IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 3 NO. 1 2017

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Trading Volume and Market Turnover in the Nigerian Capital Market: Implications to Stock Market Returns

John Okey Onoh (Ph.D) & Okanta Sunday Ukeje (Ph.D) and Nkama Nkama O

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Abstract

The study investigated the effect of trade volume and market turnover on daily stock returns of the Nigerian Stock Market (NSE) using secondary data obtained from daily trading at the stock exchange. Because of the risk of substantial error involved in using aggregate data the researchers deemed it appropriate to use daily data for a robust result. The methodology used was regression analysis using the Stata statistical package we tested for the effect of volume on stock returns in the first hypothesis. In the second hypothesis we also tested the effect of turnover on stock returns also using the stata computer statistics to capture trading relative to the market size for the period in question (15 years). The findings of the study indicated that the model used for both tests judging by the F-Statistics was well fitted. The R2 and the adjusted R2 measuring the goodness of fit of the model indicates that variations observed in the dependent variable for the two hypotheses were explained by the independent variables. The Durbin Watson statistics indicate that there is a slight trace of autocorrelation in hypothesis one but no trace of such in hypothesis two. The result of hypothesis one shows that value of transaction ratio has a negative and significant impact on the SR (VTr coefficient = -8.51 p = 0.00 < 0.05, t-value = 30). The result shows that Tor has a positive and significant impact on the Log ASI of Nigerian (TOr coefficient = 0.36, p = 0.00 < 0.05, t-value = 146.44).The study concluded by stating that Volume of trade had a negative but significant effect on stock returns and attributes it the possibility of investor misspecification about future earnings or illiquidity of low volume stocks. The turnover at the market had a positive and significant effect on the stock market returns attributable to a possible anticipation of higher market illiquidity by investors and consistent with the positive cross-sectional relationship between stock return and illiquidity

keywords:

Trading volume, Market Turnover, Nigerian Capital Market and Stock Market Returns

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