The Effect of Macroeconomic Variables on Stock Return Volatility in the Nigerian Stock Exchange Market

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Henry Pole
Behiye Cavusoglu


The link concerning stock return volatility and macroeconomic indicators have been an arguable phenomenon all time long. It has also been one of the major issues to domestic and foreign investors in building an efficient and optimum stock portfolio in the stock market. However, the volatility of macroeconomic indicators adversely affects the level of stock return in the Nigerian stock market. However, the study investigates the effect of macroeconomic factors on stock return in the Nigerian stock market. The study employed secondary data obtained from Nigerian Stock Exchange (NSE) fact book and Central Bank of Nigeria (CBN) statistical bulletin within the period of 1998 and 2019. The monthly data obtained were subjected to the Autoregressive Distributed Lag (ARDL) method of analysis. Findings revealed that money supply and aggregate industrial production positively and significantly affect stock return (β=0.466098, P<0.05; β=0.213141, P<0.05) while exchange and inflation rates negatively affect stock return in the Nigerian stock exchange market (β=-0.009285, P<0.05; β=-0.028260, P<0.05) respectively. The study concludes that macroeconomic factors significantly affect stock return in the Nigerian stock market at short run and long run. The study recommends that the Central bank of Nigeria should employ deflationary fiscal policy and Adaptive Stabilization Method of Exchange Rate policy in order to reduce variance between actual and expected stock returns in the Nigerian Stock Market. Overall, the study adds to the previous literature by identifying the dynamic effect of long and short runs of macroeconomic indicators on stock returns. To the best of the author's knowledge, this is the first work to incorporate money supply and aggregate industrial production in modeling stock returns in the Nigerian context.

Foreign exchange rate, inflation rate, Nigerian Stock market, stock return volatility

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Pole, H., & Cavusoglu, B. (2021). The Effect of Macroeconomic Variables on Stock Return Volatility in the Nigerian Stock Exchange Market. Asian Journal of Economics, Finance and Management, 3(3), 32-43. Retrieved from
Original Research Article


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