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ABSTRACT
This study investigates the effects of inflation on equity returns within the Nigerian construction sector stocks, employing empirical analysis based on secondary time series data. The research aims to elucidate the relationship between inflation and equity returns while considering the influence of interest rates. The theoretical framework integrates insights from financial economics, behavioral finance, and macroeconomic theories to provide a comprehensive understanding of the phenomena under investigation. Data will be sourced from reputable sources such as the Central Bank of Nigeria (CBN) and the Nigerian Stock Exchange (NGSE), covering a specific period (2019-2021) to ensure robust analysis. This study employs a quantitative approach using panel series data analysis to comprehensively explore the effects of inflation and equity returns within this market, with a particular focus on stocks that come from the construction industry. The methodology employed in this research employs the Auto Regressive Distributed Lag Model (ARDL) and GARCH modeling techniques, which are suitable for explaining the variability in returns. The results of the empirical analysis of this study review that the short-run model changes in the stock returns (LSTR) are significantly influenced by their lagged values, indicating some persistence or momentum in stock price movements. The analysis provides insights into the dynamics between stock prices, interest rates, and inflation, with implications for policy and investment decisions.
