The determinants of stock returns in the midst of global uncertainties evidence from the Ghana stock market

Abstract

The study sought to investigate the effect of interest rate, inflation, gross domestic product, gold price, crude oil price, cocoa price and covid-19 pandemic on the stock market returns of the Ghana stock exchange. The study used causal research design, quantitative technique. Annual data from 1998 to 2021 was used. Data analysis techniques employed were VAR model, Toda & Yamamoto, Johansen cointegration, ADF and PP unit root test. Findings revealed that the hypothesised macroeconomic variables interest rate, inflation rate and gross domestic product do not granger cause stock market return. Contrary to conventional findings, the study observed no causality between gold prices, crude oil prices, cocoa price and stock market returns of the Ghana stock exchange. However, covid-19 pandemic was found to granger cause stock market returns of the Ghana stock exchange. The study found no bi nor uni-directional relationship among the independent variables when used as dependent variables. The findings have the following practical implications; the government should focus more attention on other aspect of the financial system such as the banking industry that respond quickly to variations in these variables. Again, the findings implies that effort and actions by government to minimize shocks posed by volatility in the price of analysed commodities should be shifted toward other commodities that Ghana trades-in. The novelty of the study is the test of probable causality between Covid-19 and stock market movement as the first of its kind in the study’s jurisdiction.