Nigerian Stock Exchange Market Research Articles

MODELING AND FORECASTING OF THE VOLATILITY OF ALL-SHARE INDEX OF NIGERIAN STOCK EXCHANGE MARKET

This paper modeled and forecasted the volatility of the Nigerian Stock Exchange Market while incorporating trade volume from January 2022 to December 2024 using both symmetric and asymmetric volatility models such as ARCH, GARCH, GARCH-M, EGARCH, TGARCH, and PGARCH each in Normal, Students-t and Generalized Error Distributions. The results revealed the following facts: the volatility of the market returns could best be modeled using PGARCH (1, 3) model in normal error distribution, there is evidence of positive leverage effect which reflects that positive shocks induce a larger increase in volatility when compared to the negative shocks of equal magnitude, news about volatility from the previous periods has an explanatory power on current volatility, there is volatility clustering in the market returns, changes in the market returns are explosive, the market risk and returns are inversely related, and the out-sample forecast of the market volatility for the next 2years shows that there will be a low volatility from March to September of the year 2023 and then an increase in volatility up to December 2024. However, for policy and investment decision the paper recommends taking the news on volatility into consideration while forming expectations in the market, investors could invest more within March to September 2023 as the market risk and returns are inversely related, following the forecast estimate that the volatility will be on increase from October 2023 up to December 2024 within which investors are likely to invest less as the market risk and returns are inversely related monetary authority could contract the money supply so as to control the problem of idle cash if the percentage of the investors in the risk-averse category is greater than that of risk-lovers and risk diversifiers categories.

Financial Indicators and Stock Market Performance in Nigeria

This study examined financial indicators and stock market performance in Nigeria. The low performance of the stock market has been attributed to so many factors, ranging from financial, macroeconomic to political and institutional. Hence, the study examined the relationship between financial indicators and stock market performance, using the econometric analytical technique. Annual time series data sourced from the Central Bank of Nigeria and Nigerian Stock Exchange were employed. Stock market performance was measured by all-share index while financial indicators were represented by stock market profitability, liquidity and efficiency. The bound testing and Autoregressive Distributed Lag model estimation techniques were employed for the analysis. It was revealed that a long run relationship exists among the variables in the estimated model. A positive relationship exists between market profitability, liquidity, efficiency and stock market performance in Nigeria with coefficients of 58.98, 879.58 and5152.51, respectively. The implication of the findings is that market profitability, market liquidity and market efficiency have positive impact on stock market performance in Nigeria. Hence, the study recommends that; there is need for implementing policy such as good corporate governance that will maximize profit for investors in the market, make it attractive and hence deepen the Nigerian stock exchange market; the provision of windows for firms to raise cash through issuance of new shares, debentures, loans and deposits, when needed and enhance the ability of the firms to convert assets to cash to pay its current liabilities and its debt capacity;while a high trading volume should be maintained to enhance efficiency of the Nigerian capital market.

INTERNAL CORPORATE GOVERNANCE MECHANISMS AND EARNINGS QUALITY OF LISTED INDUSTRIAL FIRMS IN NIGERIA

This study examined the effects of corporate governance mechanism on earnings quality in Nigeria. To achieve the aims of this study, a total of 23 listed industrial firms in the Nigerian stock exchange market were selected and analyzed for this study using the census sampling technique. Also, the corporate annual reports for the period 2006-2016 were used for the study. The regression analysis method was used as a statistical technique for analyzing the data collected from the annual report and accounts of the selected firms. Findings from the study revealed that board independence, board gender, board size and CEO duality have a significant negative effect on earnings quality (proxied by discretionary accruals) for the sampled industrial firms in Nigeria. The study recommends that corporate governance mechanisms in Nigeria industrial firms should enable the individual companies to organise its governance optimally in accordance with the principles.

