Effect Of Interest Rate And Exchange Rate On Stock Market Returns In Uganda.
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Date
2018-04
Authors
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Publisher
KIU. College of Economics and Management
Abstract
This study investigated the effect of interest rate and exchange rate on stock market returns in
Uganda by analyzing monthly interest rate, exthange rate and stock indices from the Bank of
Uganda, and Uganda Securities Exchange for the period ranging from January 2006 to December
2015. The study employed ex-post-facto research design. The study adopted descriptive analysis
and regression models in analyzing the data. The results of descriptive analysis show that the
mean of lending interest rate, Shilling!USD exchange rate, and USE returns are 21.5%, 2301.3
shilling, 1160 respectively. The standard deviation values for the series show wide dispersion
between the minimum and maximum values from their averages. The skewness coefficients
show that all the series are positively skewed. The results of inferential statistics using regression
models revealed that interest rate has a significant negative effect on stock returns in Uganda at
the 5% sigi~ificance level. The results further show that exchange rate has significant positive
effect on stock returns in Uganda at the 5%. significance level. It was therefore concluded,
amongst others, that interest rate has negative effect on stock returns in Uganda, and that
exchange rate has positive effect on stock returns in Uganda. The study consequently
recommends that stock market investors should include interest rates and exchange rates stock
valuation models as well as watch changes in interest rates and exchange rate so as adjust stock
portfolio in accordance with such changes. It was further recommended that the regulators of the
financial market should monitor changes in interest and exchange rates so as to formulate
proactive policies to stabilize the market whenever there is expectation shocks from the
variables.
Description
A Research Thesis Submitted to The College of Higher Degrees and Research Kampala International University in Partial Fulfilment Of The Requirements For The Award Of Master Of Business Administration Degree In Accounting And Finance Of Kampala International University Kampala, Uganda.
Keywords
Interest Rate, Exchange Rate, Stock Market Returns