Abstract
The objective of this paper is to investigate the relationships between some selected macroeconomic variables and stock market returns in Nigeria. Time series data on macroeconomic variables were collected from Central Bank of Nigeria (CBN) annual statistical bulletin 2018 covering between years 1981 to 2018. The error correction model (ECM) was used to show the strength of relationship between the macroeconomic variables and stock market performance. The result of the coefficients of macroeconomic variables are negative and positive values and also significant and insignificant. Hence, there is disequilibrium in the long run and must be corrected. The coefficient of parameters estimates for short run for return and gross domestic product at lag 1 are positive while values of crude oil prices, interest rate and inflation rate at lag 1 are negative. Hence, there is short run dynamic changes in crude oil prices, interest rate and inflation rate could lead to negative changes in stock market performance. The ECM coefficient is -0.80 suggesting that any disequilibrium can be corrected at the speed or rate of 80 percent within a year. In view of this, there is long run dynamic influence running from macroeconomic variables to stock market performance in Nigeria.
Highlights
The issue of stock market performance and the relationships between macroeconomic indicators has been a great concern to researchers, individual and portfolio managers who manage the investments of investors over the years.There has being a recent decline observed in the Nigerian stock market, many scholars have investigated the effectiveness of monetary policies in order to improve the performance of the Nigerian stock market
The results revealed that a weak relationship exists between Average share price (ASP) and macroeconomic variables
While crude oil prices, gross domestic product and inflation rate are plytokurtic in nature, suggesting that there is no presence of outliers
Summary
The issue of stock market performance and the relationships between macroeconomic indicators has been a great concern to researchers, individual and portfolio managers who manage the investments of investors over the years.There has being a recent decline observed in the Nigerian stock market, many scholars have investigated the effectiveness of monetary policies in order to improve the performance of the Nigerian stock market. The issue of stock market performance and the relationships between macroeconomic indicators has been a great concern to researchers, individual and portfolio managers who manage the investments of investors over the years. Stabilizing and maintaining the financial system remains the main objective of the Central Bank of Nigeria (CBN). Macroeconomic variables that influence stock market returns have been documented in recent finance literature without a consensus on their appropriateness as regressors. This is confirmed by [5, 14, 11].
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