Kennedy Bwambok* and Susan Okeri
The aim of this study was to establish the interlink between inflation rates, interest rates, gross domestic product and oil price movement on the stock market returns. The study aimed to ascertain the reaction of the stock market to a movement in each of the macroeconomic variables. The effect of the movement of oil prices on the stock market returns was also measured. Published time series data from 1990 to 2022 was sourced from the NSE, Kenya National Bureau of Statistics and the Central Bank of Kenya. Empirical results from the regression model concluded that oil price movement displayed a major relationship with stock market volatility. A percentage point movement in the price of oil, the model forecasted stock market return drop of 0.4%. Inflation rates, Interest rates and gross domestic product returned immaterial relationships. The impact of a standard deviation shock on each of the macroeconomic variables on stock market returns concluded that shock in oil prices was both negative and positive confirming their asymmetric relationship.
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