In 2016, the performance of Capital markets in
Africa experienced a downward trend. Notable among them were Zambia, Ghana and
Nigeria (http://www.african-markets.com/). The Lusaka Securities Exchange (LuSE) share price index was the worst
performer year-to-date, down 26.83% in local currency. Among the contributing
factors cited were commodity prices as the country relies on copper for more
than 70% of its export revenue and had therefore suffered from commodity prices
plunged which led to weakened currencies and widened budget shortfalls (http://www.african-markets.com/). Although the contributing factors are known, their impact on the
Zambian stock market is not known. This study was an attempt to establish the
impact of commodity prices and macroeconomic factors on the stock market
returns. Like in similar studies, Nordin et
al. (2014)and Alam & Uddin (2009), we used Auto regression
Distribution Lag and Cointegration analysis and the Vector Error Correction
model on the variables (stock price index, copper price, oil price, interest
rates, and exchange rates) for the period 2004-2016.The findings of the study revealed Interest rates, exchange rates, copper
and Oil price jointly have the long and short Run impact on the Lusaka Stock
Market,but individually, only interest rates and copper prices had a significant
long term impact on the stock market, but in the short run only Copper and
Exchange rates had an immediate impact on the stock market. One important
policy implication of this study is that it will alert the authorities and the
investors on the impact of commodity prices, interest rate, and the exchange
rate on the Lusaka Securities Exchange stock market performance.
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