Browsing by Author "Mbewa, Martin"

Now showing 1 - 2 of 2
  • Thumbnail Image
    Item
    The causal relationship between inflation, interest rate and stock market volatility in Kenya
    (European Journal of Business, Economics and Accountancy, 2016) Amata, Evans Ombima ; Muturi, Willy; Mbewa, Martin
    This study examined the relationship between interest rate, inflation and stock market volatility in Kenya using both primary and secondary data. A monthly time series data for a period of 14 years from January 2001 to December 2014 was used to study the relationship. Additionally, 385 Questionnaires were distributed to individual investors to understand investor’s perceptions on the relationship. The vector error correction model was used to analyse time series data for the long run causal relationship between inflation, interest rate and stock market volatility, while the granger causality test was used to analyse the short run relationship. Findings revealed that there was a positive and significant long run relationship between inflation rate and stock market volatility (t-statistic= 5.96). Findings also show a positive and significant short run relationship between inflation and stock market volatility (chi-square value of 13.39 and a p-value of 0.0039). The relationship between interest rate and stock market volatility was found to be negative and weakly significant both in the short run (p-value of 0.0683) and long run (t-statistic of -1.90). Results from investor’s perception revealed that 69% of the respondents agreed that a change in inflation rate causes fluctuation in share prices. Additionally, primary data results show that 75% of the respondents agreed that sudden changes in the interest rate have always caused variations in the stock market returns
  • Thumbnail Image
    Item
    Relationship Between Macro-economic Variable, Investor Herding Behavior and Stock Market Volatility in Kenya
    (International Journal of Economics, Commerce and Management,, 2016-08-08) Amata, Evans Ombima; Muturi, Willy; Mbewa, Martin
    This study sought to examine the relationship between interest rate, inflation, gross domestic product (GDP), foreign exchange, investor herding behaviour and stock market volatility. Published time series data from January 2001 to December 2014 was obtained from the Central Bank of Kenya, Kenya National Bureau of Statistics, Capital Market Authority and the Nairobi Securities Exchange. Granger causality test was used to determine the short run causality while the Vector Error Correction Model (VECM) was used to test the long run causality between predictor variables and stock market volatility. Result from the regression model show a positive and significant relationship between inflation and stock market volatility both in the short run and long run. The study finds that an increase in inflation by 1% leads to an increase in stock market volatility by approximately 24%. Results also revealed that there is a negative and significant relationship between interest rate and stock market volatility both in the short run and long run. GDP, Foreign exchange and herding behaviour had no significant relationship with stock market volatility in Kenya.