Analyzing Dynamic Regimes of GARCH Model on Stock Price Volatility

As a result of volatility dynamics, investors and other stakeholders in businesses and industries have difficulty making financial decisions. Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models are the most widely applied in the analysis of financial derivatives volatility. Volatility persistence is a common issue when analyzing stock prices, making it cumbersome for GARCH models. The GARCH model is transformed into the Makov switching GARCH model to check for dynamics in volatility persistence. Markov Regime-Switching GARCH (MSGARCH) models permit the conditional mean and variance to change across regimes over time. The Markov switching GARCH models incorporate the regime variables in the parameter space, making it viable for the parameters to be estimated by the maximum likelihood estimation method, unlike the classical GARCH models. Zenith Bank plc’s daily closing stock prices, a top-tier stock on the Nigerian Stock Exchange market, are fitted using the GARCH and MSGARCH models. The comparison between the MSGARCH model and the classical GARCH model was verified using the AIC and BIC metrics as well as the one with the maximum log likelihood estimates. The outcome suggests that MSGARCH model performs better than the single-regime GARCH model and that it yields significantly better out of-sample volatility forecasts. The results will aid the stakeholders to leverage and mitigate risks in their investment on the selected stocks.

VALUE RELEVANCE OF ACCOUNTING INFORMATION FOR LISTED FINANCIAL SERVICE FIRMS IN NIGERIA

Over a 5-year period from 2016 to 2020, this paper compares the value relevance of accounting numbers of banks and insurance firms listed on the Nigerian Stock Exchange market. The analysis used data from annual accounts of these companies and the Nigerian Stock Exchange facts sheet to apply Ohlson's (1995) valuation model to test the comparative value validity of accounting numbers of these two sub-sectors in the financial service industry. The findings of the empirical analyses revealed the importance of accounting information's value relevance to listed group financial service firms in Nigeria. Furthermore, the accounting numbers of banks have been found to be more important in terms of information quality than the accounting numbers of insurance firms. As a result, the paper proposes that firms' operations be sustained in order to improve profits, performance, and shareholder wealth.

A regime-switching skew-normal model of contagion in some selected stock markets.

This study examined the contagion and structural break between Nigerian Stock Exchange Market (NSE) and some selected stock markets, namely: Ghana, South Africa (SA), Tunisia, and the United States. Two periods were considered: the crisis period (1st May 2016 to 31st December 2017) and the calm period (1st January 2018 to 31st December 2019). Following the work of (Chan, J., Fry-McKibbin, R. & Hsiao C. (2018). A Regime switching skew-normal model of contagion. Studies in Nonlinear Dynamics and Econometrics, Volume 23, Issue 1), the study used the Regime Switching Skew-Normal (RSSN) model which is capable of measuring contagion and structural breaks between markets. Our results indicated evidence of a structural break between the crisis and calm periods, which is a prerequisite for contagion. Furthermore, the study found a moderate contagion between Nigeria and SA stock markets but an absence of contagion between Nigeria and the remaining stock markets, suggesting capital flights from Nigeria to SA for safety during the 2016 economic recession. However, we were unable to find any evidence of capital reversal to Nigeria from SA during the calm period, implying an existence of an asymmetric relationship between Nigeria and South African stock markets. The absence of contagion between Nigeria and the selected African stock markets, suggests there is no significant economic cooperation and cross-border portfolio investment flow among the countries. This development further underpins the imperativeness of the full implementation of the African Continental Free Trade Agreement (AfCFTA), which encourages economic activities and investment flow on the continent.

Influence of Liquidity and Profitability on Profits Growth of Nigerian Pharmaceutical Firms

Abstract: Purpose: This study sought to assess the influence of liquidity ratio and profitability ratio on profit growth of pharmaceutical firms in Nigeria. Method: The researcher employed ex-post facto research strategy with a population of six (6) selected listed pharmaceutical firms in Nigerian stock exchange market. The study used 30 firm yearly observations from the six pharmaceutical firms listed in Nigeria. Results: The results of the study revealed that the current ratio's liquidity ratio and the quick ratio's liquidity ratio had a statistically significant link with profit growth rate. The profit growth rate has no statistically significant link with the profitability ratio of net profit margin and return on asset. Limitations: The discoveries of this study is limited to pharmaceutical firms in Nigeria and may not be adopted elsewhere. Contribution: This study is anticipated to help pharmaceutical companies manage their cash and cash equivalents while also improving the performance of the business. Keywords: 1. Liquidity ratio 2. Profitability ratio 3. net profit margin 4. return on asset 5. profit growth

Sustainability and Financial Reporting Quality for Listed Manufacturing Companies in Nigeria: The Legitimacy Theory Perspective

