Influence of High Cost of Living, Oil Price, Government Expenditure and Exchange Rate Effect on Stock Market Return Volatility. A Critical Literature Review
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Date
2022
Authors
Kariuki, Robert
Journal Title
Journal ISSN
Volume Title
Publisher
Cari Journals
Abstract
Purpose: The financial services sector aims at creating a vibrant and globally competitive financial
sector promoting high-levels of savings and financing for investment needs. The overall objective
of this study was to examine influence of high cost of living, oil price, government expenditure
and exchange rate effect on stock market return volatility. A critical literature review
Methodology: The paper used a desk study review methodology where relevant empirical
literature was reviewed to identify main themes and to extract knowledge gaps.
Findings: The study also concluded that among the variables under study oil price, inflation,
government spending and exchange rate, only exchange rate is significant in explaining the
volatility in stock returns in Nairobi securities exchange. Positive shocks are associated with higher
volatility than negative shocks. Policy makers should enhance exchange rate stability as well as
making sure that inflation is suppressed so as to spur growth in the economy.
Unique Contribution to Theory, Policy and Practice: The study recommends that the
government should also increase production of energy locally so as to reduce over reliance on
imported oil, reduce the cost of production as well as suppressing the rate of inflation in the
economy. This study recommends that Policy makers, and investors, need to take the
macroeconomic variables into account when formulating financial and economic policies which
are necessary to encourage investment.
Description
Article
Keywords
Influence, High Cost Living, Oil Price, Government Expenditure, Exchange Rate, Stock Market Return Volatility
Citation
Kariuki, R. K. (2022). Influence of High Cost of Living, Oil Price, Government Expenditure and Exchange Rate Effect on Stock Market Return Volatility. A Critical Literature Review. International Journal of Modern Statistics, 2(1), 36–46. https://doi.org/10.47941/ijms.1132