A study of the macro-economic factors affecting stock market performance in Zambia: a case of the Lusaka securities exchange.

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Muyanga, Patson
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The University of Zambia
According to Ali (2014), capital markets, across the globe, channel funds from savers to firms, which use the funds to finance projects. Efficient capital markets, therefore, make it easier for firms to raise capital because the markets determine the prices at which existing and potential security holders are willing to exchange claims on a firm’s future cash flows. Many studies have been done to establish whether macro-economic factors do influence stock market performance both in developed and developing financial markets. As such, this study sought to determine the influence of the macro-economic factors on stock market performance in Zambia specifically the Lusaka Stock Exchange. The independent variables were annual Interest rates, exchange rates, money supply, GDP growth rate and Index of Industrial Production measured by the Central Statistical Office and Bank of Zambia, respectively. The dependent variable in this study was the All Lusaka Stock Exchange Annual Share Index. Further, secondary data was collected for a period of twenty (20) years from 1998 to 2017. The study employed a descriptive research design and a multiple linear regression model was used to analyse the data. SPPS version 23 was used for data analysis purposes. The results for the study produced an R-square value of 0.819 which means that 81.9 % of the variations in stock market indices are influenced and caused by the five selected macro-economic factors covered in this study while 18.1% of the variations are influenced and caused by factors not covered in this study. ANOVA results show that the F-Statistic was significant at 5% level with an fstatistic of 12.632. As such, the model was fit to explain stock market index variations at Lusaka Stock Exchange. The results also revealed that, individually, interest rates have a strong negative association with stock market performance and the association is statistically significant. On the other hand, money supply, exchange rates and Index of Industrial Production have a positive association with stock markets and the association is statistically significant. However, GPD growth rates have a positive association with stock market performance although the association is not statistically significant. Key words: Stock Market, All LuSE Share Index, Performance, Macro-Economic Factors, Interest Rates, Exchange Rates, Money Supply, GDP Growth Rates, Index of Industrial Production, Regression, Correlation and SPSS.
Stock exchange--Zambia , Business--Zambia