The universal declaration of a healthy and sustainable environment was adopted by the United Nations (UN) Human Rights Council in 2021 as a fundamental human right; The U.S. Security Exchange Commission in March, 2022 and the European Union's directives in 2014 strengthen the need for all reporting entities to include sustainability reports in their annual reports, for the purpose of improving the quality of financial reporting. Our study examined how sustainability reporting affects the quality of financial reporting from the perspective of legitimacy theory, within the manufacturing sectors in Nigeria as a result of their environmental impact amongst other sectors. The published annual reports of 16 listed manufacturing companies, on the Nigerian Stock Exchange Market, were observed between the financial reporting periods of 2011 and 2020. Sustainability indices were proxied using both the Environmental Disclosure index and Social Disclosure index, while the financial reporting quality was measured using the Accrued earnings management, following the Jones (1991) Model. Using a panel regression analysis, the study applied the Variance inflation factor to test for multicollinearity among the predictors and also employed the fixed effect estimator, as suggested by our Hausman test result, in analyzing the observed data. Our findings revealed that environmental disclosures do not impair the quality of their financial reports. Such impracticability could have resulted from the use of strict environmental regulations by the government and its agencies. However, opportunistic managers could use social disclosure information to dilute the quality of financial reporting. We also found that the profitability performance of manufacturing firm is highly susceptible to impairing the quality of financial reports. We suggest that auditors should be provided with a full-fledge understanding of sustainability reporting to unveil managements' practice of earnings management; the financial reporting council should mandatorily impose the disclosure of sustainability information either as a stand-alone report or as part of the annual reports to allow stakeholders to make relevant economic decisions about the firm; and adequate internal control systems should be in place and should be assessed on yearly basis, as firms continue to operate.

THE EFFECTS OF GLOBAL PANDEMIC ON STOCK LIQUIDITY IN THE NIGERIAN STOCK EXCHANGE

Stock liquidity plays important role in investors’ participation in any nation’s stock market. The global pandemic shock created market illiquidity especially among developing stock market like Nigerian stock market. However, the emergence of global pandemic via COVID-19 pandemic triggered declined market turnover (stock liquidity) which in turn created lack of confidence among stock investors in Nigeria. This study therefore examined the effects of Global pandemic on stock liquidity in the Nigerian stock market using stock turnover and COVID-19 pandemic as measure for stock market liquidity and global pandemic. The study employed expost facto research design using weekly data of both corona-virus pandemic and stock market turnover within the period of March, 2019 to February, 2022. The study employed Exponential GARCH (EGARCH) model and found a considerable negative consequence of Global Pandemic (Covid-19) on stock liquidity, implying that corona-virus pandemic has brought bad information (bad news) which deteriorate the liquidity in the stock exchange market. The study concluded that COVID-19 pandemic shock reduces stock liquidity in Nigerian stock exchange market. The study however recommended that government should put in place more palliative policies such as tax incentive and lowest interest rate on loan to individual and institutional investors which will cushion effect of COVID-19 pandemic and increase investors’ participation in the Nigerian stock market. Also, Nigeria stock market regulators should put in place sound measures that will enhance availability of stock information so as to arouse the interest more and new investors to the Nigerian Stock Market.

DYNAMICS OF OIL PRICE, EXCHANGE RATE AND THE TRADE PERFORMANCE OF QUOTED INDUSTRIAL SECTORS AT THE ALL SECURITIES MARKET (ASEM) IN NIGERIA

The study examined the dynamic interaction among oil price, exchange rate and the trading performance of quoted industrial sectors at the Nigerian stock exchange market from 1980 to 2020 used in a Panel Vector Error Correction Mechanism (PVECM) framework. Data were sourced from BP Energy Review, Central Bank of Nigeria Statistical Bulletin and Annual report of the Nigerian Stock Exchange Market. Findings showed that long run relationships were established for oil price, exchange rate and the stock market performance of the industrial sectors. The result revealed a long run negative relationship among oil price, exchange rate and the stock market performance of the industrial sector. In the absence of possibility of complete shift of the burden of oil price rise on to the consumers, the profits and dividends of companies are reduced which may result into decline in stock prices on the long run. The study suggested that variations in oil price and exchange rate are two strong macroeconomic factors which also stand as a risk factor to the performance of the Stock Exchange Market both at the aggregate market level and the disaggregated industrial sector level, therefore, government policies need to be redirected towards controlling for both the negative and positive effect of the risk factors as their impact on the Stock Exchange Market is revealing from this study.

