Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Asset Prices and Macroeconomic Volatility- Empirical Linkage: Nigerian Experience

Agbam, Azubuike Samuel & Anyamaobi, Chukwuemeka

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 pricesmacroeconomic variablesinvestmentsstock returnsarbitrage pricing modelNigerian Stock Market

References

Abraham, Terfa Williams (2011).Stock market reaction to selected macroeconomic variables in the Nigerian economy.CBN Journal of Applies Statistics, 2(1): 61-70. Adaramola, A. O. (2011). The impact of macroeconomic indicators on stock prices in Nigeria. Developing Country Studies, 1(2) 1-14 Adjasi, C. K. D. and Biekpe, B. N. (2005). Stock market returns and exchange rate dynamics in selected African countries: a bivariate analysis. The African Financial Journal, 1(4):23-44. Adoo, Augustine (2016). The impact of Treasury-bill rate and interest rate on the Stock Market returns: Case of Ghana Stock Exchange. Retrieved from www.academia.edu/3848706. June, 2016 Adrian, T. D; M. Covitz and N. Liang (2013).Financial stability monitoring.Federal Reserve Bank of New York Staff Reports No. 601. Aggarwal, R. (1981). Exchange rate and stock prices: A study of the US capital markets under Floating Exchange Rates. Akron Business and Economic Review, 12 (4): 7- 12. Akmal, R. (1997). Stock markets, banks, and growth: Correlation or causality? Policy Research Working Paper 2670, Washing DC; World Bank. Antoniou, A., Garrette, I., and Priestley, R. (1998).Macroeconomic variables as common pervasive risk factors and the empirical content of the Arbitrage pricing Theory.Journal of Empirical Finance, 5(3):221-240. Apte, P. G. (2001). Currency exposure and stock prices.Journal of Foreign Exchange and International Finance, 12, (92):135-143. Arouri, M. E. H. and Jawadi (2010). On the impact of crisis on the risk premium: Evidence from the U.S. Stock Market using a Conditional CAPM, Economic Bulletin, 30(2):1032-1043. Asankha, (2012).Dynamic relationship between stock market performance and short-term interest rate- Empirical evidence from Sri Lanka.Social Sciences research Network. Electronic copy available at http://ssm.com/abstract=2156150 Asai, M. and Shiba, T. (1995). The Japanese stock market and the macroeconomy: An empirical investigation. Financial Engineering and the Japanese Markets, 2: 259-267. Azeez, K. P. and V. Yonoezawa (2003) Firm characteristics, unanticipated inflation and stock return. Journal of Finance, 43(4):965-981. Barro, R. J. (2006). Rare disaster and asset markets in the Twentieth Century, Quarterly Journal of Economics, August, 823-866. Barro, R; E. Nakamura; J. Steinsson and J. Ursua (2009). Crises and recoveries in an empirical model of consumption disaster, Working Paper, http:/papers.ssrn.com//so13/papers.cfm/abstract id=1594554 Beenstock, M. and Chan, K. (1988). Economic forces and London stock market. Oxford Bulletin of Economics and Statistics, 50(1): 27-39. Berry, M. A., Bumeister, E., and McElroy, M. (1988). Sorting out risks using known APT factors. Financial Analyst Journal, 44(1): 27-39. Banerjee, Bhabatosh (2010). Financial policy and management accounting,Eight edition, New Delhi: PHI Learning Private Limited. Bhat, Sudhindra (2008). Security analysis and portfolio management, first edition; New Delhi, India: Excel Books ...

More Articles from INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT

Bridging Legal, Financial, and Data Governance in Enterprise AI: Emerging Trends

Author: Funmilayo Ashore-Onisemo, Ebehiremen Faith Iziduh, Uchechi Mary-Linda Unamma, Ifeanyichukwu Jeffrey Okwesa

Macroeconomic Policies and Economic Stability in Nigeria

Author: Abel-Tariah Emmanuel Onate, Okon, Ekanem Nsikhe, Nwenyi Francis Onwe

Determinants of Bank Liquidity in Nigeria

Author: Nelson Johnny Ebifemo-ere Stephen