The IUP Journal of Applied Finance
The Determinants of Stock Market Return in Ghana: FMOLS and DOLS Approaches

Article Details
Pub. Date :Oct, 2019
Product Name : The IUP Journal of Applied Finance
Product Type : Article
Product Code : IJAF11910
Author Name : Joseph Emmanuel Tetteh, Deodat Emilson Adenutsi and Anthony Amoah
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 23



The paper seeks to examine the impact of macroeconomic (external and internal) and political variables on the returns of Ghanaian stock market. The study employs lag of stock market return, consumer price index, 91-day treasury bill rate, exchange rate between domestic currency and US dollar, real gross domestic product, international crude oil prices, London Stock Exchange (LSE) all share index and political cycle (independent variables) and monthly stock market returns (dependent variable). The Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square (DOLS) models are used to ensure efficient, robust and reliable results. Whilst lag of stock market returns, political cycle and real gross domestic product exerts positive effect on stock market returns, the effect from treasury bills, consumer price index, exchange rate, crude oil and LSE is negative. The significant impact of crude oil prices, LSE all share index and political cycle on stock market returns is seen as revelations of the study. The findings of this study have important implications for understanding stock market return in Ghana. It may provide insights about other key determinants of stock market variables that have been ignored by most scholars.


Ghana has experienced a paradigm shift since the 1980s in its effort toward growth of the private sector and economic growth in general. This necessitated mobilization and channeling of long-term investible funds for economic growth and development (Osinubi, 2004; and Adam and Siaw, 2010). To this end, the Ghana Stock Exchange (GSE) was established in 1989. Notwithstanding all the contributions of the stock market, the expected impact of the stock market on the growth of the Ghanaian economy can be realized and sustained to a larger extent with the efficient control of the macroeconomic variables. The importance of the stock market to the economic growth of Ghana is therefore knotted to good governance and appropriate regulatory framework designed not only by politicians but most importantly by policy makers.


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