GENERALIZED AUTOREGRESSIVE CONDITIONAL HETEROSCEDASTICITY (GARCH) MODELS AND OPTIMAL FOR NIGERIAN STOCK EXCHANGE

This paper focused on comparative performance of GARCH models, ascertaining the best model fit, estimating the parameters and making prediction from optimal model. The study used UBA daily stock exchange prices sourced from the official websites of www.investing.com,on the daily basis of the Nigeria stock exchange rate over a period of ten years from 06/06/2012 – 04/06/2021. Five GARCH models (SGARCH, GJRGARCH or TGARCH, EGARCH, APGARCH and IGARCH) were fitted to the secondary data set of the Nigerian Stock exchange market for the period of June 2012- June 2021 and the results of the findings were obtained. The AIC results were SGARCH (1,1) (-6.1784), GJRGARCH (1,1) (-6.1778), EGARCH (1,1) (-6.1714) , APGARCH (1,1) (-6.1245) and IGARCH(1,1) with the value of AIC -6.1793. The EGARCH (1, 1) was found to be the optimal model with AIC value of -6.1714. The further findings indicated volatility clustering and leverage effect. The result of the analysis equally showed parameter estimates of the EGARCH (1,1) model and all the parameters were significant including mean and alpha. Prediction using the optimal model was made with an initial out of sample of 200 and n ahead of 200 with predicted values within the 95% confidence interval resulting there is no sign of volatility and clustering. Based on the findings of the study, other time series packages should be compared with GARCH models, data should be making available for easy access and investors should be encouraged to invest in United Bank for Africa (UBA, Nigeria).

Effect of Dividend Policy on Share Price Movement: Focusing on Companies Listed on the Nigerian Stock Exchange Market

This study examined the relationship between dividend policy and share price movements with evidence from firms listed on the Nigerian Stock Exchange. A systemization literary approach for data analysis was panel regression analysis and Generalized Methods of Moments (GMM). Panel data covering the year 2011-2020 were obtained from the financial statements of twenty firms listed on the Nigerian stock exchange. It was discovered that dividend yield has negative relationship with share price movement. It was discovered that Dividend yield has negative and significant relationship with Share price. It was revealed thatfirms’ size has positive and significant relationship with stock price volatility. The study therefore recommends that the stakeholders of quoted firms must make sure that percentage of earnings disbursed as dividends to shareholders have good influence on the value of the company’s common stock at the stock market on a continuous base. It was recommended that Stake holders should ensure that the ratio of a quoted company’s annual dividend compared to its share price have good influence on the value of the company’s common stock at the stock market on a frequent base. Also, the stake holders of quoted firms must map out strategies of increasing their sizes in terms of asset, branch creation etc., this will increase patronage and profit of quoted firms which can have good influence on the value of the company’s common stock at the stock market.

FOREIGN PORTFOLIO INVESTMENT AND CAPITAL MARKET DEVELOPMENT IN NIGERIA

The poor performance of Nigeria’s stock market is a source of concern and has generated contentious debates among the stakeholders in the Nigerian Stock Exchange Market (NSE). This study investigates the impact of foreign portfolio investment on the performance of the stock market in Nigeria for the period of 30years (1989-2018). Secondary and time-series data were used and the variables such as; stock market capitalization proxy for capital market performance, portfolio investment, exchange rate and inflation rate were sourced from the Central Bank of Nigeria (CBN) statistical bulletin, 2019 To avoid spurious results, unit-root test and regression analysis were used as the tools of data analysis. Findings show that all the predictors have no significant impact on stock market capitalization except the exchange rate that is statistically significant at 5% critical value. However, the f-statistic results (18.83660) indicate that the combine variables have a significant impact on stock market performance in Nigeria. It was therefore concluded that foreign portfolio investment if properly encouraged serve as a Potent variaable for enhancing the performance of the stock market in Nigeria. The study recommends that, there is a need for the government through the central bank of Nigeria to implement a policies that will increase the level and size of market capitalization in the capital market. Such an increase in the capital market will provide the necessary funds for investors for further investments thereby increasing productivity in Nigeria.

