Stock Prices in Nigeria: The Macro-Economic Variables Involved
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Date
2009
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Publisher
International Journal of Business and Common Market Studies
Abstract
A lot of literature has been written on the four schools of thought on stock price behaviour. These are; the technical school, the fundamental school, the Efficient Market Hypothesis (EMH) school and the macro-economic school. What are the macro- economic variables that affect stock prices in the Nigerian market? What is their overall effect on stock prices? How does each of them affect stock prices and in which direction? In finding answers to these and other similar questions, the study made use of secondary date of twenty two (22) years (198 2005) obtained from various sources on the macro-economic variables involved. Using multi-linear regression analysis, it was found that interest rate (represented by Minimum Rediscount Rate (MRR), but lately changed to the Monetary Policy Rate by the Federal government), inflation rates, money supply (represented by M2) and exchange rate (Naira/Dollar) collectively account for 96% of stock prices in Nigeria. Though each of the variables affects stock prices differently, the findings here confirm previous works on the topic while it recommended that government should at all times be mindful of the implications of its macro-economic policies on the generality of the people.