Macroeconomic Effects on Stock Market Returns in Nigeria

Abstract

The purpose of this study is to investigate the relationship between macroeconomic effects on stock market returns in Nigeria employing the CBN annual time series data spanning from 1985-2019. The study applied unit root test, auto-regressive distributed Lag and granger causality tests to investigate the relationship between all share index and interest rate, inflation rate, exchange rate. The unit root tests results for stationarity revealed that the entire variables are reliable for economic decisions. The findings of the study revealed that interest rate was negative and not significantly related with the all share index; also inflation rate was negative and not significantly related with the all share index while exchange rate was positive and significantly related with the all share index. The granger causality result revealed Uni-directional causality which implies no causality. This study recommends that macroeconomic factors should be adequately managed by the Central Bank of Nigeria with the view to promoting investors confidence in the stock market.