Macroeconomic factors and stock market development in sub-Saharan Africa: does the measure of stock market development matter?

Abstract

We examine the impact of macroeconomic factors on stock market development in sub-Saharan Africa. More specifically, we examine the sensitivity of the impact of macroeconomic factors on stock market development to the choice of measure of stock market development. We apply the Feasible Generalised Least Squares (FGLS) estimator on a panel dataset of 12 countries over the period 2000–2015. The empirical results indicate that income, trade openness, financial openness, macroeconomic instability, financial intermediary development, savings, and investment influence stock market development. We provide evidence to suggest that the impact of macroeconomic factors on stock market development is sensitive to the choice of measure of stock market development. The implication of our findings is that the multidimensionality of stock market development should not be jettisoned in making policy prescriptions for stock market development in sub-Saharan Africa.