Macroeconomic variables and their association to stock market returns in sub-Saharan Africa

Abstract

The thesis examines the relationship between stock market returns and macroeconomic variables in seventeen countries that are included in the IMF’s definition of Sub-Saharan Africa. The study is conducted using a multivariate OLS regression and a Granger Causality test. The results suggest that macroeconomic variables do affect stock market returns in the given region, but that the relationship between the two is not necessarily what economic theory suggests. Even so, as Gross Domestic Product per Capita, inflation, net inflows in the form of Foreign Direct Investment and Real Interest Rates are significantly explaining returns of stock market indices, they should be considered for investment decisions and further studies.