IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 2 NO. 1 2016

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The Application of Arbitrage Pricing Theory (APT) in the Nigeria Capital Market

Monogbe Tunde Gabriel, Edori Inivia Semion & Iki Barnabas Akpoede

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Abstract

This study attempts to capture the application of Arbitrage pricing theory in the Nigerian Capital Market using macroeconomic variables as the determinants of returns of the companies chosen. In pursuance of this objective, five companies were chosen which include Okitipupa oil palm, Mobil oil plc. , Forte oil plc. , Fidelity bank Plc. and aluminium extrusion industry plc. The data collected include, returns on security which constitutes the dependent variable, Interest rate, Exchange rate, and Inflation rate which constitute the independent variables for the period (1986-2014). The data collected were subjected to Ordinary Least Square (OLS) regression analysis, Arch and Garch model. The output of our findings shows that Interest, Inflation and Exchange rate were not statistically fit in explaining returns on investment in the Companies studied. This puts a question mark on the applicability of Ross theory (APT) in justifying returns on stocks in the Nigerian context of the capital market.

keywords:

APT, Capital Market, Garch, Arch Model

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