IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 3 NO. 2 2018

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Asset Prices and Macroeconomic Volatility- Empirical Linkage: Nigerian Experience

Agbam, Azubuike Samuel & Anyamaobi, Chukwuemeka

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Abstract

This study tests the relationship between asset prices and macroeconomic variables in Nigeria Equity Market. The study employed the Ross (1976) arbitrage pricing model and adopted the Chen, Roll and Ross (1986) approach. The Augmented Dickey Fuller Unit Root Test was employed to examine the behaviour of the set of selected macroeconomic variables. The first and second pass ordinary least squares regressions were used to estimate the relationship between the stock returns (from January 2002 to December 2016.) and seven macroeconomic variables. The results reveal that the macroeconomic variables risk premium strongly affects the stock prices/returns in the Nigerian equity market. .Hence the model has empirical applicability. We recommend that investors taking investment decisions should consider macroeconomic factors that are very sensitive and negative determinants of average return.

keywords:

Asset prices, macroeconomic variables, investments, stock returns, arbitrage pricing model, Nigerian Stock Market

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