The Relationship between Stock Market Performance and Economic Growth In the East African Community

Citation:
Nyanaro E, Elly D. "The Relationship between Stock Market Performance and Economic Growth In the East African Community." African development finance journal. 2017;1(1):110-132.

Abstract:

Purpose – This paper investigated the relationship between the stock market performance and the
economic growth in the East African Community. The stock market variables considered in the
study were stock market capitalization, market liquidity and share price volatility. The GDP
growth was a used a measure for economic growth.
Methodology – The quantitative research methods were employed to define the nature of
relationship between the variables. The population of the study was the All-Share index in the 4
stock markets in the member countries. To fulfill the purposes under the research, the stock market
performance of the EAC member countries was collected from the Capital markets, EASRA and
the respective Stock Exchanges. Data for GDP growth was collected from the World Bank website.
The study employed the Vector Autoregressive (VAR) model as well as the Granger test for
causality to estimate as well as provide evidence regarding the nature and direction of relationship
of the variables.
Findings - The study established an existence of long term relationship between the stock market
performance variables (market capitalization and liquidity) and economic growth in the East
African community. The study established that there was no relationship between the share price
volatility of the stock market and economic growth

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