An investigation of the relationship between stock market performance and economic growth inZambia

Abstract

The study examines the casual relationship between stock market performance and economic growth in Zambia for the period running from 2000 to 2020.Economic growth is proxied by Gross domestic product (GDP) and Market performance is premixed by LSE Market capitalisation, Consumer price index and Exchange rate.The objective of the study was to establish the link between stock market performance and Economic growth if any, and to understand the significance of that link. (i.e. whether stock market The findings imply that the causality between economic growth and capital markets runs unilaterally from the capital market performance indicators to the GDP. From the results, it was inferred that the movement of stock prices in the LusakaStock Exchange reflect the macroeconomic conditions of the country and can therefore be used to predict the future path of economic growth. The study shows that the capital market performance has positively and significant impact on the Zambian economy within the period of the study (2000-2020). The study therefore, recommends that among other things introduction of mobile and online transaction to encourage individual would be investors in the market unlike the current happenings where the market is dominated by institutional investors. This is necessary because it will increase the quantum of market capitalisation that will result in improving the performance of the Zambia Stock Market.