The Impact of Changes in Interest Rates on Zambian Stock Prices in Zambia

Abstract: This paper’s primary objective was to examine how interest rate volatility affects stock in Zambia. The study examined monthly data from the Lusaka Securities Exchange (LuSE) over the 2000–2023 time period. Procedural tests, such as stationarity, integration, autocorrelation, heteroscedasticity and multicollinearity were done before conducting the ARDL model. The study’s findings demonstrated that stock prices in Zambia were directly impacted by fluctuating interest rates. Stock prices decreased when interest rates rise and vice versa. According to the standard, which holds that stock prices and interest rates have an inverse relationship, Zambia was found to have a negative association. This may be the result of higher borrowing costs. Businesses find it more costly to borrow money to fund their operations as interest rates rise. This may result in lower earnings and profits, which may then cause stock values to drop. Expectations from investors may also contribute to this, as they may grow more risk averse and sell equities in favor of safer assets like bonds. As a result of a decline in demand, stock prices may fall. It is crucial to remember that there are numerous variables that might affect the intricate relationship between interest rates and stock prices, such as investor expectations, market sentiment, and economic conditions. Stock prices may suffer as a result of higher interest rates, although this is not always the case. In certain cases, rising interest rates may indicate a robust economy, which could result in higher stock prices and more profits and earnings for businesses. In conclusion, there are many facets and complexities to the relationship between interest rates and stock prices. The relationship between growing interest rates and stock prices is not always clear-cut and can be influenced by a variety of circumstances. For example, rising interest rates may result in lower consumer spending, higher borrowing costs, and other effects. When making investment decisions, investors should carefully weigh the unique issues impacting individual companies as well as the larger economic backdrop. It was also found that other elements such as the money supply, lending rate, exchange rate, and consumer price index affected stock prices. Keywords: Interest Rates, Zambian Stock Prices, money supply, lending rate, exchange rate. Title: The Impact of Changes in Interest Rates on Zambian Stock Prices in Zambia Author: Nicollete Nyamadzawo International Journal of Novel Research in Marketing Management and Economics ISSN 2394-7322 Vol. 11, Issue 3, September 2024 - December 2024 Page No: 82-93 Novelty Journals Website: www.noveltyjournals.com Published Date: 20-November-2024 DOI: https://doi.org/10.5281/zenodo.14191123 Paper Download Link (Source) https://www.noveltyjournals.com/upload/paper/The%20Impact%20of%20Changes%20in%20Interest-20112024-3.pdf