The 4th Annual International Conference on Public Administration and Development Alternatives 03 - 05 July 2019, Southern Sun Hotel, OR Tambo International Airport, Johannesburg, South Africa 200 The Role of Macroeconomic Variables in the Johannesburg Stock Exchange's Oil and Gas Stock Returns SB Molele University of Limpopo Abstract: The study pursued an investigation into the role of macroeconomic variables on the stock return volatility of the JSE's Oil and Gas sector, South Africa. The study focused on Brent crude oil prices, exchanger rate (R/$), Broad money supply and Gold Price as the selected macroeconomic variables. The GARCH–GED model to incorporate volatility was employed. Additionally, variance decomposition and impulse response were arrayed to test for shocks and forecast using secondary monthly data for the period 2007-2015. The fndings were that change in oil prices and broad money supply had a positive and signifcant efect on the sector stock returns, 1% and 10% respectively, while changes in exchange rates and gold price had a negative and signifcant efect at 1%. There was clustering of volatility detected in the sector returns, but faded at a moderate speed. A recommendation is that both the oil price and exchange rate must be monitored by market players as they have signifcant positive shock efect in the short-run and persist in the long-run. Risk, portfolio managers and interest players should keenly monitor gold prices to negate any losses due to gold positive performance as an alternative to the Oil and Gas sector. Keywords: GARCH Model, Macroeconomic variables, Stock returns, Volatility 1. Introduction South Africa's oil and gas sector has received much needed boost with the discovery of gas deposits of the coast of Southern Cape. This is sure to have an enhancement on the overall share value of the Oil and Gas sector index in the Johannesburg Stock exchange (JSE) inducing the exchange of stocks through buying and selling over the counter. It is also acknowledged that the stock market does not oper- ate autonomously, but rather infuenced by other factors, such as political and economic factors (JSE, 2015). To this efect, a number of studies document that a relationship exists between macroeconomic variables and stock returns (Bilson et al., 2001; Mangani, 2009; Chinzara, 2011; Masuduzzaman, 2012; Gupta & Modise, 2013). The macroeconomic variables chosen for the paper were as a result of current concerns and also as provided by literature. Firstly, Brent crude oil as the primary element in the oil and gas sector is expected to have an infuence through pricing, and secondly, exchange rates are also expected to infuence the sector with oil as a heavily imported commodity in South Africa. It is revealed by National Energy Regulation South Africa (NERSA) that the majority of South Africa's crude oil is supplied by three countries, namely Saudi Arabia, Nigeria and Angola which supply 89% of South Africa's total crude imports (NERSA, 2017). Thirdly, Broad money supply (M3) is included because of the government's cash injection in the sector through its industrial action plan; and fnally, the gold price is included on the bases that gold is seen as a safe haven. The gold price in particular acts as a stimulus to certain industries through demand for products to be used on the mines, isolated as a macroeconomic varia- ble due to the fact that its determination is largely divorced from other domestic economic variables (Van Rensburg, 1995). The sector's stocks were halted for trading in 2015 December and resumed in March 2018. According to the author relevant studies are lacking in the South African context. To this efect, it is signifcant to provide research study on the role of macroeco- nomic indicators on the sectors stocks. Additionally, address uncertainty over the role or how the sector stock returns reacts to the macroeconomic variables amid the expected gains in the sector. This study is expected to add to literature, thereby, advancing the relationship and how some economic factors afect the sector. It is also hoped that it might assist both private and public investors to capture any risks from the economy. Hence, benefcial to asset and portfolio managers on the stock market sector analysis especially regarding risk return nexus on