Corporate Governance on Environmental Protection Index of Sustainability Reporting in Oil and Gas Companies Quoted in Nigeria

Adequate sustainability of environmental reporting reveals the extent of transparency and corporate efforts in protecting the environment. The study investigated the effect of corporate governance on environmental protection index of sustainability reporting in oil and gas companies quoted in Nigeria. The research design adopted was expost-facto. The population of the study is the entire 12 oil and gas companies listed in the Nigerian stock exchange market from which 8 companies were selected using judgmental sampling technique. The data analyzed were obtained from the financial statement of the selected companies for the period of 15 years ranging from 2006 to 2020. Environmental disclosure checklist in line with Global Reporting Initiatives was adopted to measure the proxies of environmental protection index of sustainability. Multiple regression was used in analyzing the data.it was revealed that corporate governance had significant effect on environmental protection, (AdjR2 = 0.123; Walt-test = 39.29; P-value = 0.000). Also, Firm size and firm leverage significantly moderated the effect of corporate governance on environmental protection, (AdjR2 = 0.216; F-Statistics = 34.58; P-value = 0.000). the study concluded that corporate governance significantly impact on environmental protection and also that firm size and firm leverage moderated the effect of corporate governance on environmental protection, it was recommended that the management should ensure strong commitments and adequate disclosure of all environmental protection policies, and set full compliance as priority; also that government should provide an enabling business operating environment which will enhance effective environmental sustainability reporting.

Moderating Effect of Financial Constraint on Relationship Between Accounting Conservatism and Investment Efficiency of Nigerian Consumer Goods Firms

This study explores the moderating effect of financial constraint on relationship between Accounting conservatism and investment efficiency of consumer goods firms listed on the Nigerian Stock Exchange market. The study used correlational and ex-post facto research design in a sample of 27 consumer goods firms. Secondary data for a period of 10 years (2010-2019) was used, and Advanced panel multiple regression was employed in data analysis. The results obtained from this research indicate that there is a significant relationship between accounting conservatism and investment efficiency. The study also found that there is a significant moderation effect between accounting conservatism and financial constraint on defining investment efficiency of consumer goods firms in Nigeria. The study concludes by showing that financial constraint has antagonistic role to accounting conservatism on explaining investment efficiency thus, conservatism may not improve investment efficiency in firms facing financial constraints. The study suggests that consideration of firms financial conditions should form an essential part of any analysis towards understanding the impact of Accounting conservatism more especially on investment behaviour, because of the influence financial constraint has on accounting conservatism is antagonistic in nature

Money Supply and Stock Prices – A Case Study of Nigeria

This study examined the relationship between money supply and stock prices, using E-view version 10. The empirical results of the Augmented Dickey Fuller (ADF) unit root test at 5 percent critical levels indicates that all the variables (M2 and MCAP) were not stationary at levels. However, all the variables became stationary after first differencing. Hence, the variables are of the same order of integration I (1). A cointegration test tells us that there exists a long run relationship between or among the variables and that they will not wander far apart away even though on the short run they exhibit random walk behavior. The Vector Error Correction test shows that Money supply (M2) has a significant relationship with market capitalization of the Nigerian stock exchange. The value of the Adjusted R-Squared of 0.726710 implies that Money supply (M2) explained about 72.67% systematic variations in the dependent variable (MCAP) over the observed years while the remaining 27.33% variations are explained by other determining variables outside the model. In order to further establish the relationship between money supply and stock market price, a granger causality test was carried out and it was established that there is a bi-directional causality between money supply and stock prices. The researcher therefore recommends that there should be collaboration among agencies of government in charge of money supply and stock exchange in order to make sure that sound policies are made to achieve the objective of government. Furthermore, that there should be a deliberate and concerted policy and effort to improve the Nigerian stock exchange market in line with other stock exchanges of the world, since stock prices cause money supply and vice versa.

EXECUTIVE COMPENSATION AND FINANCIAL REPORTING QUALITY OF NIGERIAN FINANCIAL SERVICE INDUSTRY

The study evaluated the effect of executive compensation on financial reporting quality in Nigerian financial service industry for the period covered. These were with a view to providing information on the effect of executive compensation and financial reporting quality in Nigeria. The study employed a secondary source of data collection. The population for the study consisted of 22 quoted deposit money banks listed and whose stocks are actively traded on the Nigerian Stock Exchange (NSE) market for the period 2006-2017.The sample size of 14 was determined using purposive sampling method. Secondary data were collected on variables executive compensation, non-performing loan, loan loss provision, total loan, residual term all obtained from the audited Annual reports of the selected deposit money banks, fact book published by Nigerian Stock Exchange, and the Central Bank of Nigeria. Data collected were analyzed using Robust Regression. The results showed executive compensation (coef. =-0.139, p˂0.004) has a negative significant relationship with financial reporting quality. This study concluded that executive compensation has a negative significant effect on financial reporting quality.

