The Global Financial Crisis, Inflation Rate and Stock Market Returns in Kenya

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dc.contributor.authorOtieno, Donald A.
dc.contributor.authorNgugi, Rose W.
dc.contributor.authorWawire, Nelson H. W.
dc.date.accessioned2022-03-09T13:28:19Z
dc.date.available2022-03-09T13:28:19Z
dc.date.issued2017
dc.descriptionArticleen_US
dc.description.abstractThe moderating effect of events such as the 2008 Global Financial Crisis (GFC) on the relation between stock market returns and macroeconomic variables has attracted very little attention. This study investigates the extent to which the 2008 GFC moderated the relationship between inflation rate and stock market returns. The study uses month-onmonth inflation rate and year-on-year inflation rate from 1st January 1993 to 31st December 2015 and divides the sample data into pre-crisis period (from 1st January 1993 to 31st December 2007); crisis period (from 1st January 2008 to 30th June 2009); and post-crisis period (from 1st July 2009 to 31st December 2015). It uses a product-term regression model instead of the most widely applied additive regression model. Results indicate that a unit increase in the both measures of inflation rate had significant depressing effects on stock market returns after the crisis compared to before the crisis. Likewise, the results reveal that average stock market returns were significantly higher after the crisis compared to before the crisis at low rather than medium or high values of the two measures of inflation rate. These results suggest that the Kenyan stock market is highly sensitive to variations in inflation rate, especially as it emerges from a financial or political turmoil. This study is empirically innovative in the sense that it is the first to examine the moderating effect of the 2008 GFC on the relation between inflation rate and stock market returns in Kenya using a product-term model.en_US
dc.identifier.citationOtieno, D. A., Ngugi, R. W., & Wawire, N. H. (2017). The global financial crisis, inflation rate and stock market returns in Kenya. European Scientific Journal, 13(19), 191-210.en_US
dc.identifier.issn1857 – 7881
dc.identifier.issn1857- 7431
dc.identifier.urihttp://ir-library.ku.ac.ke/handle/123456789/23195
dc.language.isoenen_US
dc.publisherEuropean Scientific Journalen_US
dc.relation.ispartofseries;Vol. 13, No. 19
dc.subjectStock returnsen_US
dc.subjectInflation rateen_US
dc.subjectGFCen_US
dc.subjectProduct-term modelsen_US
dc.titleThe Global Financial Crisis, Inflation Rate and Stock Market Returns in Kenyaen_US
dc.typeArticleen_US
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