Effect Of Petroleum Price On Stock Market Returns In Ghana Effect Of Petroleum Price On Stock Market Returns In Ghana

ABSTRACT

This study investigated the effect of petroleum price on stock market returns in

Ghana by using monthly data from 1990 to 2017. The study also examined the

causality among macroeconomic variables as well as the moderating effect of

financial crises and Ghana’s lower middle income status on stock market returns.

The study adopted the Autoregressive Distributed Lag (ARDL) model and the

Linear Regression Model to achieve the objectives of the study. The findings were

that there is both short run and long run relationships among the independent

variables and stock market returns; with a speed of adjustment towards long run

equilibrium of 2%. This means that it will take 50 months for the short run

deviations in the market to converge towards long run equilibrium. It was observed

that 2007/2008 financial crises did affect the changes in stock returns of Ghana but

does not moderate the relationship between petroleum price and stock returns. The

study recommended that the government should use petroleum subsidies to lower the

petroleum price levels in the domestic market in Ghana since petroleum price

negatively affect stock market returns. The government is also encouraged to

strengthen the capital market so that it can withstand future financial crises; but at

the same time should put in place policies that will move Ghana to higher income

status levels.