Effect of Exchange Rate Volatility on Stock Prices In Ghana

Abstract The purpose of this study is to identify the whether there exists a Granger-causing relationship between exchange rate and stock prices. Using the Granger-Causality model as a framework, we employed daily data observations of the Ghana Stock Exchange Composite Index (GSE-CI) and the USD-Cedi exchange rate values across the period 2010 -2018. The data used in the study were obtained from the Bank of Ghana and the Ghana Stock Exchange. Following a Granger-causality test on for causality from exchange rate to stock price change, as well as stock price changes, the results showed that there was neither variable significantly influenced the other. Thus, we concluded that exchange rate changes do not Granger-cause stock price changes or vice-versa. Despite these observations, investors should be aware of other effects of exchange rate in their investment decisions on the stock market