IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 4 NO. 1 2019

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Macroeconomic Aggregates and Stock Market Liquidity: Evidence from African Stock Markets

S. O. Igbinosa & Monday Uhunmwangho

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Abstract

Activities in macro-economic environment determines Stock market liquidity. This study aimed to examine macro-economic aggregates (variables) and stock market liquidity in African markets. The selected countries are Nigeria, South Africa, Egypt, Mauritius and Morocco, chosen because of the size of the exchanges in the continent and to expand the scope of the study. Cross-sectional research design was used and data were sourced from World Bank data based for the period 2006 to 2016. Fixed effect panel least squares regression technique was employed in the analysis owing to the fact that it tolerates unbalanced panel data, time constant unobserved heterogeneity as well as serial correlation (Kudaisi, 2014). The results revealed that macroeconomic aggregate variables significantly explained stock market liquidity in Africa. The forces that account for stock market liquidity are money supply (T-value= -2.1052 and P.Value =0.042 < 5%), inflation (T-value=2.0942 and P.Value =0.043 < 5%), exchange rate (T-value=-1.6804 and P.Value =0.10) and credit to private sector (T-value=2.0980 and P.Value =0.043 < 5%). Though economic growth shows the needed positive sign, it was not statistically significant at 0.05 level. The goodness of fit statistic of the model (R-2) impressively stood at 0.9386. On adjustment R-squares was 0.9026, an indication that the systematic variations in the dependent variable (TOR) is taking care of by the variations in the regressors to the tune of about 90.26%. F-statistic value is significant at1% level, validating that the model has strong predictive power. This study therefore recommends that investors particularly foreign portfolio investors, pay careful attention to macroeconomic forces of national economies because of the great potentials they hold in influencing stock market returns

keywords:

Africa stock markets; Macroeconomic aggregates; Stock market liquidity; Panel least squares.

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