Abstract:
This study examines the relationship between macroeconomic variables and stock market returns
using monthly data over period January 1992 to December, 2008. Macroeconomic variables used in
this study are consumer price index (as a proxy for inflation), crude oil price, exchange rate and 91
day Treasury bill rate (as a proxy for interest rate). Full Information Maximum Likelihood Estimation
procedure was used in establishing the relationship between macroeconomic variables and stock
market returns in Ghana. The empirical results reveal that there is a significant relationship between
stock market returns and three macroeconomic variables; consumer price index (inflation rate),
exchange rate and Treasury bill rate seem to affect stock market returns. Consumer price index
(Inflation rate) had a positive significant effect, while exchange rate and Treasury bill rate had
negative significant influence on stock market returns. On the other hand, crude oil prices do not
appear to have any significant effect on stock returns. The results may provide some insight to
corporate managers, investors and policy makers.
