Abstract
The paper appraise the nature of beta in the Nigeria stock market and the impact of Beta on Investors’ wealth maximization strategy in the Nigerian Stock Market. Ex-pos facto was iused to design the research as secondary data from the Nigerian stock market was deemed fit for the study. The study also indicated that there is a strong relationship between the firms’ Stock Return and Beta Coefficient. Finally, the study established that Beta Coefficient has a significant effect on the Stock Return of Firms Listed on the Nigerian Stock Exchange. Three years data collected (from January 2017 to December 2019) from the database of the Nigeria Stock Exchange was used to estimate the coefficient of the stocks’ betas. The data collectected were monthly price rates of the stocks, the All Share Index monthly rates and the Nigeria Treasury Bills monthly rates. The All Share Index is used to calculate the market returns and the Treasury Bills used as the risk free rate. To carryout the data analysis, returns were calculated for stocks and the market. Regression Analysis wss then to regress the stocks’ returns against the market returns in order to estimate the beta coefficient using the CAPM (Capital Asset Pricing Model) theory: Ri=Rrf + Bi (Rm-Rrf). The result showed that Guanranty Trust Bank, Ashaka Cement, Dangote Cement, Flour Mills Nigeria plc and Northern Nigeria Flour Mills plc have higher risk (beta) of investment than the other stocks meaning they are more volatile than the market and the other stocks that have beta value les than one (1), thence higher expected retuns. It is, therefore, recommended that Investors should invest in these mentioned Companies with higher risk as higher risk is synanimous to higher returns in order to maximise their returns.
Highlights
Investment in Stocks is sound financial decision especially where the need of the Investor is to grow his savings over a long term
The study established that Beta Coefficient has a significant effect on the Stock Return of Firms Listed on the Nigerian Stock Exchange
It is important to know the risk-return characteristics of quoted firms such as Guanranty Trust Bank, Ashaka Cement, Dangote Cement, Flour Mills Nigeria plc and Northern Nigeria Flour Mills plc have higher risk of investment than the other stocks meaning they are more volatile than the market and the other stocks that have beta value les than one (1), thence higher expected retuns
Summary
Investment in Stocks is sound financial decision especially where the need of the Investor is to grow his savings over a long term. Every investment carries one risk or the other. This existential reality is more pronounced in the quest for wealth through investment in stock markets. The stock market offers investors the opportunity to invest in securities of quoted firms such investment could be in fixed income isecurity e.g. Preference shares, debentures, etc. Each of these securities offer returns to investors, depending on firms’ risks and the nature of the stock invested on. The higher the risk, the higher the return, all things being equal
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