THE EFFECT OF MACROECONOMIC DETERMINANTS OF STOCK PRICE MOVEMENTS IN NIGERIA
DOI:
https://doi.org/10.29121/granthaalayah.v6.i1.2018.1609Keywords:
Absolute Stock Price, Gross Domestic Product, Exchange Rate, Efficient Market HypothesisAbstract [English]
This study examined the effect of macroeconomic determinants of stock price movements in Nigeria. To achieve this objective, data were gathered on macroeconomic variables such as gross domestic product, exchange rate, inflation, interest rate and absolute stock price were captured for the purpose of analysis. The autoregressive distributive lag (ARDL) model was used in analyzing the macroeconomic determinants of stock price movement in Nigeria. The augmented Dickey-Fuller (ADF) unit root test was also engaged in order to ascertain the stationarity or otherwise of the variables. The ADF unit root test revealed that only interest rate was stationary at levels while the remaining variables became stationary when differenced once. The ARDL findings revealed that the determinants variables (GDP, EXCHR, INTR, and INFL) were not jointly co-integrated with the dependent variable, ASTP, hence, no existence of a long run relationship. Conclusively, there was no long run relationship between macroeconomic determinants and stock price movements in Nigeria. It was recommended that, government should create conducive business environment, strengthen the real sector to stimulate the economy, boost savings and stock investment. Finally, government should fine tune its policies on exchange rate determination and setup a consistent policy plan to stimulate investment in the capital market.
Downloads
References
Adjasi K. & Biekepe B. (2006), Stock exchange and economic growth: the case of selected African countries, DOI: https://doi.org/10.1111/j.1467-8268.2006.00136.x
University of Stellenbosch Business School, Cape Town, South Africa.
Arango, L. E., Gonzalez, A. & Posada, C. E. (2002). Returns and interest rate: A nonlinear relationship in the DOI: https://doi.org/10.1080/09603100110094493
Bogotá stock market. Applied Financial Economics, 12(11), 835-842.
Attari, J. I. & Safdar, T. D. (2013). Macroeconomic variables and stock prices. A multivariate analysis. Africa Journal of Development Studies, 2(1), 159-164
Chinzara, F. (2014). The element of banking in Nigeria. London: Graham Burn.
Chukwuma-Agu, B. U. (2009). Fundamentals of finance (2nded.). Uyo: Nelgrafik Press.
Dermirgue, D. S.& Levine, P. D. (2005). Sensitivity of investor reaction to market direction and volatility: dividend change announcements: Journal of Financial Research, 28(1) 21-41. DOI: https://doi.org/10.1111/j.1475-6803.2005.00112.x
Ekineh, O. I. (2014). The Nigerian capital market: Present and future challenges: Paper presented at a workshop on legislating for the capital market in a democratic environment organized by the Securities and Exchange Commission, Nicon Hilton Hotel, Abuja, Oct. 12.
Fama, E. F. (1997). Foundation of finance: portfolio decisions and security prices. Oxford: Basil Blackwell.
Foley, B. J. (1991). Capital markets. Hong – Kong: Macmillan publishers. DOI: https://doi.org/10.1007/978-1-349-21426-6
Gupta, M.O. & Modise, A.S. (2011). Stock price and effective exchange rate of the dollar: Applied Economics, 24(5). 459-464.
Ibrahim, D. E. & Aziz, R. J. (2013). Security analysis and portfolio management. New Delhi: Pearson Education.
Inanga, B. J. & Emenuga, H. (2015). Capital market operators and their Functions. A paper presented at a Public Enlightenment Workshop on Opportunities in the Nigerian Capital Market for Industrial Development of Ekiti State of Nigeria and Teachers Forum.
Jefferis, K. R. & Okeahalam, C. C. (2000). The impact of economic fundamentals on stock markets in Southern Africa. Development Southern Africa, 17(1), 23-51. DOI: https://doi.org/10.1080/03768350050003398
Kelikume, I. B. (2015). New evidence from the efficient market hypothesis for the Nigerian stock index using the wavelet unit root test approach: Proceedings of the Asia Pacific Conference on Business and Social Sciences, 2(7), 131-143.
Mitchel, R. A. & Burns, S. C. (1998). Principles of corporate finance. Retrived from http://ebookbrowse.com/principles-of-corporate-finance-brealey-myers-7th-ed-pdf-d138508468
Nurudeen, E. T. (2002). Price volatility, expectations and monetary policy in Nigeria. Retrieved on 18/11/2009 from emmaadamgbe@yahoo.com
Nyong, M. O. (2007). The stock market and economic efficiency. Uyo: Nelgrafik Press.
Obadan, I. M. (2004). The information content of option prices and a test for market efficiency: Journal of Financial Economics, 6(1) 213-234. DOI: https://doi.org/10.1016/0304-405X(78)90030-2
Ogege, S. & Udoka, C. O (2012). The efficiency of the Nigerian stock exchange: A theoretical and empirical analysis. Indian Journal of Finance, 6(9), 13-20.
Osei, K. I. (2002). Assets pricing and information efficiency of the Ghana stock market: Africa Economic Research Consortium Research Paper. 115, 1-15.
Raju, T. R. & Gosh, S. N. (2004). Stock market development and long-run growth: World Bank Policy Research Working Paper, 1582, 688 – 726.
Seyyed, T. U. (2010). Stock analysis for value investing: The price earnings ratio. Retrieved from http/www.stockmarketnigeria.com.
Soludo, C. (2004). The politics of trade and industrial policy in Africa: forced consensus. Africa World Press.
Spyrou, I. S. (2001). Stock returns and inflation: evidence from an emerging market. Applied Economics Letters, 8, 447-450. DOI: https://doi.org/10.1080/13504850010003280
Tobin, P. G. (2009). Autoregressive conditional heteroskedasticity with estimates of the variance of United Kingdom inflation: Econometrica, 55(1), 391-407
Udoka, C. O. (2012). Weak-form market efficiency: Dynamic effects of information on the Nigerian stock market’: Interdisciplinary journal of Contemporary Research in Business, 4(7), 417-429.
Udoka, C. O., Mboto, H. W. & Anyingang, R. A. (2013). The effect of inflation on stock market performance in Nigeria: 1980-2010. International Journal of Marketing and Technology, 3(8), 16-29
Udoka, C. O. & Anyingang, R. A. (2014). Operational Efficiency Dynamics of the Nigeria Stock Market: International journal of Finance & Banking Studies, 3(1), 173-216. DOI: https://doi.org/10.20525/ijfbs.v3i1.178
Wang, F. O. (2010). The random walk hypothesis and the behaviour of share prices in Nigeria: Nigeria Journal of Economic and Social Studies, 26(1), 57–71.
Zordan, D. J. (2005). Stock Prices, Interest Rates, Investment Survival. Econometrica USA, Illinois. [Online] Available: http://www.econometricausa.com/publications/StockPrices.pdf
Downloads
Published
How to Cite
Issue
Section
License
With the licence CC-BY, authors retain the copyright, allowing anyone to download, reuse, re-print, modify, distribute, and/or copy their contribution. The work must be properly attributed to its author.
It is not necessary to ask for further permission from the author or journal board.
This journal provides immediate open access to its content on the principle that making research freely available to the public supports a greater global exchange of knowledge.
