An investigation of the effect of macroeconomic variables on the performance of the Namibia stock market
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Date
2019
Authors
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Publisher
University of Namibia
Abstract
This study investigated the long term as well as short term relationship between macroeconomic variables and the Namibia Stock Market using monthly data from 1996 to 2016. The macroeconomic variables tested are interest rate, inflation, exchange rate, foreign direct investments and GDP. A Vector Error Correction Model (VECM) was employed to determine the long run equilibrium relationship while short term Granger causality test was employed for any short run interactions among the variables. The results indicate that the NSX has insignificant positive long run relationships with interest rate, exchange rate lag two and GDP, and an insignificant negative relationship with the inflation, exchange rate lag one, and foreign direct investments. The results indicate that a multifactor model is appropriate for Namibia Stock Market. Specifically, the study is in support of the multifactor APT as opposed to CAPM, identifying interest rate, exchange rate, FDI and GDP as priced risk factors. However, given the moderate R-squared of the VECM, there may be other macroeconomic variables of statistical significance that still remain unidentified.
Description
A thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science in Economics
Keywords
Macroeconomic variables, Stock market