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Macroeconomic Development and Stock Market Performance: A Non-Parametric Approach

Author

Listed:
  • George Adu
  • George Marbuah
  • Justice Tei Mensah
  • Prince Boakye Frimpong

Abstract

This paper applies a local-linear non-parametric kernel regression technique to examine the effect of macroeconomic factors on stock market performance in Ghana. We show that the popular parametric specification in the existing literature suffers from functional misspecification. The evidence suggests that the relationship is non-linear and hence the implied elasticities are non-constant, contrary to findings in the literature. The main finding of the study suggests that stock prices are significantly affected by macroeconomic fundamentals and oil price shocks albeit weakly. This reinforces the need to closely monitor behaviour of macroeconomic indicators while sustaining prudent macroeconomic policy management.

Suggested Citation

  • George Adu & George Marbuah & Justice Tei Mensah & Prince Boakye Frimpong, 2012. "Macroeconomic Development and Stock Market Performance: A Non-Parametric Approach," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 55(3), pages 100-129.
  • Handle: RePEc:eei:journl:v:55:y:2012:i:3:p:100-129
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    Cited by:

    1. Md. Abu HASAN, 2017. "Efficiency and Volatility of the Stock Market in Bangladesh: A Macroeconometric Analysis," Turkish Economic Review, KSP Journals, vol. 4(2), pages 239-249, June.
    2. Imhotep Paul Alagidede & Gideon Boako & Bo Sjo, 2021. "African equity markets’ exposure to oil and other commodities - implications for global portfolio diversification," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(2), pages 288-315, April.

    More about this item

    Keywords

    Bandwidth; stock exchange; local-linear kernel regression; nonparametric.;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G00 - Financial Economics - - General - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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