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Stock Market Response to Economic Growth and Interest Rate Volatility: Evidence from Nigeria

Author

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  • Babajide Abiola Ayopo

    (Department of Banking and Finance, Covenant University, Ota, Ogun-state. Nigeria)

  • Lawal Adedoyin Isola

    (Department of Accounting and Finance, Landmark University, Omu Aran, Nigeria,)

  • Somoye Russel Olukayode

    (Department of Accounting, Banking and finance, Olabisi Onabanjo University, Ago Iwoye, Nigeria.)

Abstract

This study examined the relationship between macroeconomic variable volatility and stock market return within the context of Blanchard (1981) extension of the Hicks (1937) IS-LM hypothesis, using exponential general autoregressive conditional heteroskedascity estimation techniques to analysis monthly data sourced on the Nigerian economy from January 1985 to December 2013. Our result shows that stock prices responds significantly to innovations in the interest rate and the real gross domestic product (RGDP), we therefore recommends that policy makers on the one hand should consider volatility in both the interest rate and the RGDP when making policies aimed at enhancing stock market development. On the other hand, market practitioners are expected to make provisions for volatility in interest rate and the RGDP when making portfolio decisions.

Suggested Citation

  • Babajide Abiola Ayopo & Lawal Adedoyin Isola & Somoye Russel Olukayode, 2016. "Stock Market Response to Economic Growth and Interest Rate Volatility: Evidence from Nigeria," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 354-360.
    • Handle: RePEc:eco:journ1:2016-01-45
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    References listed on IDEAS

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    2. Abiola Ayopo BABAJIDE & Funso Abiodun OKUNLOLA & Adedoyin Isola LAWAL & Victoria Bosede AKINJARE & Bukola Bose LAWAL-ADEDOYIN, 2021. "Financial Inclusion: Implication on Per Capita Income in Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(8), pages 603-617, August.
    3. Emran Hasan & Shahanawaz Sharif, 2019. "Do Macroeconomic Variables Affect Stock Market Performance? A Case Study of DSEX and DS30 Index of Dhaka Stock Exchange," Business and Economic Research, Macrothink Institute, vol. 9(3), pages 182-203, September.
    4. Zhang, Yulian & Hamori, Shigeyuki, 2021. "Do news sentiment and the economic uncertainty caused by public health events impact macroeconomic indicators? Evidence from a TVP-VAR decomposition approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 145-162.
    5. Si, Deng-Kui & Liu, Xi-Hua & Kong, Xianli, 2019. "The comovement and causality between stock market cycle and business cycle in China: Evidence from a wavelet analysis," Economic Modelling, Elsevier, vol. 83(C), pages 17-30.
    6. Lawal, Adedoyin Isola & Ozturk, Ilhan & Olanipekun, Ifedolapo O. & Asaleye, Abiola John, 2020. "Examining the linkages between electricity consumption and economic growth in African economies," Energy, Elsevier, vol. 208(C).
    7. Maku Affor Owen, 2020. "Stock Market Development and Economic Growth: Empirical Evidence From an Institutional Impaired Economy," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 496-509, October.
    8. Adedoyin Isola Lawal & Adeniyi Olayanju & Afeez Adebare Salisu & Abiola John Asaleye & Olatunde Dahunsi & Oluwasogo Dada & Oluwasola Emmanel Omoju & Olabisi Rasheedat Popoola, 2019. "Examining Rational Bubbles in Oil Prices: Evidence From Frequency Domain Estimates," International Journal of Energy Economics and Policy, Econjournals, vol. 9(2), pages 166-173.
    9. Uhunmwangho, Monday, 2022. "Determinants of Stock Market Volatility in Africa," African Journal of Economic Review, African Journal of Economic Review, vol. 10(2), March.
    10. Adedoyin Isola LAWAL & Ezekiel OSENI & Abiola John ASALEYE & Bukola LAWAL-ADEDOYIN & Rachael OJEKA-JOHN, 2021. "Is the Stock Market Efficient? Evidence from Nonlinear Unit Root Tests for Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(5), pages 384-395, May.
    11. Xiao-Lin Li & Yi-Na Li & Lu Bai, 2019. "Stock Market Cycle and Business Cycle in China: Evidence from a Bootstrap Rolling Window Approach," Review of Economics & Finance, Better Advances Press, Canada, vol. 17, pages 35-50, August.
    12. Faris Alshubiri, 2021. "The stock market capitalisation and financial growth nexus: an empirical study of western European countries," Future Business Journal, Springer, vol. 7(1), pages 1-20, December.

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    More about this item

    Keywords

    Interest Rate; Real Gross Domestic Product; All Share Price; Volatility; Exponential General Autoregressive Conditional Heteroskedascity;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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