Macroeconomic Conditions and Stock Market Liquidity in Kenya

Abstract

This paper explores the role of macroeconomic conditions on systematic stock market liquidity in Kenya. The study first estimates the monthly probability of liquidity switching from a high to a low liquidity state using the Markov regime switching framework. Then, using ordinary least squares, the study identifies macro factors that significantly drive liquidity fluctuations. Importantly, monetary policy changes, exchange rate fluctuations and global risk aversion are found to significantly explain the resilience of stock market liquidity. Understanding the specific macroeconomic variables that drive liquidity fluctuations helps investors to monitor their liquidity exposures further enabling them to make informed investment choices. This ultimately leads to efficient resource allocation. Additionally, the empirical findings of this study provide key information to financial market supervisors regarding which macro variables to watch in their surveillance duties.

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APA

Muriu, O (2024). Macroeconomic Conditions and Stock Market Liquidity in Kenya. Afribary. Retrieved from https://track.afribary.com/works/macroeconomic-conditions-and-stock-market-liquidity-in-kenya

MLA 8th

Muriu, Ochenge "Macroeconomic Conditions and Stock Market Liquidity in Kenya" Afribary. Afribary, 03 Oct. 2024, https://track.afribary.com/works/macroeconomic-conditions-and-stock-market-liquidity-in-kenya. Accessed 24 Dec. 2024.

MLA7

Muriu, Ochenge . "Macroeconomic Conditions and Stock Market Liquidity in Kenya". Afribary, Afribary, 03 Oct. 2024. Web. 24 Dec. 2024. < https://track.afribary.com/works/macroeconomic-conditions-and-stock-market-liquidity-in-kenya >.

Chicago

Muriu, Ochenge . "Macroeconomic Conditions and Stock Market Liquidity in Kenya" Afribary (2024). Accessed December 24, 2024. https://track.afribary.com/works/macroeconomic-conditions-and-stock-market-liquidity-in-kenya

Macroeconomic Conditions and Stock Market Liquidity in Kenya

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