Symbiotic Disclosure of Real Sector and Financial Sector: Evidence in Nigerian GDP and Stock Market Capitalization

Main Article Content

Suoye Igoni
Lucky Orlu
Ucheoma. I. Ezirim

Abstract

The focus of this study is to identify the disagreement if any between the real sector and the financial, and to disclose its activities alongside macroeconomic factors before the emergence of the 2016 and 2017 fair recession in Nigeria. The ending controversies of the financial sector being a host or a parasite to the real sector pave the gesture for this study. This study, therefore, evaluated the prevailing casual disclosure between the Nigeria Stock Performance and Gross Domestic Product alongside other Macroeconomic indicators, such as exchange rate, external reserves, Inflation rate, and Interest rate data sourced from Central Bank of Nigeria over the period 1985-2014. The Augmented Dickey-Fuller and Granger Causality tests were employed. The results disclose a significant symbiotic link between Stock Market Capitalization and GDP in the growth process. On the other hand interest rate tends to influence Market capitalization activities. The study concludes that GDP and Stock Market Capitalization constitute significant influential variables in the Nigerian economy as both promote each other, while the inference of interest rate follows movements in Stock Market Capitalization. The implications to these findings show that the financial sectors and the real sectors both operate within and obey the demand follow and supply leading hypotheses. The study recommends that the Central of Nigeria should collaborate with the Bank of Industry and the Agricultural Development Bank to issue out soft loans to capable entrepreneurs to uphold the symbiotic disclosure shown in this study. Finally, CBN should properly manage the macroeconomic variables to improve the Nigerian economy.

Keywords:
GDP, stock market capitalization, granger causality, symbiotic disclosure, Nigeria

Article Details

How to Cite
Igoni, S., Orlu, L., & Ezirim, U. I. (2020). Symbiotic Disclosure of Real Sector and Financial Sector: Evidence in Nigerian GDP and Stock Market Capitalization. Asian Journal of Economics, Finance and Management, 2(2), 29-38. Retrieved from http://globalpresshub.com/index.php/AJEFM/article/view/828
Section
Original Research Article

References

Onwumere JUJ, Ibe IG, Okafor RG, Uche UB. Stock market and economic growth in Nigeria: Evidence from the demand following hypothesis. European Journal of Business and Management. 2012;4(19):1-9.

Esen E, Omit O. Effects of Macroeconomic dynamics on stock returns: The case of the Turkish Stock Exchange. Journal of Economic Cooperation. 2005;26(2):69-90.

Ologunde AO, Elumilade DO, Asaolu TO. Stock market capitalization and interest rate in Nigeria: A time series analysis. International Research Journal of Finance and Economics. 2006;4(4);154-167.

Maku OE, Attanda AA. Determinants of stock market performance in Nigeria: Long-run analysis. Journal of Management and Organizational behavior. 2010;1(3):1-16.

Igoni S, Onwumere JUJ, Ogiri IH. The Nigerian Digital Finance Environment and Its Economic Growth: Pain or Gain. Asian Journal of Economics, Finance and Management. 2020;2(2):1-10.

Parab N, Reddy YV. The dynamics of macroeconomic variables in Indian stock market: A Bai-Perron approach. Journal Macroeconomics and Finance in Emerging Markets Economies. 2020; 13(1):89-113.

Liu L, Pan Z. Forecasting Stock Market Volatility: The role of technical variables. Economic Modeling. 2020;84:55-65.

McQueen G, Roley VV. Stock prices, news, and business conditions. The Review of Financial Studies. 1993;6.

Jarvinen J. Essays on Industry portfolio and macroeconomic news. Academic Dissertation, University of Tampere; 2000.

Miller M, Modigliani F. Dividend Policy, Growth, and the Valuation of shares. Journal of Business. 1961;34(4):411- 433.

Ross SA. The Arbitrage Theory of Capital Asset Pricing. Journal of Economic Theory. 1976;13(3):341-360.

Bilson CM, Brailsford TJ, Hooper VJ. Selecting macroeconomic variables as explanatory factors of emerging stock market returns, working paper series in Finance. 2000;00-04.

Groenewold N, Fraser P. Share price and macroeconomic factors. Journal of Business Finance and Accounting. 1997; 5(2):155-192.

Sharpe WF. Factor models, CAMP, and APT. The Journal of Portfolio Management. 1984;11(1):21-25.

Gan C, Lee M, Yong HHA, Zhang J. Macroeconomic variables and stock market interactions: New Zealand evidence. Investment Management and Financial Innovations. 2006;3(4):89-101.

Padhan PC. The nexus between stock market and economic activity: An Empirical Analysis For India, International Journal of Social Economics. 2007;34(10): 741-753.

Ahmed S. Aggregate Economic Variables and Stock Market in India, International Research Journal of Finance and Economics. 2008;14:141-164.

Ozlen O, Ergun U. Macroeconomic factors and stock returns. International Journal of Academic Research in Business and Social Sciences. 2012;2(9).

Zubair A. Causal relationship between stock market index and exchange rate: Evidence from Nigeria. CBN Journal of Applied Statistics. 2013;4(2).

Olawale AN, Olusegun AS, Taofik A. Statistically significant relationship between returns on FTSE 100, S&P 500 market Indexes, and macroeconomic variables with emphasis on unconventional monetary policy. International Journal of Statistics and Applications. 2014;4(6):249-268.

Vanita T, Ritika S. Stock market performance and macroeconomic factors: The study of the Indian equity market. Global Business Review. 2014;11(2):209-220.

Mutuku C, Ng’eny KL. Macroeconomic Variables and the Kenyan Equity Market: A Time Series Analysis. Business and Economic Research. 2015;5(1):1-10.

Lee JW, Brahmasrene T. An exploration of dynamical relationships between macroeconomic variables and Stock Prices in Korea. 2018;5(3):7-17.

Mohamed IA, Ahmed S. The Effects of Macroeconomic Variables on Stock Returns in the Jordanian Stock Market. Global Journal of Management and Business. 2018;5(2):087-093.

Aldukhail AM. The Effect of Macroeconomic Variables on the Saudi Stock Market. Archives of Business Research. 2019;7(12).
DOI: https://doi.org/10.14738/abr.712.7508

Aryasta N, Artini LGS. The effect of Indonesian Macroeconomic indicators and global stock price index on the composite stock prices index in Indonesia. International Journal of Scientific and Research Publications. 2019;9(6).
DOI:https://doi.org/10.29322/IJSRP.9.06.2019.p9069

Bassar TS. Analysis of the effect of Sharia stock trading activity factors and macroeconomic factors on the performance of Sharia Stocks in the capital market in Indonesia. International Journal of Tax Economics and Management. 2019;2(11):12-28.

Koop G. Analysis of Economic Data. Wiley, 4th Ed; 2013.

Dickey DA, Fuller WA. Distribution of Estimators for time series regression with a unit root. Journal of American Statistical Association. 1976;74:427- 431.