Activities of Macroeconomic Variables and Stock Market Performance: Evidence in Nigeria

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Williams Odiche
Sylvester F. A. Udeorah


This study evaluates the dynamic influence of activities of macroeconomic variables and stock performance in Nigeria from 1986 to 2015. The study utilizes secondary data sourced from the central bank of Nigeria's statistical bulletin. The study utilized data techniques of the unit root test, Ordinary least square, the Johansen co-integration, the Pairwise Granger causality test, and the error correction model. It was discovered that there is an existence of long-run relationships among market capitalization and macroeconomic variables proxies with inflation rate, interest rate, exchange rate, and money supply account for approximately 77% variations in market capitalization in the long run. The parsimonious error correction model which is rightly and significantly signed with a co-efficient of -0.484794 is an indication that over 48% variation in market capitalization can be corrected over a year using our selected independent variables. The Granger causality test reveals that there is no bidirectional relationship among any of our independent variables and market capitalization; it was thus recommended that due to the influential role of inflation on stock market performance public authorities should implement policies which will curb inflation rate and poverty level through infrastructural development and improved the standard of living. Also, the interest rate should be made moderate to encourage investment and transactions in stocks in Nigeria capital market and the central bank of Nigeria should formulate and use instruments that will maintain inflation at a reasonably low level so that it will not erode the real values of stocks gains.

Money supply, exchange rate, interest rate, inflation, market capitalization, granger causality, error correction, ADF, Nigeria

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Odiche, W., & Udeorah, S. F. A. (2020). Activities of Macroeconomic Variables and Stock Market Performance: Evidence in Nigeria. Asian Journal of Economics, Finance and Management, 2(4), 21-39. Retrieved from
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