You have no items in your shopping cart.
ABSTRACT
This study examines the relationship between market risk and stock return in Nigeria. The specific objectives of the study were to ascertain the effect of interest rate risk, exchange rate risk, inflation rate risk, oil price and political instability risk on stock returns in Nigeria.
The time series data spanning the period of 1980-2016 were collected from Central Bank of Nigeria (CBN) statistical bulletin were subjected to preliminary test corresponding computation of descriptive statistic, test for stationary and co-integration test. The study employed the Vector Error Correction Model (VECM) dynamic framework to determine the short run dynamics and long run equilibrium effect of market risk factors on stock return in Nigeria. Findings showed that a dynamic relationship exists between market risk factors and stock returns in Nigeria in different magnitude. Among other things, the findings shows that exchange rate risk and Oil price risk have a significant effect on stock return both in the short and long run period. Inflation rate risk (DINFR), Interest rate risk (INTR) and political instability risk considered in the model have a non-significant effect on stock return both in the short and long run period. Finally, the findings detected a unidirectional (partial feedback) relationship between interest rate, oil price, political instability and stock return in Nigeria during the period under review. Causality relationship was not found between inflation rate, exchange rate and stock return in Nigeria. From the foregoing, the study concluded that exchange rate risk, oil price risk, interest rate risk and political instability risk are the major determinants of stock return in Nigeria during the period under review.
