Macroeconomics Determinants of Stock Prices at Nse

CHAPTER ONE

INTRODUCTION AND BACKGROUND TO THE STUDY

1.1 Introduction

Stock market dose not only create a market for firms shares, it also a reliable barometer to measure the economic conditions of a country. It serves also as a facilitator between the surplus units and the deficit units. It enables them to pool and transfer funds. And share the risk involved. Normally, commodity prices are determined by natural market forces of demand and supply. This is what economist makes us to believe. Though we may accept this view, Ofcos other factors acts alongside this forces .security prices are determined by factors as earnings per share, price ratio, dividend cover firms book value.

The major highlight of this chapter consists of the background to the study, statement of the problem, purpose of the study ,objectives of the study ,research questions, hypothesis limitations and delimitations ,assumptions of the study, theoretical and conceptual framework and operational definition of terms.

1.2 Background of the study

The stock market is also known as the equity market and is one of the important areas of a market economy as it provides access to capital to companies, ownership in the company for primary investors and the potential of gains based on the firm’s future performance for secondary investors (Osoro, 2013). Returns from such equity investments are subject to vary owing to the movement of share prices, which depend on various factors which could be internal or firm specific such as earnings per share, dividends and book value or external factors such as interest rate, GDP, inflation, government regulations and Foreign Exchange Rate (FOREX). Share price is used as a benchmark to gauge performance of a firm and its variations as an indicator of the economic health or otherwise of a firm...