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Determinants of stock market performance in Nigeria: long-run analysis

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  • MAKU, Olukayode E.
  • ATANDA, Akinwande Abdulmaliq

Abstract

This study examines critically the long-run macroeconomic determinants of stock market performance in Nigeria between 1984 and 2007. The properties of the time series variables are examined using the Augmented Dickey-Fuller (ADF) unit root test and most of the incorporated variables in the study was found to have a unit root at level. The Augmented Engle-Granger Cointegration test result revealed that the stock market performance in Nigeria is mainly determined by macroeconomic forces in the long-run. However, the empirical analysis showed that the NSE all share index is more responsive to changes in exchange rate, inflation rate, money supply, and real output. While, the entire incorporated macroeconomic variables were found to have simultaneous and significant impact on the Nigerian capital market performance in the long-run. The study recommended that investors should pay close attention to exchange rate, inflation, money supply, and economic growth rather than treasury bill rate in the long-run in their investment decision.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35838.

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Date of creation: 2010
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Publication status: Published in Journal of Management and Organizational Behaviour 3.1(2010): pp. 1-16
Handle: RePEc:pra:mprapa:35838

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Keywords: Macroeconomic Variables; Stock Market Performance; Long-run; Unit root and Cointegration;

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  1. Adam, Anokye M. & Tweneboah, George, 2008. "Do macroeconomic variables play any role in the stock market movement in Ghana?," MPRA Paper 9357, University Library of Munich, Germany, revised 2008.
  2. John Y. Campbell & Robert J. Shiller, 1988. "Stock Prices, Earnings and Expected Dividends," NBER Working Papers 2511, National Bureau of Economic Research, Inc.
  3. Andreas Humpe & Peter Macmillan, 2007. "Can macroeconomic variables explain long term stock market movements? A comparison of the US and Japan," CDMA Working Paper Series 200720, Centre for Dynamic Macroeconomic Analysis.
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