;Otieno et al, 2019).…”

Section: Introductionmentioning

confidence: 99%

Does gold–platinum price ratio predict stock returns? International evidence

Singh

2022

IJMF

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PurposeThe purpose of this study is to investigate the relationship between gold–platinum price ratio (GP) and stock returns in international stock markets. The study addresses three empirical questions: (1) Does GP have robust predictive power in international stock markets? (2) Does GP outperform other macroeconomic variables in international stock markets? (3) What is the relationship between GP and stock market returns during economic recessions?Design/methodology/approachThe study mainly uses OLS regressions to perform empirical tests for a comprehensive set of 17 advanced international stock markets and overall world market. The monthly data is used for the period January 1978 to July 2019, 499 observations for each market.FindingsThe study finds that the first-difference of GP (ΔGP), not the initial-level of GP, has strong predictive power for stock returns, both in short- and long-time horizons. The results remain robust after controlling for a number of macroeconomic predictors. The out-of-sample test results are significant, confirming the robustness of the predictive power of ΔGP.Originality/valueThis study is the first to examine the ability of the ΔGP to predict stock returns, and provide novel evidence on the relationship between ΔGP and international stock markets. The study draws on behavioral finance theory, specifically the myopic loss aversion, the herd effect and the limited attention theory, to explain the predictability of stock returns in international stock markets.

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The impact of inflation rate on stock market returns: evidence from Kenya

Cited by 14 publications

References 24 publications

Does Public Debt Moderate the Effect of Inflation Rate on Securities Market Returns in Kenya?

Does Public Debt Moderate the Effect of Inflation Rate on Securities Market Returns in Kenya?

Stock market reactions to COVID-19 shocks: do financial market interventions walk the talk?

Does gold–platinum price ratio predict stock returns? International evidence

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