Abstract:
This study attempts to analyze the dynamic linkage between stock market returns and exchange rate in two West African emerging economics, namely; Nigeria and Ghana. To enhance purpose of this study we employed monthly closing prices of All Share Price Index (ASPI) from Nigerian Stock Exchange and Ghana Stock Exchange market and monthly exchange rate of US dollar in terms of Nigerian (USD/Naira) and US dollar in terms of Ghana (USD/Cedes) covering the period from 2004 to 2016. First, the study performed Augmented Dickey Fuller (ADF) test to enhance integrating order of the variables. Then, we employed Johansen's Cointegration test to examine long run relationship among variables and Granger causality test to determine causal relationship between variables and Ordinary Least Square (OLS) analysis to determine relationship between stock returns and exchange rate. The results suggest that there is long run relationship between variables in Nigeria and Ghana. Furthermore, one way causality from stock returns to exchange rate in both countries and all findings are similar to both countries. Finally, OLS regression suggests that the existence of relationship between stock returns and exchange rate is seen only in Indian context. |
