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Interest Rate and Stock Market Performance in Nigeria, South Africa and Ghana: 1986 - 2018
This study examined the effect of interest rate on stock market performance in Nigeria, South Africa and Ghana using time series data from 1986 to 2018. The study seeks to ascertain if interest rate alone can influence stock market performance in the three economies. Autoregressive Distributed Lag Model (ARDL) was employed in analysing the data sourced. The results of the study revealed that interest rate has a negative but not significant effect on stock market performance in Nigeria in both short-run and long-run. The results for South Africa indicated that interest rate has a negative effect in the short-run and a positive effect in the long-run, on stock market performance. However, the results were not significant at 5% level. The results for Ghana showed that interest rate has a negative but not significant effect (in both short-run and long-run) on stock market performance. Therefore, the study concluded that interest alone cannot significantly influence stock market performance in Nigeria, South Africa and Ghana. The conclusion is based on the result that interest rate has no significant effect on stock market performance in Nigeria, South Africa and Ghana, taking a bivariate regression model into consideration with only interest rate as the independent variable. Thus, the study recommended that interest rate as a macroeconomic factor should not be used alone to predict or influence the performance of stock markets in Nigeria, South Africa and Ghana. Rather, other macroeconomic factors such as inflation rate, unemployment rate, GDP growth rate and money supply should be considered along with interest rate.
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