Effect of Monetary Policy on the Nigerian Stock Market: A Smooth Transition Autoregressive Approach

This paper examines the nonlinear effect of monetary policy decisions on the performance of the Nigerian Stock Exchange market, by employing the Smooth Transition Autoregressive (STAR) model on monthly data from 2013 M4 to 2019 M12 for All Share Index and monetary policy instrument. This study considers the two regimes characterizing the stock market, which are the lower regime (the bear market) and the upper regime (the bull market). The results show evidence of nonlinear effect of monetary policy on the stock exchange market. Monetary policy rate, money supply, lagged monetary policy rate and lagged treasury bill rate are found to have significant positive effects on the stock exchange market in the lower regime while current treasury bill rate shows a negative effect. In the upper regime, money supply and lagged treasury bill rate have significant negative effect on the stock market. The current treasury bill rate is found to have a positive effect on the stock exchange market. It is recommended that the Central Bank of Nigeria should maintain a stable money supply growth that is consistent with increased activities in the Nigerian stock market.

Market Risk and Stock Return of Listed Financial Service Firms in Nigeria

The trading financial instruments in the capital market by Financial Service Firms (FSF) have generated return arising from changes in the prices of stock which exposed the firms to market risk. An effective market risk decision remains significant to determining stock return level realized from the volume and value of stock traded. This study examines the effect of market risk on stock return of listed FSF in Nigeria. The population of this study consists of fifty-six (56) financial service firms listed in the Nigerian Stock Exchange Market. In arriving at the sample size of twenty-nine (29) firms the purposive sampling technique and filtering criteria were employed. Data were sourced secondarily from the audited annual report of financial service firms, Nigeria Stock Exchange fact book, and other relevant financial service firms’ websites for period of twelve (12) years (2007-2018). Panel multiple regression technique of data analysis was applied using the ordinary least square estimator. The findings of the study revealed that book to market ratio as a proxy of market risk was insignificantly negative on stock return during the period under review. Net interest margin as a proxy of market risk revealed a significant positive effect on stock return during the period of review. Also, the study revealed that control variables of firm size, leverage had significant positive effects on stock return, though; the effect of monetary policy rate was positive but insignificant on stock return. The study concluded that a higher book to market ratio would reduce stock return and to a larger extent the reduction in stock return may not be affected significantly. It also concluded that a higher net interest margin would result to a higher stock return and vice versa. The study recommended that decision-makers and portfolio managers of financial service firms should employ appropriate risk strategies through derivatives, forwards, futures, swaps, options that can mitigate market risk in order to optimize return. Keywords: Financial Services Firms, Stock Returns, Market Risk, Firms Specific Risk factors, Nigerian Stock exchange. DOI: 10.7176/EJBM/13-8-10 Publication date: April 30 th 2021

Inflation and Stock Returns: Implication for Nigerian Stock Exchange Market

Understanding various hypotheses often dictates the nexus between inflation and stock returns and over the years studies have failed to establish which among these hypotheses are examined in Nigeria. Therefore, this present study examines the long-run relationships and dynamic interactions between stock returns and inflation in Nigeria using quarterly data of the All Share Price Index from the Nigerian Stock Exchange and Inflation rate together with other selected macroeconomic variables such as interest rate, exchange rate and growth in real GDP from 1985Q1 to 2018Q4. The analytical technique of Vector Error Correction Model, Johansen Co-integration technique and Granger Causality test were exploited. From the results, it is evident there exists a long run relationship between stock returns and inflation in Nigeria. The short run dynamic model also revealed that the speed of convergence to equilibrium is moderate implying that there is a short run relationship between stock returns and inflation. However, in order to establish the causal links and its directions between inflation rate and stock returns, the Johansen co-integration shows that there exist a unidirectional relationship between stock return and inflation rate. This is attributable perhaps to the instability of prices of stocks noticed over time and also the study supported the Proxy hypothesis. Based on the above, it is a perfect avenue for investors to use in an attempt to hedge against inflation.