The Impact of Financial Indicators and Stock Market Volatility on Stock Returns in Nigeria: Evidence from Panel Analysis

Stock markets play a critical role in economic development by facilitating capital formation and investment. However, in emerging economies like Nigeria, stock market performance is often characterised by high volatility, structural inefficiencies, and sensitivity to macroeconomic conditions, raising concerns about the stability and predictability of stock returns. This study investigates the impact of financial indicators and stock market volatility on stock returns in Nigeria, employing the Generalised Method of Moments (GMM); and established the presence of long-term memory in the stock market in Nigeria, which indicates that the movement in stock market prices are carried directly from the past to the present. Additionally, findings show that the historical movement of the stock prices is characterised by a rough series with local anti-persistence. This means that the stock prices possess mean-reverting tendencies. Moreover, the results of the study show that return on equity (ROE), return on assets (ROA), and stock market volatility are significant determinants of changes in the stock market returns. Also, the health of the economy, measured by the level of inflation and economic growth, and monetary policy, are important factors that investors should consider before making their choices on which stocks to buy.