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Determinants of Stock Trading Volume in Nigeria: Money Demand Approach

Author

Listed:
  • Saibu Olufemi Muibi
  • Alenoghena Raymond Osi
  • Olaniyi Evans
  • Tewogbade Seun

Abstract

This study has investigated the determinants of stock trading volume using the demand for money approach. In order to establish the magnitude and direction of relationship between stock trading volume and other macroeconomic variables such as broad money, interest rate, foreign direct investment, exchange rate, income and global financial crisis for the period 1985 to 2014, an ARDL model was set up. The results showed that the exogenous variables studied have long run equilibrium relationship with the volume of transactions in the stock exchange. Specifically, while money supply exhibited strong positive significant relationship with stock volume, interest rate and exchange rate impact was negative and significant. The impact of income and foreign direct investment was positive but not significant. The dynamic error correction model shows that the system converges back to equilibrium at a speed of 41.3%. The CUSUM test reveals that irrespective of the downward trend in the volume of trading on the exchange in Nigeria for the period, stock trading volume has remained stable. The study recommends that policy makers in the country should take into account the influence of money supply, interest rate and exchange rate in the course of planning the target volume level of trading transactions on the floor of the Nigerian Stock Exchange.

Suggested Citation

  • Saibu Olufemi Muibi & Alenoghena Raymond Osi & Olaniyi Evans & Tewogbade Seun, 2016. "Determinants of Stock Trading Volume in Nigeria: Money Demand Approach," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 5(2), pages 74-89.
    • Handle: RePEc:rss:jnljee:v5i2p1
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    Cited by:

    1. Evans Olaniyi, 2017. "Back to the Land: The Impact of Financial Inclusion on Agriculture in Nigeria," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(4), pages 885-903, Autumn.
    2. Ogechi Adeola & Olaniyi Evans, 2020. "ICT, infrastructure, and tourism development in Africa," Tourism Economics, , vol. 26(1), pages 97-114, February.

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