Title:
EFFECT OF SELECTED MACROECONOMIC VARIABLES ON THE PERFORMANCE OF THE NIGERIAN STOCK MARKET

Authors:
Adesola, Wasiu Adebisi; Uket, Eko Ewa; Arikpo, Oka Felix; Fabian Okwejie

Volume - 2 Issue - 9, Pages - 4705-4728

Abstract:
This study looked at the problem of how and to what degree the Nigerian stock market responds to the changes in macroeconomic variables. This study examined the effect of selected macroeconomic on the performance of the Nigerian capital market, utilizing time series data covering the period from 1985 to 2013. The study employed the Error Correction Mechanism(ECM) methodology in estimation of the relevant equation. However, before the final result was estimated, the study was tested for unit root using the Augmented DickeyFuller(ADF) test and Philip-Perron(PP) test. The study also tested for the long run equilibrium relationship among the variables using the Johansen-Jesulius multivariate co-integration approach. The Granger causality test was also carried out to investigate the direction of causality among the variables captured. The result of the co-integration test showed that the variables are co-integrated and hence there is a long run relationship among them. The result of the Granger causality test showed that there were bi-directional relationships between market capitalization and broad money supply and market capitalization and savings. The Granger causality result also revealed that there is a unidirectional causality relationship running from gross domestic prod, and domestic investment to market capitalization and from market capitalization to financial development. The results of the market capitalization equation showed that savings, domestic investment, gross domestic product and financial development have positive and significant effect on stock market performance in Nigeria during the period under review. On the other hand, the results showed that broad money supply and inflation rate have negative relationship with stock market performance in Nigeria. Based on the results, the study recommended that there is need for government to implement reform measures that will bring about efficiency and performance in the Nigerian stock market. This can be achieved by raising savings deposit rate so as to encourage more savings from the people. There is also need to provide basic infrastructures, maintaining stable macroeconomic atmosphere in Nigeria. Lastly there is need to implement policies that will promote domestic investment by lowering the cost of doing business in Nigeria.

Cite this Article:

[Adebisi, Adesola, Wasiu, et al. "EFFECT OF SELECTED MACROECONOMIC VARIABLES ON THE PERFORMANCE OF THE NIGERIAN STOCK MARKET." International Journal of Social Science and Economic Research, vol. 2, no. 9, 2017, pp. 4705-4728. September.]