An empirical analysis on impact of macroeconomic variables on stock prices case in Kenya

Abstract

Previous research has evidenced that some macroeconomic variables have an effect on the stock prices of their listed companies. However this is not always the case especially in researches that were studying developing countries. This study was conducted in Kenya on 41 companies for a period of 10 years, 2005-2014, to try and ascertain what type of relationship exists between inacroeconomic variables and the stock prices of listed companies in the country with the aim of understanding better what affects stock prices and ascertain if the macroeconomic environment has a significant relationship with the stock prices . This research used co-integration tests, Vector Error Correction Model from (Johansen, 1991) and Granger Causality tests to achieve its objectives. The results show presence of short term relationships and weak significant long term relationships.